Key Takeaways
- Scholarships and grants used for tuition, fees, and required course materials are tax-free, but stipends for living expenses are taxable.
- Military housing allowances (BAH) and subsistence allowances (BAS) are tax-free, but other military pay is taxable.
- Research stipends, teaching stipends, and fellowship stipends are usually taxable income reported on Form 1099-NEC or W-2.
- You report taxable stipends on your tax return the same way you report wages, which may increase the tax you owe or reduce a refund.
- The person or organization paying the stipend should tell you whether it is taxable and send you a tax form if it is.
How the IRS Classifies Stipends
The IRS does not have a single rule for all stipends. Instead, it looks at the purpose of the payment and the relationship between you and the payer. A stipend for tuition at a university is treated differently from a stipend for living expenses while you study. A housing allowance from the military is treated differently from a research stipend at a hospital.
The key distinction is whether the stipend is compensation for services or support for education. If you are receiving money because you are doing work — teaching, researching, assisting — the IRS treats it as income. If you are receiving money to pay for school itself, the rules are different.
Your payer should tell you which category applies. If they do not, you can contact them directly and ask whether the stipend is taxable. This is a straightforward question, and most organizations have a standard answer.
Tax-Free Stipends and Grants
Scholarships and grants used for may have access to education expenses are not taxable. may have access to expenses include tuition, fees, books, supplies, and equipment required for your course. They do not include room and board, transportation, or personal expenses, even if the school requires you to live on campus.
If a scholarship covers both tuition and living expenses, only the tuition portion is tax-free. The living expense portion is taxable income. Some schools break this out for you on a separate statement; others do not, and you may need to calculate it yourself based on the school's published cost of attendance.
Military housing allowances (BAH) and subsistence allowances (BAS) are also tax-free. These are paid to service members to cover the cost of housing and food and are not reported as income on your tax return. Other military compensation — base pay, bonuses, special pay — is taxable.
Taxable Stipends You Must Report
Research stipends, teaching stipends, and fellowship stipends are almost always taxable. These are payments for work you do or services you provide, even if you are also a student. If you are paid to teach a class, grade papers, conduct research, or information a professor, that payment is income.
Graduate assistantships and teaching assistantships fall into this category. The stipend you receive is taxable, though you may be able to deduct tuition waivers separately if they meet certain conditions. The organization paying you should send you a Form 1099-NEC (if you are an independent contractor) or a Form W-2 (if you are an employee).
Internship stipends are taxable if you are paid for the work you do. Some internships are unpaid; others pay a flat amount regardless of hours worked. Either way, if money changes hands, it is taxable income.
How Taxable Stipends Affect Your Tax Return
When you report a taxable stipend on your tax return, it increases your total income for the year. This can affect you in several ways. If you are a dependent on your parents' return, the stipend income might push you over the threshold where you must file your own return. If you are filing independently, it increases your adjusted gross income, which can reduce tax credits you claim and increase the tax you owe.
If your stipend is your only income and it is below the filing threshold for your age and filing status, you may not have to file a return at all — but you should check, because you might be due a refund of taxes withheld.
The payer withholds taxes from taxable stipends the same way they do from wages. If taxes are withheld, you will see them on your W-2 or 1099-NEC. When you file your return, you report the full stipend amount and claim credit for the taxes withheld. If too much was withheld, you get a refund; if too little, you owe more.
What to Do If You Are Unsure
If your payer has not told you whether the stipend is taxable, ask them directly. They should be able to tell you in one sentence and should send you the appropriate tax form by January 31 of the following year. Do not guess — the wrong answer can trigger an audit or cause you to miss a filing important date.
If you received a stipend but no tax form, that does not necessarily mean it was tax-free. Some organizations fail to send forms even when they should. If you believe you should have received a form, contact the payer and ask for a corrected one. If they do not respond, you can still report the income on your return based on your own records.
The IRS Publication 970 (Tax Benefits for Education) covers scholarships and grants in detail. The IRS Publication 17 (Your Federal Income Tax) covers stipends and other income. Both are free and available on the IRS website.
Stipends and Student Loan Forgiveness
If you are pursuing Public Service Loan Forgiveness or another forgiveness program, taxable stipend income counts toward your income for purposes of income-driven repayment plans. A larger stipend means a higher calculated payment, even though the stipend itself may not be subject to income tax withholding.
This is a separate issue from whether the stipend is taxable. A stipend can be taxable and still affect your loan payment calculation. If you are on an income-driven plan, report your stipend income accurately on your tax return, because the IRS shares that information with the Department of Education.
Frequently Asked Questions
Do I have to pay taxes on a scholarship for tuition?
No, if the scholarship is used for tuition, fees, books, and required supplies. If part of the scholarship is for room and board or other living expenses, that portion is taxable. Ask your school to break down how much of your scholarship covers each category.
Is a graduate assistantship stipend taxable?
Yes. Graduate assistantships are compensation for work you perform, not scholarships. The stipend is taxable income, and your university should send you a Form 1099-NEC or W-2. Tuition waivers may have different tax treatment — ask your university's tax office.
What if my stipend is so small I do not think it matters?
Report it anyway. The IRS requires you to report all income, regardless of amount. If taxes were withheld, you need to report it to claim credit for those taxes. If no taxes were withheld, you still owe tax on it unless it falls below the filing threshold for your situation.
Can I deduct expenses related to my stipend?
It depends on the type of stipend and the expenses. If the stipend is for research or teaching, you may be able to deduct unreimbursed expenses as a miscellaneous deduction, but the rules are strict. Consult a tax professional or IRS Publication 529 (Miscellaneous Deductions) for details.
Will a taxable stipend disqualify me from financial aid?
Stipend income counts as your income when you fill out the FAFSA, which can reduce the financial aid you are offered. Report it accurately on the FAFSA. Some schools treat certain stipends differently for aid purposes — ask your financial aid office how they count your specific stipend.