Do You Have to Pay Taxes on Stipends? Rules, Forms, and Filing

Do you have to pay taxes on stipends? In most cases, yes. A stipend is tax-free only when a degree-seeking student at an eligible school spends the money on tuition, required fees, and the books, supplies, and equipment required for coursework. Anything beyond those qualified expenses, and anything paid in exchange for work, is taxable income under federal law.¹

The One Way a Stipend Escapes Tax

Internal Revenue Code Section 117 is the only general exclusion, and it has three conditions that all have to be met. You have to be a candidate for a degree at an eligible educational institution. The payment has to be a scholarship or fellowship grant. And the money has to go toward qualified tuition and related expenses, which the IRS defines narrowly as tuition and enrollment fees plus books, supplies, and equipment required for your courses.¹

Everything else falls outside the exclusion. Room and board, travel, research costs, health insurance, clerical help, and any equipment that isn’t required for enrollment are all taxable even when paid from a “fellowship” check.² If your school awards a $30,000 fellowship and tuition is $22,000, the $8,000 that pays your rent and groceries is taxable income no matter what the award letter calls it.

Non-degree candidates don’t qualify at all. Visiting scholars and most post-doctoral researchers can’t use Section 117, so their stipends are taxable in full even if the whole payment covers tuition and fees.³

What Makes a Stipend Fully Taxable

The quickest way to lose the exclusion is a work requirement. If your funding depends on teaching, doing research for the university, or performing administrative duties, the IRS treats the entire payment as compensation for services. It doesn’t matter how you spend it, and it doesn’t matter what the payment is called.⁴ A “fellowship” that requires you to grade papers each week is wages.

Federal law carves out three narrow exceptions where service doesn’t poison the exclusion: the National Health Service Corps Scholarship Program, the Armed Forces Health Professions Scholarship and Financial Assistance Program, and comprehensive student work-learning-service programs at designated work colleges.⁵ Outside those three, service means taxable income.

The second common path to a tax bill is spending stipend money on non-qualified expenses. Living-expense stipends are the usual culprit. Many universities pay graduate students a monthly amount specifically for housing and food, and that money is fully taxable. Schools often send no tax form for it, which catches students off guard at filing time.

Which Tax Form to Expect

The form you receive depends on how the institution classifies the payment.

Form W-2 arrives when the institution treats the stipend as wages for services, which is standard for teaching and research assistantships. Federal income tax, Social Security, and Medicare are usually withheld.
Form 1099-NEC is used when the institution treats you as an independent contractor. No tax is withheld.
Form 1099-MISC is sometimes issued for fellowship or grant payments not tied to services.
No form at all is common for purely educational stipends, especially living-expense payments. The institution may not be required to send one.

Receiving nothing in the mail doesn’t make the income tax-free. You are responsible for figuring the taxable amount yourself. Taxable scholarship and fellowship income that isn’t already on a W-2 goes on Schedule 1 (Form 1040), line 8r, labeled “Scholarship and fellowship grants not reported on Form W-2.”⁶

Paying Tax When Nothing Is Withheld

The practical headache for most stipend recipients is that no one takes tax out of the payment. If you receive a fellowship with no W-2 and expect to owe $1,000 or more after any withholding and refundable credits, you have to send the IRS quarterly estimated payments using Form 1040-ES.⁷

The 2026 quarterly deadlines are April 15, 2026, June 15, 2026, September 15, 2026, and January 15, 2027. You can skip the January payment if you file your 2026 return and pay the full balance by February 1, 2027.⁸

You avoid the underpayment penalty by paying at least 90% of the current year’s tax or 100% of what you owed last year, whichever is smaller. If your prior-year adjusted gross income exceeded $150,000 ($75,000 if married filing separately), the 100% figure rises to 110%.⁹ Fall short and the IRS charges interest on the shortfall. As of early 2026 that rate is 7% per year, compounded daily.¹⁰

When Self-Employment Tax Applies

Self-employment tax comes into play only when a stipend is compensation for services and reported on a Form 1099-NEC (or should have been). In that case you owe the full 15.3% self-employment tax on net earnings of $400 or more: 12.4% for Social Security and 2.9% for Medicare, calculated on Schedule SE with net profit on Schedule C.¹¹ You can deduct half of the self-employment tax as an adjustment to income on Schedule 1, which reduces your adjusted gross income.¹²

A taxable fellowship that exceeds your qualified expenses but carries no work obligation is subject to income tax but not self-employment tax. That distinction spares many graduate students the extra 15.3%.

Common Stipend Situations

Graduate Fellowships With No Work Requirement

A Ph.D. student funded purely to pursue research, with no teaching or faculty-support duties, can exclude the portion that covers tuition and required fees. The living-expense portion is taxable income tax but not subject to self-employment tax. The university often sends no tax form, so you need to track tuition paid and calculate the taxable remainder yourself.

Teaching and Research Assistantships

A teaching assistantship is compensation for services. The full stipend is taxable and usually reported on a W-2 with tax withheld. The same treatment applies to a research assistantship when the research benefits the university rather than serving purely as your own degree work. The question is whether you’re providing a service to the institution or pursuing your own education.

Post-Doctoral and NRSA Fellows

Most post-docs are non-degree candidates, so the Section 117 exclusion is unavailable and the whole stipend is taxable. NIH Kirschstein-NRSA stipends are explicitly not salaries and don’t create an employer-employee relationship, but they are still subject to federal income tax and often state tax too.³ The institution may issue a Form 1099-MISC but isn’t required to. Because NRSA stipends aren’t wages or self-employment income, they usually escape Social Security and Medicare taxes, but they also don’t build Social Security earnings credits.

Medical Residents

Residents perform substantial clinical work, and their stipends are almost always treated as taxable wages reported on a W-2 with federal income tax, Social Security, and Medicare withheld by the hospital.

Internships

If the company benefits from your work, the payment is compensation and will typically show up on a W-2 or 1099-NEC. Purely educational internships where the employer gets no direct benefit may avoid that classification, but most paid internships involve productive work and the stipend is taxable.

Arts Grants and Non-Profit Stipends

Grants from arts foundations or community organizations generally fall outside Section 117 because they aren’t tied to a degree program at an eligible school. If the grant requires a deliverable, the payment is compensation. Even unrestricted artist grants are taxable as ordinary income, though they usually don’t trigger self-employment tax unless service is attached.

International Students and Non-Resident Aliens

If you’re in the U.S. on a student or scholar visa, the rules layer. Foreign students on F-1, J-1, or M-1 visas who have been in the U.S. for fewer than five calendar years are generally non-resident aliens, and wages for services permitted by the visa (on-campus work up to 20 hours per week during the school year and 40 hours in summer) are exempt from Social Security and Medicare taxes. That exemption ends once you become a resident alien, typically after five calendar years.¹³

A tax treaty between the U.S. and your home country may reduce or eliminate federal tax on scholarship or fellowship income. You claim the exemption by giving the paying institution a Form W-8 BEN with your Social Security Number or Individual Taxpayer Identification Number on it; without the number, the institution can’t apply the exemption.¹⁴ Treaty benefits usually have time limits, so check the terms of your specific country’s treaty.

Stipend income paid to a non-resident alien is reported on Form 1042-S rather than a W-2 or 1099, except that amounts qualifying as tax-free under Section 117 don’t require Form 1042-S reporting at all.¹⁵ Non-resident aliens file on Form 1040-NR instead of Form 1040.

How Taxable Stipends Affect Financial Aid

A taxable stipend raises your adjusted gross income, which feeds into the Student Aid Index on the FAFSA and can shrink need-based aid in later years. The FAFSA formula includes an offset for taxable college grant and scholarship aid reported as income, which softens the hit for both dependent and independent students, but the offset only covers amounts you reported as taxable income.¹⁶ A stipend properly excluded under Section 117 shouldn’t move your FAFSA number at all.

Keep clean records of what you paid in qualified tuition and fees and what you spent on everything else. Those numbers protect both your tax return and your next financial aid application.

1
Office of the Law Revision Counsel. 26 USC 117 – Qualified Scholarships
2
Internal Revenue Service. Publication 970 Tax Benefits for Education
3
National Institutes of Health. NIH Grants Policy Statement – Stipend Supplementation, Compensation, and Other Income
4
Internal Revenue Service. Your Scholarship, Fellowship or Grant May Be Tax-Free
5
Office of the Law Revision Counsel. 26 USC 117 – Qualified Scholarships
6
Internal Revenue Service. 2025 Schedule 1 (Form 1040)
7
Internal Revenue Service. Estimated Taxes
8
Internal Revenue Service. Form 1040-ES, Estimated Tax for Individuals (2026)
9
Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
10
Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026
11
Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
12
Internal Revenue Service. Topic No. 554 – Self-Employment Tax
13
Internal Revenue Service. Foreign Student Liability for Social Security and Medicare Taxes
14
Internal Revenue Service. Claiming Treaty Exemption for a Scholarship or Fellowship Grant
15
Internal Revenue Service. Instructions for Form 1042-S
16
U.S. Department of Education’s Federal Student Aid. 2026-27 Student Aid Index (SAI) and Pell Grant Eligibility Guide