# Stipend: Definition, Types, Benefits, and Tax Implications

![Stipend: Compensation paid to certain individuals to help cover basic costs while they receive training.](https://www.investopedia.com/thmb/HTMMPpa_8-D2kHh0Wp06qhx1LQQ=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/stipend.asp-Final-932919e0f5104b3d87428e6240443739.jpg)

*— Yurle Villegas / Investopedia*

## What Is a Stipend?

 A stipend is a fixed monetary amount offered as support during periods of training or employment for roles that might otherwise not provide compensation. Commonly allocated to [interns](https://www.investopedia.com/articles/investing/011316/job-or-internship-guide-college-students.asp), trainees, students, and clergy, stipends help offset living costs or training expenses, although they come with tax responsibilities. Understanding the parameters and implications of stipends can guide recipients in managing their financial obligations effectively.

### Key Takeaways

*   A stipend is a fixed sum of money provided to individuals to help cover expenses during training or unpaid work.  
    
*   Stipends are typically not subject to withholding tax by employers, but recipients must pay applicable taxes themselves.  
    
*   Common recipients of stipends include interns, apprentices, students, and clergy members.  
    
*   Government regulations allow stipends to fall below minimum wage as long as they are used for training purposes.  
    
*   Stipends can cover various expenses such as housing, food, travel, health insurance, or wellness programs.

## Understanding the Mechanics of Stipends

A stipend is often offered to individuals as a fixed sum and is commonly paid to the recipient as a lump sum payment. This type of compensation is sometimes called an allowance and is normally provided on a daily, weekly, or monthly basis.

A stipend is usually offered as compensation for training instead of salaries for employment purposes. That being said, it allows people to pursue work that is normally unpaid by helping defray living expenses.

Common recipients of stipends include interns, apprentices, fellows, and clergy. Rather than being paid for their services, they’re given stipends as financial support while they engage in the service or task at hand. A stipend often includes other benefits, such as higher education, room, and board.

Rules outlined by the U.S. Department of Labor (DOL) exist surrounding how stipends can be used by companies and organizations. Stipends cannot be used to hire students to replace existing staff, and the students must be the primary [beneficiaries](https://www.investopedia.com/terms/b/beneficiary.asp) of the employment or training—not the company. Also, a stipend may be lower than the minimum wage as long as it’s used to pay trainees.

For W-2 employees, stipends can add to a salary but can't replace it.

The stipend amount varies based on the assigned task or the expense covered. For instance, a company may pay a trainee $450 for a week’s worth of training or a church may pay a clergy member $1,000 for living expenses.

> **Important**
>
> Most stipends are considered taxable income, so you’ll have to pay the entire 15.3% withholding tax out of your own pocket. This includes both your portion and the employer’s portion.

## Important Factors to Consider With Stipends

If you receive a stipend, there are certain things you must consider. One of the main advantages of this type of compensation is that you may get to keep what you earn depending on your employment status. Depending on your status, you may not have taxes withdrawn to pay for [Medicare](https://www.investopedia.com/terms/m/medicare.asp) and [Social Security](https://www.investopedia.com/terms/s/socialsecurity.asp).

Remember, most stipends are considered taxable income. This means recipients need to set aside a portion of their earnings. For the 2024 tax year, the withholding rate for both programs is 15.3%: 12.4% for Social Security and 2.9% for Medicare. Half of this is paid by the employer.

Recipients should be careful about how their payments are classified. Students and interns should be classified as such. If the company identifies you as an employee, your stipend may be taxed and you won’t receive the full amount.

 In this case, you are entitled to [minimum wage](https://www.investopedia.com/terms/m/minimum_wage.asp) and overtime pay, if applicable. On the other hand, employees should ensure they aren’t considered trainees. This could lead to complications with their pay.

> **Fast Fact**
>
> Not all stipends are considered taxable. For instance, fringe benefits like parking are only taxable after a certain amount. Consult a tax advisor if you're unsure about your stipend's tax implications.

## Exploring Different Types of Stipends

As mentioned above, stipends are not hourly-based pay and are often used by employers as a lower-cost option to pay interns or to offset the cost that individuals bear while executing certain services.

As such, stipends can vary depending on the company or organization that pays them. Many companies offer stipends to cover housing, food, or travel costs. Here are just a few of the types of stipends that are offered.

### Academic Research Stipends

Stipends are commonly offered to researchers at academic institutions or other related organizations to help them focus on their projects.

Much like [grants](https://www.investopedia.com/terms/g/government-grant.asp), these stipends may be furnished by third parties who wish to see a particular study or form of research advance further without fiscal distractions that may otherwise hamper the researcher.

Foundations may also offer stipends to support researchers and their projects.

### Expense-Related Stipends

Stipends might also be offered to cover very specific costs and expenses. For instance, students could receive a stipend that must be used toward the purchase or lease of computers during academic semesters. Alternatively, stipends may be issued to help defer the cost of transportation incurred by the recipient to and from the company for training purposes.

### Health Insurance Stipends

Since employers don’t have to offer health benefits to interns, some of them may offer their workers extra money by adding it to their paycheck to help them with [health insurance](https://www.investopedia.com/terms/h/healthinsurance.asp) costs. Individuals can then use this extra cash to put toward paying for their insurance premiums for coverage that can be purchased either through the healthcare exchange or directly from private insurers.

### Wellness Program Stipends

Health and wellness are now an important part of the work-life balance that many employers promote. So it’s only natural that a lot of companies also offer stipends for employees that can be used for a variety of fitness expenses, such as gym memberships, yoga classes, or even personal trainers, as part of a wellness program.

### Job Training Stipends

Some companies offer stipends to employees who wish to take additional training and classes that may assist them with their jobs and career development. The employee may enroll and pay for classes or additional training, for which the employer provides a [reimbursement](https://www.investopedia.com/terms/r/reimbursement.asp).

## Real-World Stipend Examples

Many corporations and organizations offer stipends to workers and other individuals. The following are just a few examples that are found in the real world.

*   The National Endowment for the Humanities offers grants in the form of stipends to support individuals who conduct advanced research that may be of interest to the general public or scholars. The organization has given out $5.6 billion in more than 64,000 grants. The types of research projects eligible to receive such stipends may include books, translations, articles, digital publications, or site reports on archaeological digs. To receive a stipend like this, the recipient must ensure the project does more than collect data. Analysis and interpretation of the gathered information must be included.
*   Health and wellness stipends are growing in popularity. Microsoft ([MSFT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT)) offers full-time employees $1,200 per year for wellness-related expenses, such as gym memberships, fitness classes, financial advising, debt management, or massages, for example. The cost of the chosen services is reimbursed to the employee in addition to other healthcare benefits, such as medical, dental, or vision care.
*   Professional development is another popular employer-sponsored stipend. Apple ([AAPL](https://www.investopedia.com/markets/quote?tvwidgetsymbol=AAPL)) reimburses employees for formal education expenses related to furthering their careers at Apple, including tuition.

## How Is a Stipend Different From a Salary?

A salary is compensation for work performed and is a set amount, typically per year. A stipend, on the other hand, is not considered compensation for work, but rather monetary support for a variety of possible factors, such as expenses incurred during traveling or during a training period, or to cover certain living expenses. Stipends are also typically lower in amount. As such, they are often lower than minimum wage and are not regulated by the state but provided at the discretion of the employer.

## Is a Stipend Considered Income?

Stipends are not considered as wages, so employers will not withhold income tax on any stipends made to employees. However, stipends are often considered income, so you as an individual will have to calculate and pay taxes on any stipends received; this includes Social Security and Medicare. It is important to check with your employer on the tax implications regarding any stipends.

## How Often Are Stipends Paid to an Employee?

How often stipends are paid out to an employee will vary depending on the institution and the circumstances. Stipends can be paid out weekly, monthly, or annually. Most often they will not be paid out annually, as they are considered a form of support and the individual may need that monetary amount throughout the year. It is common that stipends are paid out as often as an employee’s salary.

## The Bottom Line

Stipends serve as financial support for individuals engaged in career training or unpaid work, like interns, students, and trainees, helping to offset living expenses. Typically less than minimum wage, stipends are a fixed amount that can also accompany a salary to support employees with additional costs, including housing, travel, and health insurance.

While they provide financial relief, recipients must be mindful of the tax implications, as most stipends are taxable income. Understanding stipend structures and their benefits can aid in informed financial decision-making and in maximizing their utility.

> **Article Sources**
>
> 1.  U.S. Department of Labor. “[Fact Sheet #71: Internship Programs Under the Fair Labor Standards Act](https://www.dol.gov/agencies/whd/fact-sheets/71-flsa-internships).”
>     
> 2.  Internal Revenue Service. “[Self-Employment Tax (Social Security and Medicare Taxes)](https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes).”
>     
> 3.  Internal Revenue Service. “[Topic No. 751, Social Security and Medicare Withholding Rates](https://www.irs.gov/taxtopics/tc751).”
>     
> 4.  Internal Revenue Service. “[Qualified Parking Fringe Benefit](https://www.irs.gov/charities-non-profits/qualified-parking-fringe-benefit).”
>     
> 5.  National Endowment for the Humanities. “[Grants](https://www.neh.gov/grants).”
>     
> 6.  National Endowment for the Humanities. “[Information for First-time Applicants](https://www.neh.gov/information-first-time-applicants).”
>     
> 7.  Premera. “[Microsoft Health Programs](https://www.premera.com/documents/046723.pdf).”
>     
> 8.  Apple. “[Careers at Apple](https://www.apple.com/careers/us/benefits.html).”