What Is a Stipend?
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A stipend is a payment made to a trainee or learner for living expenses, unlike a salary or wages, which are paid to an employee.
Though the terms "stipend" and "salary" are often used interchangeably, the U.S. Department of Labor has a specific stipend definition with several criteria that must be met to pay a stipend.
To merit a true stipend check, the job must focus on training rather than employment, says the University of Washington.
Defining a stipend:
- The training must be predominantly for your own benefit, not the employer’s
- You can't be entitled to a job at the end of the training
- You can't displace regular employees
- You and the employer must both acknowledge that you aren’t entitled to wages for training time
Minimum Wage Not Required
If you meet the requirements to be considered a trainee rather than an employee, the amount of the stipend is at the employer's discretion. Your stipend check can be less than the minimum wage.
Are Stipends Taxable?
Stipend checks aren’t considered wages so you won't pay Social Security or Medicare taxes on them. But they still count as taxable income when it comes to your income taxes.
Here’s the catch: your employer won't withhold any income taxes from that stipend check. So you’ll need to set aside some of your stipend money to pay any taxes you owe at the end of the year.
If you’re working for an employer, rather than being in a trainee or student position, make sure your payments are not classified as stipend checks.
Why not? Because “stipend” means you can be significantly underpaid.
If you’re classified as an employee, you're entitled to the minimum wage as well as overtime pay, which means 1.5 times your normal hourly rate for any hours worked over 40 in a given week.
If you’re only getting a stipend, you’re not entitled to either one.