Self-Employment Tax on Stipends

A stipend is generally paid as part of a scholarship, fellowship or grant given to university students or postgraduate scholars. Stipends are also paid to nonresident aliens working as au pairs. For students, the stipend may be paid for a specific purpose or as a general grant. The self-employment tax paid on stipends depends on whether it is paid to a U.S. citizen or to a nonresident alien, and on whether it is paid to a degree candidate or a nondegree candidate.

Stipends paid to university students who are U.S. citizens or resident aliens do not need to be reported to the Internal Revenue Service (IRS) as income, as long as the money is to be used for education, such as to pay for tuition, fees, supplies and equipment. Stipends that are used to pay for food, housing or other incidental expenses are taxable and should be reported as income. Stipends that are paid to students in exchange for teaching, research or other work, also need to be reported as income.

Stipends that are given to nondegree candidates, such as postdoctoral scholars or research fellows, are considered as taxable income by the IRS. These stipends must be reported on your self-employment income tax forms. Research stipends also need to be reported as taxable income, but you may be able to deduct some of the stipend amount from your taxes. For example, you may be able to deduct travel costs and expenses related to your research.

All stipends paid to nonresident aliens are taxable as income, unless the stipend is from an overseas source, such as an institution in the students' home country. Stipends paid to nonresident aliens who are on visas that state they are students, teachers, researchers, au pairs, trainees, physicians or scholars are subject to a federal withholding tax of 14 percent. All other nonresident aliens must pay a federal withholding tax of 30 percent on stipends. Nonresident aliens who are paid a stipend in exchange for work on campus, such as teaching or research, are exempt from paying withholding tax on the income.

Some foreign residents may enter the United States on special visas allowing them to work as au pairs. Foreign au pairs enter the United States on a J-1 visa, which allows them to stay in the U.S. for one year and to be paid a stipend of $195.75 per week, in addition to room and board and a $500 education allowance. Au pairs must be between 18 and 26, and must attend an educational institution part time. The stipend paid to an au pair is considered a wage and is taxable. Au pair stipends need to be reported on self-employment taxes, although it is more common for au pairs to file form 1040EZ. Stipends for au pairs are also subject to a 14 percent withholding tax.