Stipends and per diem

Most agencies pay stipends through an accountable plan. The IRS says the plan must meet three rules.[1]

• The costs must be tied to your work.[1]
• You must account for them to your employer within a reasonable time.[1]
• You must return any extra within a reasonable time.[1]

If a plan breaks these rules, the money is added to your wages on your W-2.[1]

The GSA sets per diem rates for each area. They cover lodging plus meals and incidentals.[2]

If your stipends are at or below the federal rate, they are not put in your taxable wages.[1] If they are higher, the extra is taxed as wages.[1]

Rates change each October 1. Look up the ZIP code on GSA.gov.[2]

Stipends are only tax-free when you travel away from your tax home for work.[1] Read What a tax home is.

Some packages lower the hourly rate and raise the stipends. The IRS has said that turning wages into tax-free pay this way doesn't work.[3]

This guide is general information, not tax advice.