Difference between Stipend and Salary

What is a Stipend?

A stipend refers to a fixed amount given periodically for services provided or to cover expenses. It is often offered to various individuals, such as students, apprentices, trainees, interns, and clergy members, as a form of payment. Stipends are commonly used to help offset specific costs and may be provided alongside or instead of a regular salary. They are typically given as a single payment and might include benefits such as accommodation, education assistance, and meals....

How do Stipends Work?

1. Purpose and Nature of Stipends: Stipends, despite sharing a similar structure with salaries in the form of fixed monthly payments, serve a distinct purpose. Stipends function more as financial aid. They support individuals involved in training or learning experiences, acting as training allowances rather than payment for services rendered. This distinction is particularly evident in the case of interns, who often receive stipends instead of traditional wages....

Types of Stipends

1. Training Stipends: A training stipend serves as compensation for individuals undergoing job-related training, continuing education, or career development. It aims to assist in covering basic living expenses during the training period and can complement a regular salary. It encourages individuals to pursue further professional growth and skill development....

Real-World Examples of Stipends

1. Facebook Internship Benefits: Facebook provides interns with a $1,000/month stipend, in addition to a range of other benefits. These include assistance with child care, health club memberships, life insurance coverage, support for relocation expenses, and various health benefits for employees. These benefits aim to support interns during their internship period and contribute to their overall well-being and professional development....

Who Qualifies to get a Stipend?

1. Trainees: Trainees undergoing job-related training or apprenticeships may receive stipends to assist with essential expenses during their training period, providing financial support while they gain valuable skills....

Tax on Stipend

1. Taxable Scholarships: Stipends listed on Form 1042-S with income code 16 in box 1 are classified as taxable scholarships for permanent residents, US citizens, and resident aliens for US tax purposes. Recipients must report this income on Form 1040-NR line 1 and ensure correct classification in tax software to prevent misinterpretation and avoid potential errors in taxation....

Difference between Stipend and Salary

Basis Salary Stipend Nature of Payment Salary is the fixed remuneration for regular work performed as part of a job. A stipend is a fixed payment to interns, trainees, or apprentices for living expenses during learning experiences. Recipient & Relationship Salaries are paid to employees in an employer-employee relationship. Stipends are paid to apprentices, interns, or fellows in a mentor-student relationship. Tax Implications Salaries are taxable income, subject to income tax, Social Security, and Medicare withholding. Stipends shall or shall not be taxable, depending on the context and purpose. Educational stipends may be tax-exempt, while work-related stipends are often taxable. Flexibility & Increment Salaries can vary based on performance, merit, or annual increments. Stipends are fixed amounts that usually do not change during the stipend period. Purpose & Usage Salaries are used for general savings, living expenses, and discretionary spending. Stipends are designated for specific purposes, such as healthcare, education, or travel, and recipients may need to provide evidence of expenditure....

Stipend – FAQs

Can the stipend be paid in cash?...