Can You Use Stipends for Self-Employment?

As a small business, the capital to pay a staff of employees or contractors may not be present, particularly as you strive to grow the business. However, the need for additional staff may be crucial to your operation. Without large loans or investments and a new operation, stipends may be a viable way to get the staffing you need.


While a stipend is deemed as compensation, it is actually payment paid for services in lieu of wages or salary. Stipends are regarded as payment for services that are generally unpaid. Thus, they are often viewed as a reward. Self-employed individuals may find the smaller scale of stipends to be helpful in managing financial records such as bank accounts and determining the eventual salary levels of certain positions and services.

Stipend Benefits

As a member of the self-employed community, paying stipends can be a great way to save money in the beginning. Stipends can also help self-employed individuals reduce their taxable income since stipends are considered a business expense.


Stipends can be a great way for self-employed individuals to attract interns, since they will receive some monetary compensation for their work. In addition to interns offering another way to save money, they also can provide valuable insight in regards to ideas to improve the business and can increase productivity, particularly if they are given more than mundane tasks to perform.

Taxation on Stipends

The Internal Revenue Service does tax stipends. Those who receive stipends must pay estimated quarterly taxes to the state in which they reside and to the IRS. The IRS requires estimated tax payments for those who anticipate owing more than $1,000. A new trend for employers who pay stipends is to offer a health insurance stipend to workers that will help them with their health-care needs. The stipend is taxable to the worker. Stipends paid to independent contractors are not taxable for self-employed individuals according to the IRS; however any income received by interns must be reported but will lessen the taxable income of the self-employed, small-business owner.