Does AmeriCorps Stipend Count as Income?

AmeriCorps provides its members with a living allowance and a Segal Education Award upon successful completion. Understanding the tax implications of this compensation is a common concern for members. This guide analyzes how the Internal Revenue Service (IRS) treats these distinct forms of payment.

Taxability of the Living Allowance

The living allowance received by AmeriCorps members is considered taxable income by the IRS and is treated in the same manner as wages from traditional employment. The organization administering the AmeriCorps program handles this income like a typical employer, which includes withholding federal and applicable state income taxes, as well as Social Security and Medicare (FICA) taxes.

Consequently, members will receive a Form W-2, Wage and Tax Statement, at the end of the year, not a Form 1099-MISC for these payments. The Form W-2 will detail the total living allowance paid and all taxes withheld.

Tax Treatment of the Segal Education Award

The Segal AmeriCorps Education Award is also taxable income, but its treatment differs significantly from the living allowance. The award becomes taxable only in the year it is used, not the year it is earned.

When a member uses all or part of their award, the National Service Trust, which administers the funds, will issue an IRS Form 1099-MISC for the amount used if it totals $600 or more in a calendar year. Unlike the living allowance, no taxes are withheld from these award payments. The recipient is solely responsible for calculating and paying the income tax due on the amount of the award they used.

This lack of withholding requires careful financial planning, and members should set aside a portion of the funds to cover their tax liability. While there have been legislative efforts, such as the Segal AmeriCorps Education Award Tax Relief Act, to make the award tax-exempt, it remains taxable under federal law.

Reporting AmeriCorps Income on Your Tax Return

For the living allowance, the total wages shown in Box 1 of your Form W-2 should be reported on the wages line of Form 1040. The federal income tax withheld, found in Box 2 of the W-2, is also entered in the designated section for payments on Form 1040.

Reporting the Segal Education Award requires a different form. The amount of the award you used during the tax year will be reported in Box 3, “Other Income,” on Form 1099-MISC. This amount must be reported on Schedule 1 (Form 1040), Additional Income and Adjustments to Income, specifically on the line for “Prizes and awards”. This income must also be included on any required state tax returns.

Interaction with Education Tax Credits

Using a Segal Education Award can affect your eligibility for federal education tax credits, such as the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). The IRS has rules to prevent “double-dipping,” which means you cannot use the same qualified education expenses to claim a tax credit and to justify the tax-free portion of a scholarship or grant.

You can claim an education credit in the same year you use your Segal Award, but not for the same expenses. For example, if you have $10,000 in qualified tuition and fees and use a $6,000 Segal Award to pay for part of it, you can only use the remaining $4,000 of expenses to calculate a potential AOTC or LLC.

This requires a strategic allocation of expenses to maximize tax benefits. The AOTC, for instance, is available for 100% of the first $2,000 of qualified expenses and 25% of the next $2,000, for a maximum credit of $2,500. A student might choose to use their personal funds to pay for the first $4,000 of expenses to maximize the AOTC and then use the Segal Award for any remaining costs. IRS Publication 970, Tax Benefits for Education, provides detailed guidance on coordinating scholarships and tax credits.