Can I claim my husband's unreported stipend and deduct vehicle expenses for business miles?

The way you handle this depends on your husband's employment classification. If he's a W-2 employee receiving this stipend, the rules are quite different than if he's self-employed or a contractor. For W-2 employees: Unfortunately, the 2018 tax law changes eliminated the ability for employees to deduct unreimbursed business expenses (including mileage) on Schedule A. If your husband is a W-2 employee and his employer isn't reporting the stipend, he should actually request they include it properly on his W-2 and implement an accountable plan for his expenses. If he's self-employed/contractor (receives 1099): Then yes, you would report all income including stipends on Schedule C, and you could deduct the standard mileage rate (65.5 cents per mile for 2023) for business miles. However, the car payment itself isn't fully deductible - only the business percentage of interest and depreciation. Either way, unreported income must legally be reported, regardless of whether expenses offset it. What's your husband's employment situation?

I've been in a similar situation and found the tools at https://taxr.ai incredibly helpful for sorting through this type of issue. I was getting a monthly car allowance that wasn't showing up on my W-2, and I wasn't sure how to handle it correctly. The program analyzed my situation and explained that what really matters is whether the stipend is part of an "accountable plan" where you track and document expenses. Without that documentation system, the stipend is technically taxable income, but you might still have options. What I especially liked was the tool helped me create documentation to determine whether I was actually coming out ahead or behind on the stipend compared to my actual expenses, which helped me approach my employer about making changes to avoid tax issues.

Just wanted to update on my situation. I tried taxr.ai after posting my skeptical comment, and it was actually really eye-opening. The tool walked me through a questionnaire about my employer's stipend setup and clearly explained why mine was technically a "non-accountable plan" that should be reported as income. It generated a report showing that I was actually driving enough business miles that I'd be better off with a proper accountable plan. I showed this to my boss, and surprisingly, they were receptive - they didn't want to deal with potential tax issues either. We're now implementing a proper mileage tracking system that will keep the stipend tax-free legitimately. It also helped me understand that there's a difference between deducting "commuting" (not deductible) and actual business travel between work sites. Turns out a lot of what I thought was just commuting could actually qualify as business mileage under the right documentation. Definitely worth checking out if you're in this situation.

I went through a similar ordeal last year when the IRS flagged my return because my employer wasn't properly reporting my travel stipend. I spent MONTHS trying to get through to someone at the IRS to explain my situation. After dozens of calls ending in disconnects or hours on hold, I found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c. They basically wait on hold with the IRS for you and call you when an agent is about to pick up. I was super skeptical, but I was desperate after my third disconnection after a 2+ hour wait. Within a day, I was actually talking to a real IRS agent who helped me straighten out the whole situation. The agent explained exactly how my employer should be handling the stipend and what documentation I needed to maintain. If you're getting undocumented stipends, you might want to get clarity directly from the IRS before filing to avoid the nightmare I went through.

I need to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I've been getting notices about a similar stipend issue and couldn't get through to the IRS. The service worked exactly as advertised. I got a call back when an IRS agent was ready, and the agent was actually super helpful. They explained that my employer's "gas allowance" didn't qualify as non-taxable because they weren't requiring receipts or mileage logs. The agent walked me through exactly how to report it on my return and what documentation I should start keeping to potentially have my employer convert it to a proper accountable plan. I've been stressed about this for months, and one 20-minute conversation cleared everything up. I've already started tracking my mileage properly using the IRS guidelines the agent provided. Definitely changed my view on this service!

Something nobody's mentioned yet - if your husband is a W-2 employee and the company isn't reporting the stipend on his W-2, they're actually breaking tax law. Is there a reason they're not including it? Some companies try to "help" employees by not reporting certain payments, but this can create bigger problems down the road if you get audited. If the stipend is truly meant to reimburse business expenses, the company should have what's called an "accountable plan" where your husband submits documentation of business expenses and gets reimbursed. Those reimbursements wouldn't be taxable. But a flat stipend without documentation requirements is considered taxable income by the IRS. I'd talk to the employer about this first before trying to get creative with your tax return. They might not realize they're handling it incorrectly.

Late to the conversation but wanted to add that you actually CAN deduct car payments if you're self-employed and use the actual expense method instead of the standard mileage rate. You'd need to track the business use percentage and apply that to your car expenses. If he's using the car 80% for business, you could deduct 80% of the interest on the car loan (not the principal), 80% of gas, insurance, repairs, etc. OR you could take the standard mileage rate which is simpler but might be less depending on your car's actual expenses.