Will I be taxed on this stipend? Is it considered income/tax deductible?

They are advising you that your stipend is taxable and must be reported to the taxing authorities as income. There is no withholding so you may have to file a Schedule C or simply report it as other income not subject to self employment tax. Whatever way they report it to you such as a 1099misc you will need to put that as income on your 2010 tax forms. Consult someone at H & R Block at that time. In the meantime if you have legitimate expenses such as supplies, car expenses or books then that can be charged against your earnings.