What Travel Nurses Need to Know about Stipends and Tax Homes

If you are considering becoming (or already are) a travel nurse or other travel healthcare professional, it is important that you understand stipends and the IRS rules around them. In this article, we will dive into questions travel healthcare professionals usually ask in regards to stipends and tax homes. 

What are travel stipends?

When you look at the pay breakdown for a travel nurse (or other travel healthcare professional), you’ll typically see 2 main categories: hourly wage and stipends. 

Hourly Wage

The hourly wage can further include things like an overtime wage or on-call wage. The main point here is this money is taxed (just like the hourly pay you would receive at a staff job). Depending on the agency supplying your travel contract, and the location of the contract, the hourly wage can look rather low. This is because a large portion of your total paycheck comes in the form of stipends.

Stipends

Stipends (also called per diems) are most often broken into two categories: meals and incidentals (often abbreviated as “M&I”) and a housing stipend.

Your M&I stipend is tax-free money given to cover food and other incidental expenses while traveling away from home for work purposes. 

Your housing or lodging stipend is tax-free money meant to cover the cost of temporary housing at the location of your travel assignment. 

The big thing to understand with stipends is that they are tax-free money given to cover the expenses associated with taking a job away from your normal home. Stipends provide a huge advantage for travel professionals. However, in order to receive tax-free stipends, you have to qualify by meeting IRS standards. 

Unfortunately, travel agencies and recruiters are often not knowledgable when it comes to the tax code. It is up to you as a professional to understand and follow IRS rules. 

How do I qualify for stipends?

In order for the government to allow you to receive tax-free money in the form of stipends, you must 1-maintain a tax home and 2-incur travel-related expenses while away from your tax home for business purposes. 

What is a tax home, and how to I maintain it?

For most people, a tax home is the general area or entire city/metropolitan area where they normally conduct business and earn money. Due to the nature of travel nursing, our definition of a tax home is a bit more complicated. Because we do not have any one place where we normally conduct business, our tax home is more often where we live. Still, we have to prove to the IRS that we have a tax home. Otherwise, we would be considered an itinerant worker (that’s not a bad thing, but it means that you don’t qualify for tax free stipends). 

Now, let’s take a few more steps to maintain (or prove to the IRS) our tax home. 

Option 1 for maintaining your tax home: Working in the tax home on a regular, cyclical basis

If you have a PRN or part time job that you regularly return to and roughly 25% of your income or more is obtained from the PRN or part time job, then you can qualify that metropolitan area as your tax home. 

More on this later, but you want to be careful that you are not unintentionally turning a different location into your tax home by returning too regularly. 

*Just a quick note here- the 25% of your income isn’t a hard written IRS rule, but a recommendation I received from a tax professional. Also, I do recommend doing a tax consult for yourself regarding your personal tax situation. I used traveltax.com.

Option 2 for maintaining your tax home: Duplication of housing expenses

Duplicating expenses means that you are paying for lodging both at your tax home and at your assignment. This needs to be for the duration of your contract, not only the days that you are working. It is also expected that you are remaining at the assignment location for the duration (yes, you can still take a trip home or a vacation elsewhere. You can’t travel home each week without having eligibility the M&I portion of your stipend jeopardized). 

Don’t abandon your tax home

Another part of maintaining your tax home is keeping close ties to the area. Having a home or apartment that you pay for helps with this, but you also have to return to it frequently. According to the tax consult I mentioned before, it is recommended that you live in your tax home at least 30 days out of the year between assignments. The 30 days do not have to be consecutive. The 30 days is a recommendation I received from the consult, not a written IRS rule. It’s a good idea to keep some receipts as proof that you return to your tax home regularly. 

Don’t accidentally make a travel assignment your tax home

If you can help maintain your current tax home by returning to it year after year, it makes sense that you risk creating a new tax home if you take an assignment in the same city multiple years in a row. This can outweigh returning to your intended tax home year after year, because you are also making money at the assignment location. 

In addition, if you stay at an assignment longer than a year, this is seen as a permanent move. This would also disqualify you from receiving stipends. 

Here are a couple of rules to remember:

• Do not work in the same area more than 12 months in a 24 month period
• Do not return to the same area for 3 years in a row

What counts as “incurring travel-related expenses for business purposes”?

Another criteria you must meet to qualify for stipends as part of your travel pay package, is travel far enough to need additional expenses for lodging and meals. The IRS does not actually set a milage number for this. Instead, it’s defined as far enough away that you need to stop and rest/sleep before you could return home. So, if you go to work, then return home to sleep, you are proving to the IRS that you do not qualify for tax-free stipends. 

Also, if you are staying with a friend and not either paying rent or splitting the rent, then you are of course not incurring travel-related expenses on your assignment. 

Luckily, you do still get to keep what you do not spend for travel expenses. This is where a lot of benefit from traveling can come into play- especially if you are able to find inexpensive housing. 

What about the 50-mile-rule?

A lot of travel agencies and recruiters will tell you that you qualify for stipends as long as the assignment is 50 miles or more from home. The advice I received from the tax consult previously mentioned recommended being a 90 minute drive or further away, or further than what would be considered a normal commute for that area.

That said, I’m sure the travel agencies also received the 50 mile suggestion from their own tax professional. Just know that there is no 50 mile rule from the IRS. The choice is up to you, but again I recommend talking it through with a tax professional yourself since the IRS leaves this a bit ambiguous. 

What if I don’t qualify for stipends?

If you don’t qualify for stipends, but you do work travel contracts, you will simply need to have all of your pay package taxed.

 One example of this is an itinerant worker- someone who travels from job to job and does not have a tax home.

While you won’t receive the tax free benefit of a stipend, you also don’t have the financial hardship of duplicating expenses. In some cases, this could be better financially.

One caveat- in my experience, some travel agencies don’t give you the option of taking a fully taxed package, or they may not be able to offer the same pay as they do for someone that does qualify for stipends. This is not to say that it’s not possible or worth-while. It certainly can be, and there are a lot of travelers that go the itinerant route, but the agency limitations is something to be aware of before making that decision. 

Now that you have a better understanding of stipends and tax homes, you may be wondering if travel nursing is still worth it (financially speaking anyway). The article linked above should help you figure that out. 

I also have a calculator that I use to compare multiple contract offers at the same time (it factors in duplicating expenses).

One more suggestion- this post will be helpful in determining if a contract you are considering is a good idea or not.