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It’s no secret that traveling medical professionals get paid well. With a paycheck every week and the potential for tax-free stipends, becoming a traveler can look very appealing to many medical professionals. Travelers are paid by their travel agency, and their paycheck consists of two main parts: the hourly wage and stipends.
Hourly wage
The hourly wage, often considered the “base pay,” is taxed just as it would be for a full-time employee at a hospital. The hourly wage is, unsurprisingly, the amount you get paid for every hour worked. For example if the hourly wage was $20/hr and 40 hours were worked in one week, the base pay would be $800/week before taxes and deductions ($20/hr x 40 hrs/week = $800/week gross).
Tax-free stipends
However what makes travel pay so lucrative is the tax-free stipends. Most travelers can receive anywhere from 40-70% of their pay from tax-free stipends. Stipends are essentially the ‘spending allowance’ you get each week to cover living expenses at your work location. The idea of these stipends was implemented by the Internal Revenue Service (IRS) as a way to alleviate the strain of duplicating expenses between your main ‘tax home’ and your temporary home while on a travel contract. Stipends are great because they are not taxable by the IRS and don’t show up on your annual W-2 form as long as you are able to prove you are maintaining a tax home as well as paying for temporary lodging.
A ‘tax home’ and how to maintain one for tax purposes as a traveler will be defined and explained in greater detail in a later post, but for now, just think of stipends as tax-free.
How do stipends work?
Although it varies depending on the travel agency, stipends are usually divided into three main types: travel, housing, and meals & incidentals (M&I). These stipends are tax free and do not show up on your W-2 tax form at the end of the year.
The travel stipend is an allowance designed to cover your expenses while traveling to and from the contract location. Usually it's around $400 that will be paid on the first and last paycheck of each new contract.
Housing stipends cover your lodging costs and are paid weekly.
M&I stipends take care of food and incidental expenses accrued during your contract. They are also paid weekly.
GSA
Housing and per diem stipend maximums are dependent on the location of your assignment and are set by the U.S. General Services Administration (GSA). High cost of living areas-- like California, New York, and Florida-- typically pay higher stipends. You can search for these rates at: https://www.gsa.gov/travel/plan-book/per-diem-rates. The per diem rates are listed as “daily allowances” to calculate how much you would receive per day, just multiply that number by seven to get your weekly rate.
Using or Losing your Housing Stipend?
While you are on a travel contract, your housing should be covered by your travel agency. There are two ways this can be accomplished. One way is the agency provides you with housing for the duration of your contract. This way the agency takes responsibility for researching and finding a place for you to stay. However, since housing is provided for by the agency, you will not be given a housing stipend on your weekly paycheck.
The other-- and most common-- option is to opt out of agency-provided housing and, instead, take the housing stipend to find your own lodging. This option is the most lucrative because usually travelers are able to secure housing for much less than the allotted stipends, and therefore, can pocket the remainder of the stipend.
Tax free stipends often allow travelers to make two or three times as much as permanent employees at the same facility. This increased pay is even further recognized when your tax liability is a fraction of what your coworkers pay. As a contractor, you give up some of the stability in having a staff job. However, it is well worth it when payday arrives.
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