Is That Stipend Really Tax-Free? Here's How to Know

Travel nurses and allied clinicians know the perks of the job often come with a side of paperwork, and nothing gets more confusing than tax season. Stipends sound great - extra cash for housing and meals? Yes, please. But when tax time hits, that ‘free money’ could come back to bite. Here’s how to protect your take-home pay - and your peace of mind.

This is Part 2 in our three-part series on travel clinician taxes. In Part 1, we explored how to file in multiple states and avoid underpayment penalties. Here, we’re diving into stipends, reimbursements, and the all-important concept of your tax home - because if you don’t have one, those untaxed stipends could become taxable income real fast.

💡 Quick Answer: Your stipend can be tax-exempt - but only if you have a real tax home, your agency uses an accountable plan, and your records are airtight.

All information is accurate as of September 2025. IRS guidelines, including Publication 463 (2024) and Notice 2024-68 on per diem rates, are current and applicable to the 2025 tax season.*

*Where IRS guidance for the 2025 filing year is not yet available, the most recent official publication has been used (typically 2024).

Your tax home isn’t just where you sleep - it’s where you earn your primary income. For IRS purposes, your tax home is your main place of work or business. If you're a travel clinician moving from one contract to another, you can still claim a tax home if you:

1. Maintain a regular place of lodging where you pay rent or a mortgage
2. Return there regularly between assignments
3. Keep ties to that location, like a driver's license, voting registration, or family

If you don’t meet these conditions, the IRS might say you’re “itinerant,” which basically means you don’t have a tax home at all. That puts your stipends at risk of being taxed like regular income.

Let’s break it down:

• Stipends are advances - often paid weekly - meant to cover housing or meals. If your agency provides them under an accountable plan, they are not taxable. But that only applies if you have a valid tax home and solid records.
• Reimbursements pay you back for actual costs like flights or licenses. These usually require receipts and are non-taxable under an accountable plan.
• Per diem is a flat daily rate for meals and incidentals. If it stays within GSA guidelines and is properly tracked, it’s typically non-taxable too.

Quick note on accountable plans: This is IRS-speak for the system your agency uses to pay you back (or give you money up front) for work-related expenses like housing and meals. For it to be considered an accountable plan, three things need to happen: the expense has to be related to your job, you have to track or prove it happened (receipts, logs), and if they give you more than you spend, you give the extra back.

⚠️ Heads-up: If your paperwork is sloppy or you don’t really have a tax home, the IRS can reclassify your stipends as income. And yes, that means paying taxes on them.

You can’t deduct travel expenses like meals, lodging, or mileage if your employer already paid you for them - even if that payment wasn’t taxed.

You can deduct:

• Work expenses that weren’t reimbursed
• Licensing and CEU fees (Make sure your license is current and state-approved - here’s how)
• Union dues or agency fees
• Work gear like scrubs or stethoscopes

For the full list, check out IRS Publication 463

• Using a friend's or a parent's address without paying rent
• Not returning to your tax home for over a year
• Taking back-to-back assignments in one city
• No real residence outside your work locations

If any of this sounds familiar, don’t panic - but do talk to a tax pro before assuming your stipends are safe.

This is what keeps you audit-ready:

• Lease, mortgage, or proof of homeownership
• Utility bills or rent payments
• Travel receipts or mileage logs to and from your tax home (Travel Nurse Guide)
• Assignment contracts showing start and end dates
• Proof of expenses not covered by your agency

Keeping this stuff organized might feel like overkill now, but your future self will thank you - especially if the IRS comes knocking.

Frequently Asked Questions

Q: Is my travel stipend always tax-exempt?

A: Only if you meet the IRS criteria: valid tax home, accountable plan, and proper documentation.

Q: What’s the difference between per diem and a stipend?

A: A stipend is a fixed advance. Per diem is a standardized rate based on GSA limits. Both can be tax-exempt under the right conditions.

Q: What happens if I don’t have a tax home?

A: The IRS may consider you “itinerant” and tax your stipends as regular income.

In our third and final article, we’ll tackle withholding, quarterly estimates, and how to avoid underpayment penalties when you’re working across multiple states. We'll also answer real traveler questions like whether it’s smarter to take a W-2 or 1099 contract, how to stay audit-ready, and if filing an extension is worth it when your contract ends in December.

Don’t miss it. Bookmark the Resource Center or message us to get notified when it drops.

And don’t worry - we’ll walk you through it without the IRS-speak.

Important Note: FlexCare is not a tax advisor. This content is for informational purposes only. Please consult a qualified tax professional for personalized advice.