Tax-Free Stipends Explained: How Travel Nurses Keep More Money

Tax-free stipends are the financial engine of travel nursing. They’re why travel nurses often take home more than staff nurses despite similar gross pay. But stipends are also misunderstood and sometimes misused. Here’s everything you need to know.

What Are Tax-Free Stipends?

Tax-free stipends are non-taxable reimbursements for expenses you incur while working away from your tax home. They’re meant to compensate you for duplicating expenses—paying for housing and meals in two places.

The IRS allows these reimbursements to be tax-free because you’re maintaining a home somewhere else while temporarily working away.

Types of Tax-Free Stipends

Housing Stipend

Purpose: Reimburse you for lodging costs at your assignment location

What it covers:

• Rent or hotel costs
• Utilities (if not included)
• Renter’s insurance

Typical range: $1,500-3,500/month depending on location

Meals & Incidentals (M&IE)

Purpose: Reimburse daily food and miscellaneous expenses

What it covers:

• Breakfast, lunch, dinner
• Tips for food service
• Small personal expenses

Typical range: $50-80/day (based on GSA rates)

Travel Reimbursement

Purpose: Cover costs of traveling to and from assignments

What it covers:

• Mileage to/from assignment
• Flights if flying
• Rental car if needed

Typical rate: $0.67/mile (2026 IRS rate) or actual costs

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The Requirement: A Valid Tax Home

Critical point: You can only receive tax-free stipends if you have a valid tax home.

Without a tax home:

• You’re not “away from home”—you’re AT home
• There are no duplicate expenses to reimburse
• Stipends should be taxable income

What Qualifies as a Tax Home?

A permanent residence where you:

1. Pay housing expenses (rent, mortgage, utilities)
2. Return to regularly
3. Have not abandoned

Examples of valid tax homes:

• Apartment you rent and return to between assignments
• House you own with ongoing mortgage and upkeep
• Room you rent from family (with documented fair-market payments)

Not valid tax homes:

• Using a friend’s address for mail
• A storage unit for your belongings
• An RV with no permanent lot

Read more: What Is a Tax Home for Travel Nurses?

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How Stipend Amounts Are Calculated

GSA Rates

Agencies base stipends on GSA (General Services Administration) rates—the per diem rates the federal government pays employees when traveling.

GSA publishes rates for:

• Lodging: Maximum daily hotel/rental cost
• M&IE: Daily meals and incidentals

Rates vary by location and are updated annually (October 1).

2026 GSA Rate Examples

Note: These are maximum allowable rates. Your actual stipend may be lower.

How Agencies Apply GSA Rates

Most agencies calculate stipends based on GSA maximums:

Example: Denver assignment

• GSA lodging: $171/day × 7 = $1,197/week
• GSA M&IE: $74/day × 7 = $518/week
• Total potential tax-free: $1,715/week

Your actual stipend depends on:

• The contract negotiation
• Agency policies
• Bill rate from the hospital

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Stipends in Your Pay Package

How a Typical Pay Package Breaks Down

Example: ICU Nurse in Denver

Only $1,260 is subject to federal and state income tax.

Your Take-Home Advantage

Let’s compare a travel nurse with stipends vs. all-taxable pay:

Scenario A: With Tax-Free Stipends

• Weekly gross: $2,975
• Taxable: $1,260
• Estimated taxes (25%): $315
• Take-home: ~$2,660

Scenario B: All Taxable

• Weekly gross: $2,975
• Taxable: $2,975
• Estimated taxes (25%): $744
• Take-home: ~$2,231

Difference: $429/week or $22,300/year more in your pocket

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Rules for Tax-Free Stipends

Rule 1: Must Have a Tax Home

You must maintain a permanent residence with documented expenses. No tax home = no tax-free stipends.

Rule 2: Must Be Working Away from Home

The assignment must be in a different area from your tax home. You’re duplicating expenses by maintaining housing in two places.

Rule 3: Assignment Must Be Temporary

Your assignment should be expected to last less than 12 months. If you work in one area for more than 12 months, it becomes your tax home.

Rule 4: Stipends Cannot Exceed Actual Expenses

In theory, you should be able to justify your stipend amounts with actual costs. If you receive $2,000/month in housing stipend but pay $800/month in rent, there could be a discrepancy.

Practical reality: Most travel nurses receive stipends below or near GSA rates, which the IRS generally considers reasonable.

Rule 5: Stipends Are Not Reported on W-2

Tax-free stipends don’t appear on your W-2. Only your taxable wages are reported. This means the IRS can’t see your stipends directly—which is why documentation is crucial if you’re audited.

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The High-Stipend Trap

Some agencies offer packages with very high stipends and very low hourly rates. This can be tempting but carries risks.

Warning Signs

The red flag package looks better, but:

Problems with Low Hourly / High Stipend

1. Overtime is based on hourly rate

   • $18/hr × 1.5 = $27 OT rate
   • $35/hr × 1.5 = $52.50 OT rate
   • Lost overtime: $25.50/hr

2. Unemployment benefits are based on wages

   • If your contract is cancelled, lower wages = lower unemployment

3. Workers’ comp is based on wages

   • If you’re injured, lower wages = lower benefits

4. Red flag for IRS audit

   • Extremely high stipends relative to GSA rates draw attention
   • May be harder to justify

5. May exceed actual expenses

   • If you can’t justify $2,400/week in housing, there’s a problem

What’s a Reasonable Hourly Rate?

General guideline: Your taxable hourly rate should be at least $25-30/hour for most specialties. Below $20/hour is a red flag.

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Maximizing Your Stipends Legally

Strategy 1: Choose High-GSA Locations

Higher GSA rates = higher potential stipends

Highest GSA locations (2026):

• San Francisco Bay Area
• New York City
• Washington D.C.
• Boston
• Los Angeles

Strategy 2: Negotiate the Full Package

Don’t just focus on hourly rate. Look at total compensation including:

• Housing stipend
• M&IE stipend
• Travel reimbursement
• Bonuses

Strategy 3: Minimize Housing Costs

If you can find housing below the stipend amount, you pocket the difference tax-free.

Example:

• Housing stipend: $1,800/month
• Your actual rent: $1,400/month
• You keep: $400/month tax-free

Strategy 4: Maintain a Low-Cost Tax Home

The lower your tax home expenses, the more you keep from your stipend savings.

Low-cost tax home states:

• Texas (no state tax, moderate housing)
• Tennessee (no wage tax, low housing)
• South Dakota (no state tax, very low housing)

Strategy 5: Document Everything

Keep records proving your tax home and housing expenses at both locations. This protects you if audited.

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What If You Don’t Have a Tax Home?

If you can’t or don’t want to maintain a tax home, you can still travel nurse—you’ll just have different tax treatment.

All-Taxable Pay Option

• Request all your compensation as taxable hourly wages
• No stipends (or stipends treated as taxable)
• Higher hourly rate to compensate
• All income is taxable

Pros of All-Taxable

• No tax home to maintain
• Simpler tax situation
• No audit risk for stipends
• Higher base for OT, unemployment, workers’ comp

Cons of All-Taxable

• Pay more in taxes overall
• Lower take-home pay
• Less financial flexibility

The Math

All-taxable weekly gross: $3,200

• Taxes (25%): $800
• Take-home: $2,400

Stipend package weekly gross: $3,000

• Taxable: $1,600
• Taxes (25%): $400
• Take-home: $2,600

Even with higher gross, all-taxable often results in lower take-home.

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Common Stipend Questions

Are stipends guaranteed?

No. Stipends are part of the negotiated contract. If your contract is cancelled or you don’t work your scheduled hours, stipends may be prorated.

Can I choose how much is stipend vs. hourly?

Sometimes. Some agencies offer flexibility in structuring your package. Others have set formulas.

Do stipends count toward Social Security?

No. Only taxable wages count toward Social Security credits. This could affect your future Social Security benefits slightly.

Are stipends subject to state taxes?

No. Tax-free stipends are not subject to state income taxes either.

What if I stay with a friend rent-free?

You should only receive a housing stipend if you have housing costs to reimburse. Staying rent-free while receiving a stipend creates a discrepancy.

Can married couples both claim stipends?

Yes, if both are travel nurses with separate tax homes and assignments. Each spouse’s situation is evaluated independently.

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Stipends and IRS Audits

The IRS can audit your tax returns and question your stipends. Here’s what you need to know.

Audit Triggers

• Very high stipends relative to hourly rate
• No apparent tax home expenses
• Inconsistent information across years
• Random selection

What the IRS Asks For

• Proof of tax home (lease, mortgage, utility bills)
• Documentation of time spent at tax home
• Records of housing costs at assignments
• Employment contracts

Protection Strategies

1. Keep all documentation for 7 years
2. Take photos of your tax home
3. Keep a calendar of days at home
4. Use a CPA who specializes in travel nurses
5. Don’t take unreasonable stipends

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The Bottom Line

Tax-free stipends are a legitimate, powerful benefit of travel nursing—if you qualify. To maximize this benefit:

1. Establish and maintain a valid tax home
2. Understand how stipends are calculated
3. Don’t accept unreasonably high stipends
4. Keep detailed documentation
5. Work with a travel nurse CPA

Get this right, and you’ll legally keep thousands more each year. Get it wrong, and you could face tax bills and penalties.

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Related Resources

• What Is a Tax Home for Travel Nurses?
• How to Establish a Tax Home
• Ultimate Travel Nurse Tax Guide 2026
• Travel Nurse Tax Deductions
• Travel Nurse Pay Calculator — See how stipends affect your take-home