Stipends
Types
Housing
Meals & Incidentals
Most agency offers combine the two stipends.
The IRS will allow these stipends to be tax-free provided they are used for what they claim to be for (e.g. meals, incidentals, and housing) and that certain criteria are met.
Do Agencies Book Housing?
Most agencies will offer one of the following options (not both)...
- to book the housing for you, using their housing department
- to pay you a housing stipend so you can book your own accommodations
Some agencies will ONLY offer a housing stipend. This is because most travel nurses would much rather accept the housing stipend and book their own accommodations and pocket any leftover stipend monies.
What is the GSA?
The GSA is a government agency that determines the per diem (daily) maximum rate of stipends*
For more information about the GSA & GSA rates: http://www.gsa.gov/
*Note: Non-foreign states like Hawaii and Alaska go through the Department of Defense @ https://www.travel.dod.mil/
Tax Home
A tax-home is where your primary address and typically where your drivers license, bank accounts, cellphone bills, and mail are addressed. This can be any home/condo you own, pay a mortgage on, an apartment you rent, or family home (that you may or may not pay rent).
There are three important reasons to have one prior to travel nursing to the States...
1) For stipend purposes
To qualify for stipends, you must show you are duplicating expenses - this means you must show you are already paying for a home in Canada and when you go to your contract, you will be paying additional money to lodge close enough to your job.
2) For the TN visa
It can be notoriously difficult to cross over the border and apply for a TN visa if you do not have a home in Canada. Typically, the border guards need to see intent to return to Canada. A tax home provides this intent.
3) For tax purposes
At 183 days in the United States, you may be deemed a resident of the U.S. for tax purposes. In order to apply for exemption, you would need to prove stronger ties to Canada. This is another reason why a tax home is so important.
You can return to your tax home between assignments, on holidays, and any other time you are able. You are required to spend minimum 30 days in your tax home per year.
Stipends are NOT taxable in the United States nor Canada
Ensure you check your paystub and see that the stipend amounts are not taxed every week (and if this happens, get it fixed with your agency immediately as it is very difficult or unlikely to be fixable later).
Likewise, at the end of the year, when your agency sends you (or posts your W2* electronically), ensure you check to make sure your stipend amounts are not included. If they are, contact your agency to amend your W2. Your stipends are to be tax-free and should not be listed in one of the taxed income boxes on the w2. Although, rarely it may be noted in a description box. This is perfectly fine.
*American Term:
FYI, if you have never heard of it, a W-2 is the Canadian equivalent of a T4
You qualify for tax-free stipends
Qualifying Criteria
Ask yourself the following questions...
- Do I have a tax home?
- Do I live approximately 50 miles from the contract facility?
- Am I paying rent, a mortgage or sharing expenses as well as paying for additional (duplicate) housing at the contract facility location?
Per the IRS, a nurse must have a tax home, live approximately 50 miles from your tax home (preferably in Canada), and the nature of traveling for work entails the nurse has to duplicate their housing expenses ie. paying for two places at one time in order to work.
More on Housing stipends
It is called a ‘housing stipend’ for a reason.
The money is meant to pay for the fact that you now need to live somewhere close to your contract job. The money is for additional housing you will need to acquire because you will be living far from your primary address.
But, there are several exclusion criteria...
1) If you do not pay rent
2) You are renting out your entire home
3) You plan to commute daily or part of the week
If you are one of the above scenarios, you are not duplicating and paying for two houses at the same time.
And if a housing stipend is not being used for housing(as it is named), then all that stipend money is technically just plain ol’income just like your hourly rate. And this means it is absolutely meant to be taxed. You can still get the stipend money (provided you are not too close or ‘local’ to the assignment per the facility), but it must all be taxed. Many agencies will try and establish during the hiring process what your ‘tax home’ status is and will ask for things like bank statements, driver’s license, etc.
You DO NOt qualify for tax-free stipends
Exclusion Criteria
Exclusion criteria for the tax-free housing stipend include the following...
If you do not pay rent or a mortgage
E.g. If you live with family for free or you put your things in storage until after your assignment ends.
You own or rent but sublet the entire place while away
E.g. If you rent out your entire home or apartment to someone else and no longer have access to even one room in the house or apartment.
You own or rent your own home but plan to commute daily or part of the week
E.g. If you plan to live in Windsor and commute to Detroit daily or even part of the week (such as planning to spend 4 days in the contract city and then return home for 3 days.
Does it matter if my stipends are tax-free or not?
Absolutely.
The key reason why it is such a good idea to get stipends is that all that money is tax-free.
When calculating the pay for most nurses, if they opted to pay taxes on their stipends because they didn’t meet the criteria (e.g. lived at home with their parents for free), the majority of the time, paying taxes on all those stipends amounted to thousands of dollars less towards their salary as opposed to if they just shared/split expenses with their family or if they rented a room somewhere.
It isn’t too hard to try and meet the rules for stipends and nearly every way results in thousands of dollars in your pocket at the end of the year.
How can I ensure I get my stipends tax-free?
EXAMPLES
I pay rent back in Canada to a landlord
I pay a mortgage/condo fees back in Canada
I have paid off my mortgage, but I still pay utilities, property taxes, etc. on the house
I rent, pay a mortgage, or own my own home and rent out A PORTION of the apartment/condo/house (but not the ENTIRE home).
I pay my parents rent (at fair market value) which they report on their taxes as income.
I pay split expenses with my parents (all household bills divided by the number of occupants).
Remember
Per the IRS, a nurse must have a tax home, live approximately 50 miles from your tax home (preferably in Canada), and the nature of traveling for work entails the nurse has to duplicate their housing expenses ie. paying for two places at one time in order to work.
FAQ
If I don’t spend all of my tax-free stipends, do i have to pay it back or pay taxes on the remainder?
Simply put, no.
For clarification, meals & incidentals does not require that you demonstrate the expenses (ie. you do not need to save your grocery bills, cellphone bills, etc.
The IRS just assumes you have to ear. Go figure!
However, with housing, a travel nurse should be able to show at least some expenses occurred. Keep all receipts. You should also be able to show you have been duplicating expenses and have been payingto maintain a proprty/rental back home in Canada.
What if i spend more than the stipends allotted to me for my housing and meals & incidentals? Can I claim the rest on my taxes?
Unfortunately no.
Even if you are paid below the GSA rate, if you end up spending more than the stipend given to you by your agency, you aren’t entitled to claim the additional feed you incurred.
Federally, the U.S. government changed the tax code and removed tax write offs for business expenses back in 2018.
Why should a travel nurse know the gsa rate for their assignment?
Because you will want to MAX the tax-free stipend. Simply because it is tax-free!
Some nurses have made high hourly rates but actually ended up with more money with a lower hourly rate, this is because of the tax-free nature of their stipends.
Find what your max stipend rate should be here: https://www.gsa.gov/
Imagine this...
$95 per hour with a stipend below the maximum allowed by the GSA
OR
$80 per hour but with a MAXED stipend...
Surprisingly, the second option could leave you with more money overall after taxes.
Another reason the max stipend amounts are helpful...
Because many assignments, especially in desirable cities and states (e.g. NYC) are crazy expensive.
The GSA has already taken this into consideration.
Do watch when seeing high paying jobs in desirable cities. A big chunk may be your housing stipend because it is so expensive to live there.
You might enjoy living somewhere like L.A. or NYC, but may not end up coming home with as much money as you thought you would!
Consider the cost of housing in every assignment you submit to and determine what is most important to you:
Making money or the experience. And often times, it is a mix of both!
E.g. NYC may pay a lot, but it also costs a lot to live there. A tiny town in upper state NY may not seem very exciting and the pay/stipend may be lower, but you might end up with a lot more because the housing costs and taxes are a lot lower there (as opposed to NYC).
Median Price of a one bedroom apartment
New York Buffalo Rochester Syracuse
How to get your stipends maxed
Ask your recruiter for a pay breakdown if you don’t already see it in the contract they are offering you.
If they won’t give you the pay breakdown, either demand it or walk. Reputable agencies don’t hide the pay breakdown and you have absolutely every right to know what it is.
I always ensure my recruiter(s) know I want my stipend maxed, even if it means my hourly rate is a bit less.
IMPORTANT: I also ask that my overtime rate is nearly double my hourly rate to make sure it is still worthwhile to pick up overtime.
IMPORTANT: I always ask for max stipends but ensure my wage is still on par with the average pay for staff nurses in that state/area. The IRS would classify too low of a wage (versus the average nurse salary in the state) as wage recharacterization. It is a bit of a myth that ‘anything less than $20/hr’ will flag the IRS, as the IRS will look to see - does your pay make sense in their algorithm
IMPORTANT: Your taxable income may also affect your ability to borrow money. If you wish to purchase a new home, car, or anything else that may require financing, your taxable income is what will determine your eligibility. While sometimes a lender is willing to accept some form of written statement from the agency attesting to the travel nurse’s actual full income including tax-free stipends, this is the exception not the rule and it’s probably extremely rare these days with the tight credit market. Financial institutions consider these payments to be stipends rather than income. Trying to justify it to the financial institution is typically futile.
Watch out for jobs with extremely low hourly rates!!
Many travelers may wonder why agencies don’t just pay a really low taxable base rate, like $10 per hour, and give the rest of the money in tax-free housing and Meals & Incidentals stipends (tax-free).
The reason is the IRS regulations require agencies to pay a reasonable wage to their employees. A reasonable wage is one that would be accepted under normal circumstances by someone with a similar professional status (e.g. a staff nurse).
A while ago, there were loads of agencies that were paying their travel nurses really low hourly rates and really high stipends (either because they were unaware of the regulations or because they just didn’t care andwere willing to take the risk to gain an advantage over their competitors).
However, the IRS have cracked down hard; leaving few agencies willing to take the risk.
Beware: Recent IRS cases have demonstrated that travelers are also at risk for penalties when they’re paid extremely low taxable base rates.
Final Things
Your mileage/flight is compensated for the initial drive/flight and return drive/flight at the end of your assignment. There is not mileage reimbursement in between or for nurses who commute (unless you can try and negotiate this with your recruiter/facility).
If you remain in the same city/metropolitan area for 12 months out of a 24 month period, you will no longer be seen as having a tax home in Canada. Instead, the IRS will consider your current city to be your new tax home. Thus, you may still receive stipends, but any and all stipends you receive will be taxed. You can discuss with your recruiter possible solutions such as a higher hourly rate or if you want to permanently relocate, etc.
Disclaimer: Please remember, all tax advice given by me and through social media is a collection of our experiences as travel nurses. However, the onus is on each travel nurse to clarify any of the information with a certified accountant, namely one that is knowledgeable in both Canadian and American tax law and regulations.