Comparing Apples to Apples: The Tax Advantages of a Travel Nurse in Detail

Tips & Tricks
October 16, 2023 by Tom Harmon

Everyone knows that Travel Nurses and Travel Technologists get tax-free compensation for expense reimbursement: housing, per diem expenses, relocation, etc.  In this article, we’re going to break down exactly what that means in simple words and numbers.  We’ll compare a hospital staff position hourly rate with a travel nurse all-inclusive hourly rate, then take it one step further and show the true comparable hospital hourly rate that would make it equal (apples to apples).

Tax-free stipends (Expense Reimbursement):  Part of travel nurse compensation is tax free expense reimbursement for housing, meals and incidental expenses.  Generally, a travel agency will use the Governmental Services Administration website to look up the daily amounts and multiply that by 7 days in a week to get a weekly amount.  Then, the weekly amount will be prorated to an hourly amount by dividing by the number of scheduled hours (usually 36 or 40).

Other Opportunities: Travel nurses may be able to deduct expenses related to their work, such as travel costs, licensing fees, continuing education, and professional association dues. If you maintain a home base and use it for administrative work related to your nursing assignments, you may be eligible for a home office deduction for a portion of your housing and utility expenses.  Depending on your specific circumstances, you may be eligible for tax credits and deductions available to healthcare professionals, such as the Lifetime Learning Credit for continuing education expenses.

In this article, we’re here to breakdown the stipend – how you calculate it, how it gets paid and reported and the “true money value” of that tax advantage.

Example (Zip Code 90291, Oct 2023)
GSA Housing per Day $183
GSA Per Diem per Day $74
Total per Day $257
Days in a Week 7
Weekly Stipend $1,799
Contracted Hours per Week 40
Prorated Hourly Stipend $44.98

Each week, you’ll see the weekly stipend included below your taxable earnings on your paystub. It’ll then be added to your total taxable earnings to give you the amount that’s deposited into your bank account.

Besides getting the money tax-free, another advantage is that your taxable earnings (called a “tax base income”) are much lower, oftentimes putting the travel nurse in the lower tax brackets. Therefore, the taxes withheld for FICA and Social Security are lower, compounding the benefits.

Looking at the comparison to the right, the hourly rates are equal at $75.00 per hour, standard for a per diem position at a hospital working full time hours. Note that the travel component is comprised of $30 an hour taxable and $45 an hour prorated stipend.

Assuming both positions work 40 hours per week for 50 weeks of the year, the annual earnings are still the same – $150,000. However, here’s where they diverge – the staff position owes taxes on $150,000 while the travel nurse owes taxes on $60,000. The effective tax rate (average, overall tax rate) for $150,000 and $60,000 in Arizona in 2022 is 28% and 15%, respectively.

After taxes, the travel nurse has almost $20,000 more than the staff position.

Let’s take the last step – how much would the hospital have to pay for both nurses to make the same?

For the hospital nurse to have $127,500 earnings after taxes, we need to divide it by (1-tax rate), or 72%.

Looking to the right, the gross annual earnings would have to be $177,083 per year, equivalent to $88.54 per hour.

Staff Travel
Taxable Hourly Wage $75.00 $30.00
Prorated Hourly Stipend $0.00 $45.00
All-Inclusive Hourly Rate $75.00 $75.00
Hours per Week 40 40
Taxable Earnings per Week $3,000 $1,200
Weekly Stipend $0 $1,800
Gross Weekly Earnings $3,000 $3,000
Annual Taxable Earnings (50 weeks) $150,000 $60,000
Annual Stipend $0 $90,000
Annual Earnings $150,000 $150,000
Assumed Tax Rate (Arizona) 28% 15%
Tax Liability -$42,000 -$22,500
Net Income $108,000 $127,500
Equivalent Annual Net Income $127,500
Required Gross Annual Earnings $177,083
(divide by 1- tax rate)
Equivalent Gross Weekly $3,542
Equivalent Taxable Hourly Rate $88.54

Disadvantages of Travel Nurse Compensation

While the cash flow is definitely an advantage, it’s not completely clear skies – and I’m not talking about the IRS.  One disadvantage of this pay structure is that your tax returns will not show a lot of income.  When applying for a mortgage or any type of loan, one major factor is the average annual compensation for the prior two years.  Showing $60,000 per year on the W-2 is not what banks dream about, I promise.

However, there are plenty of ways to mitigate this issue.  For instance, we have written letters explaining the structure to CPAs, loan officers and mortgage underwriters that have all been approved.  We have also explained to landlords and property management or realtors.  So don’t be discouraged because it’s not a dealbreaker, but be mindful.