A guide to understanding your paychecks.
Have you been trying to find the “explain it like I am five” version of how your paychecks are broken down as a travel clinician? The Script is here to help. We are going to explain the way paychecks are broken down and paid out in the simplest terms possible so you can feel confident at what you are looking at when you see your pay stubs. Before we dive in, let's get everyone on the same page with some definitions.
Tax Home: the place you keep paying for and returning to between assignments. It's the home base that proves you're temporarily away for work, not permanently relocated.
Reimbursement: the act of being paid back for a cost you have already incurred.
Stipend: Money given to cover a specific expense, like housing, equipment, or meals. Typically related to work not done in a usual setting/location.
W2: A tax form your employer sends you that shows how much you earned and how much tax was withheld from your paychecks that year.
Stipends 101
Travel clinicians get paid out through two main categories: non-taxable income (stipends) and taxable income. Below are some common forms of payments and how they would be categorized:
Taxable Income
The taxable category, income, is always taxed by state and federal governments. These are things like your hourly pay, overtime, and holiday pay. Taxes are taken out to help fund things like public works, schools, and road upkeep. Generally, clinicians will have a lower hourly rate to decrease the amount of money being taxed per paycheck.
Non-Taxable Income:
The non-taxable category, stipends, are considered reimbursements to make up for the costs associated with maintaining a tax home in a different city or state. In simple terms, the stipend should cover the cost of housing, meals, and incidentals while you’re on contract so you can simultaneously maintain the costs of housing, meals, and incidentals at your tax home.
The federal government is responsible for setting the maximum allowable tax-free amounts through the GSA (General Services Administration). This can vary in every city, county, and state. The rates are updated annually to reflect the cost of living related to travel work along with costs for meals and incidentals. This variability is reflected in how much can be offered within a contract pay package.
The Part That Actually Affects Your Paycheck
These little pieces of information help to build the bigger picture of how your contract rate is set.
GSA sets the maximum tax-free limits by location
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Hospital sets their bill rate for a clinician
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Agency builds pay package using both of those limits
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You negotiate the best deal with what’s left
As we mentioned earlier, your hourly wage is taxed. It’s ideal to keep it as low as possible (within reason) so the agency can put more money into your stipend amount. This is important. The more money that can be allocated to the stipends, the more money you get to take home tax free. When breaking down your contract it's important to know what the GSA limits are in the contracted area so you can see if you are being compensated appropriately. Often, this is why you may see different ranges for contracts with different companies.
All of this information will appear on your W2 during tax season. The non taxable stipends are reported in a separate category (Box 12 or 14) from your taxable wages (Box 1), but the full pay package is always visible on a W2. The IRS can see what the full pay package is, and can audit you to determine if you legitimately earned the stipends paid out. It’s important to understand the IRS guidelines of what’s considered a tax home. The Script has an article that outlines best practices for traveling clinicians and resources for following IRS guidelines.
Once broken down, stipends, hourly pay, and contracts aren't as intimidating as they appear to be. As travel clinicians it’s within your responsibility to know where you’re traveling to, what GSA limits are set for the area, and negotiating for the best contract you can. At the end of the day, understanding your pay package isn't just financial literacy it's self-advocacy. The more you know, the better you negotiate. Now that you know what you're looking at, go check that pay stub it probably makes a lot more sense than it did five minutes ago
Still have questions? The Script has resources to help.
References
Internal Revenue Service: Publication 463: Travel, Gift, and Car Expenses Covers tax home definitions, accountable plans, and rules for non-taxable travel reimbursements. irs.gov/publications/p463
Internal Revenue Service: Publication 525: Taxable and Nontaxable Income Defines taxable income broadly and explains when stipends are and are not considered income. irs.gov/publications/p525
Internal Revenue Service: Topic No. 511: Business Travel Expenses Plain-language overview of what qualifies as travel away from your tax home. irs.gov/taxtopics/tc511
Internal Revenue Service: About Form W-2: Wage and Tax Statement Official IRS page for the W-2 form including instructions and box definitions. irs.gov/forms-pubs/about-form-w-2
U.S. General Services Administration: Per Diem Rates Lookup tool for maximum tax-free lodging and meal rates by city and state. Updated annually. gsa.gov/travel/plan-book/per-diem-rates
U.S. General Services Administration: Explanation of 2025 IRS Form W-2 Box-by-box breakdown of the W-2 form in plain language directly from the GSA. gsa.gov/explanation-of-2025-irs-form-w2
NerdWallet: What Is a W-2 and How to Read It A plain-English breakdown of every W-2 box for readers who want a less technical explanation. nerdwallet.com/taxes/learn/what-is-w-2-form
