Expense Reimbursement, Per Diem and Stipends
By Cory Kleinschmidt
Two kinds of payments can be tax-free when IRS requirements are met: reimbursements made under an accountable plan and qualifying per diem payments within federal limits. Flat stipends or payments outside those rules are taxable income. How a payment is structured, not what it’s called, decides whether you’re taxed on it.
Two locums can receive the same dollars for the same work and owe different tax on them, entirely because of how the payment was structured. This guide is about that structure, which is the part you can actually control.
What’s the Difference Between Reimbursement, Per Diem and a Stipend?
They differ in how the money is justified, which is what the IRS cares about. A reimbursement pays you back for a documented actual expense. Per diem is a fixed daily allowance for meals (and sometimes lodging) set by government rates. A stipend is a flat allowance that may or may not be tax-free depending on whether it meets the accountable-plan rules.
The word on your paycheck stub doesn’t settle the tax question. A “stipend” handled with proper substantiation can be tax-free; a “reimbursement” with no documentation can be taxable. The mechanics decide.
Is Per Diem Taxable?
Per diem is tax-free up to the federal rate for your assignment location when it’s paid under an accountable plan. The amount above the federal rate is taxable, as are payments that don’t meet the accountable-plan rules. The federal meal-and-lodging rates are set by the GSA, vary by city and change annually, so the tax-free ceiling depends on where you’re working.
What Is an Accountable Plan and Why Does It Matter?
An accountable plan is an IRS-defined arrangement that makes reimbursements tax-free. It’s the mechanism behind almost every tax-free dollar in locum travel. Meet its three conditions and the money isn’t reported as taxable wages. Miss them and the arrangement is “non-accountable,” so the payments become taxable income.
The three accountable-plan conditions.
- Business connection. The expense has to relate to your work.
- Substantiation. You document what it was, how much, when, where and its business purpose.
- Return of excess. You pay back any advance beyond what you actually spent.
Most agencies run accountable plans. Your job is to keep the records that hold your side up.
How Much Per Diem Can You Receive Tax-Free?
Up to the GSA federal per diem rate for your assignment city, which changes annually and varies widely by location. Because the number moves, check the current-year GSA rate for the specific city at GSA.gov rather than assuming a flat figure. Any amount above the federal rate is taxable.
What Records Do You Need to Keep?
Enough to satisfy the accountable-plan substantiation test: what the expense was, how much, when, where and its business purpose, plus receipts where required. A simple habit, one folder or app per assignment, protects every tax-free dollar you receive. Those same records feed your deductions at filing; see 1099 taxes.
How This Differs for NPs, PAs and CRNAs
The rules are identical for every profession. The only variation is that typical stipend and per-diem levels track pay band and assignment location, not profession.
The tax-home concept that governs when travel is tax-free lives in the travel and housing guide. For pay context, see the nurse practitioner, physician assistant and CRNA guides.
Key Takeaways
- Structure, not the label, decides the tax. An accountable-plan reimbursement or per diem within limits is tax-free; a flat stipend usually isn’t.
- Per diem is tax-free up to the GSA federal rate for your city; anything above it is taxable.
- The accountable plan has three conditions: business connection, substantiation and return of any excess.
- GSA rates change every year and vary by location, so look up the current-year rate for the specific city.
- Keep records per assignment: what, how much, when, where and why. That’s what protects the tax-free treatment.
Frequently Asked Questions
Is locum per diem taxable?
No, up to the federal GSA rate for your assignment city when paid under an accountable plan. The amount above the federal rate is taxable, as are payments that don’t meet the accountable-plan rules.
What makes a stipend tax-free?
Meeting the IRS accountable-plan rules: a business connection, substantiation and return of any excess. A flat stipend without those is taxable.
How much per diem can I get tax-free?
Up to the current-year GSA rate for the specific location, which varies by city and changes annually.
Do I need receipts for per diem?
You need to substantiate the business purpose and the time and place. Per diem simplifies the amount, but the accountable-plan conditions still apply.
This guide explains how the rules work; it isn’t tax advice for your situation. A CPA can confirm how your specific stipends and reimbursements should be treated.