Taxable Pay as a Travel Therapist

What is a reasonable hourly taxable pay rate for a travel therapist?

This is a question we get quite often, which is understandable. This area of travel healthcare is confusing and certainly not black and white. Pretty much everyone knows that travel therapists earn more than permanent therapists on average. What some therapists don’t realize though is that the reason travelers earn more is due to the stipends (also called per diems) that are offered on travel contracts.

If you’re new to this concept, it’s important to learn the basics about travel therapist pay and how travel pay packages are set up first.

Some travelers who travel without a tax home receive their stipends as fully taxed income, in which case they don’t earn nearly as much as they would otherwise after taxes each week. Travel therapists without a tax home often wonder if it’s actually financially worth it to be a traveler, and in some cases it isn’t depending on the bill rate of the job and the amount the travel companies keeps.

But, the majority of travel therapists do have a tax home, which means that they are eligible to receive their housing, meals, and incidental stipends tax free. This is great and certainly means more take home pay each week. But naturally, many travel therapists when negotiating contracts and looking at their pay packages wonder how much of the money should be received in the form of stipends and how much should be received as hourly taxable pay.

Why Do Travel Therapists Receive Stipends?

The first thing that’s important to understand is why travelers would receive tax free stipends in the first place. Obviously the stipends themselves are for housing, meals, and incidentals while traveling for a contract, but why would they be tax free for some therapists but taxed for others? The reason for this is that if a travel therapist has a tax home that they’re traveling away from temporarily for work, then the IRS doesn’t see it as fair for them to have to pay taxes on money that they’re using for additional expenses that they’re already incurring back home.

This is the same reason that those traveling away from home for business can write off the cost of their lodging, meals, incidentals, and transportation against their business income. For example, think of a pilot or other professional who travels away from home often for work. Those costs had to be incurred as part of the job, and the individual still has all of their fixed costs back at home as well, so they’re not obligated to pay taxes on those travel related costs that are associated with their job.

On the other hand, those travel therapists without a tax home don’t have any costs back home, so there’s no reason for them to be getting a tax break on their lodging, meals, and incidentals since the costs at their “travel job” are the only living costs they’re paying. Once you understand the reasoning, it makes perfect sense, although it can be confusing at first.

To learn more about travel pay when traveling with vs. without a tax home, check out this article and this video.

Evolution of Taxable Pay Over Time

We can all agree that in most cases, if a therapist can’t earn more money as a traveler, then it doesn’t make much sense to do it. After all, there are certainly cons of travel therapy that can make it a hassle. Packing and moving often, finding temporary housing, getting licensed in various states, and having the risk of a contract being cancelled early are all headaches. Figuring out benefits when working with multiple travel companies is also a concern that permanent therapists don’t have to deal with. Yes the adventure and freedom aspects of being a travel therapist are amazing, but ultimately probably not worth the downsides for most therapists if extra money isn’t involved. Because of this, for clinics to entice therapists to take travel contracts, they have to be willing to pay more for them to offset the cons and risks. Otherwise no one would take the position.

Initially when travel healthcare was new, this meant that a facility would offer a taxable pay rate at or higher than a permanent therapist would make at a comparable job in that location. The stipends were then added on top of that pay rate to cover housing, meals, and incidentals. The stipends weren’t very high because often the facilities couldn’t afford to pay both a high taxable rate and high stipends.

Over time, there are incentives which have gradually shifted more of the travel therapist’s pay toward stipends and less to taxable pay. You see, it benefits the travel therapist, the facility, and the travel company for taxable pay to be lower and stipends to be higher. This is because the taxes you pay as a traveler and the taxes the travel company pays on your behalf (FICA) are both lower when taxable pay is less. That means more money for you each week after taxes and lower expenses for the travel company. The facility benefits as well because they can pay a lower relative bill rate and still be competitive when compared to permanent positions when looking at after tax pay than they’d otherwise be able to. So, these days, travel companies try to offer as low of a taxable hourly rate as possible to the therapist, while offering the highest tax-free stipends possible, to get the highest after tax weekly take home pay for the therapist that the bill rate will allow.

Again, if all of this is very confusing to you, it’s best to start by learning the basics of travel therapist pay here and here.

So now you might be wondering, if making the taxable pay as low as possible benefits everyone involved, why not make it really low? Like minimum wage low? Here’s where the IRS enters the chat.

How Low of Taxable Pay is Allowed?

Everyone benefits from a low taxable pay… except for the government. Lower taxable pay means less tax revenue for both federal and state governments. To keep the government from losing out in this travel work arrangement, the IRS has put rules and guidelines in place. One way they’ve done this is to set maximum allowable amounts for housing, meals, and incidental per diems that they adjust based on the cost of living in the area of the job. You can find these maximum amounts on the GSA website. This keeps travel therapists and travel companies from agreeing on unreasonably high tax free stipends on a contract.

For example, if you take a travel therapy contract in a high cost of living city like San Francisco, the allowable stipends (AKA per diems) for a job there will be very high. So, if the bill rate from the facility is high enough, the travel company can pay you a LOT in tax-free stipends. Whereas if you take a travel therapy job in rural Kansas, the allowable per diems will be much lower, so there are restrictions on how much of the bill rate the company can allocate to tax-free stipends.

As most travelers, and the IRS, know though, not all travel jobs have a high enough bill rate to max out those stipends, while keeping the hourly taxable pay in a reasonable range. There is only so much money in the “pot” (the bill rate that the facility is paying) to go around, and it has to be divided accordingly into the taxable hourly rate and the stipends.

If the GSA per diem rates were the only safeguard, then on those lower bill rate contracts, that would mean that a travel company could just pay a traveler minimum wage for their taxable rate, while putting all of the extra money into stipends to max them out. This would save both them and the traveler money on taxes. However, the IRS knows that there are incentives for companies to do this, and if left with no rules they would do this every time. So, guidance was put out by the IRS to stop this from happening. Not paying high enough taxable wages in order to move money into tax free stipends is known as wage recharacterization and is illegal.

Avoiding Wage Recharacterization

So, we want to make as much as possible after taxes as travel therapists. Part of this means paying less in taxes (in addition to working with high paying travel companies and negotiating well) by having higher tax free stipends and a lower taxable hourly rate. But we don’t want to reduce the taxable rate so much that we risk wage recharacterization. So, we have guidelines on the maximum stipends via the GSA website. But, how do we know what is an appropriate hourly taxable wage? How low is too low?

If only it was that easy. If you know anything about the IRS, you should know that nothing is black and white. Unfortunately, there’s no clear answer here. Part of it depends on your discipline (PT, OT, SLP, PTA, COTA, etc). Part of it depends on what a comparable permanent job would pay in that setting and location. Part of it depends on how high the bill rate for the job is, and if your stipends are able to be maxed out or not. Part of it depends on how you, your accountant, and your travel company (likely guided by their lawyers and accountants) interpret wage recharacterization.

The safest bet would be to accept a taxable hourly wage that is the same as the permanent staff is making in the facility where you’ll be working as a traveler, and then just take the remainder as tax free stipends. This would mean much lower take home pay than you’d make with higher tax free stipend amounts, but absolutely no risk of the wages being considered as recharacterized. On the other end of the risk spectrum, you could insist on only taking minimum wage for every contract and get as much as possible in tax free stipends. This would mean a much higher paycheck, but it would put you at serious risk of having to pay taxes and fines if ever audited due to wage recharacterization. I have heard of several therapists doing this over the years. The right decision is probably somewhere in between.

Your taxable hourly wage should be a reasonable amount for the work performed, without being so high that it makes travel therapy no longer worth it. For me, as a traveling physical therapist, I have always chosen to err on the side of caution with a taxable rate in the $20-$30/hour range depending on the contract. My justification for this pay range is that I know some therapists who have taken permanent jobs making that hourly wage in the past, so it’s much easier to justify this rate than it would be accepting minimum wage as a physical therapist. It’s also low enough that my tax free stipends are usually plenty to cover my living expenses (and have extra to put towards savings) while on contract.

What Should You Choose for Your Taxable Pay as a Travel Therapist?

Ultimately, there’s no clear answer here, and the decision is up to you. Choose an amount that you could justify based on the particular contract. If you feel uncomfortable making a decision, then consulting a professional is warranted. I recommend setting up a consultation with a trusted CPA who is knowledgeable on taxes for traveling professionals to get their opinion. Our preferred CPA who works with healthcare travelers is Nermina Culesker at Choice 1 Accounting and Tax. You can set up a consultation with her here if you’d like to discuss your taxable pay as a traveler or other travel tax related questions. Having worries of an audit hanging over your head isn’t worth making a little extra each week by cutting corners on how your pay is allocated. Peace of mind is valuable.

If you’re brand new to travel therapy and this was all very confusing to you, then I’d recommend checking out our free Travel Therapy 101 series to learn the basics. If you want more in depth knowledge before jumping into travel therapy to improve your odds of financial success, then our course, Becoming a Financially Successful Travel Therapist is the way to go. If you want help getting connected with great recruiters for your situation, then fill out our recruiter recommendation form to get our top picks based on interviewing hundreds of recruiters over our years as travel therapists.

Jared Casazza

Written by Jared Casazza, PT, DPT – Jared has been a traveling physical therapist since 2015. He is also a personal finance enthusiast. He has become an expert in the field of travel healthcare through his experience, research, and networking over nearly a decade.

Is it Worth it Financially to be a Travel Physical Therapist?

Pursuing Travel Physical Therapy can help you create a dream life in many ways: exploring the country, trying new settings, having more lifestyle flexibility, enjoying more freedom with your time, and earning higher income. But of course, being a Travel PT isn’t always sunshine and butterflies. There are certainly some downsides that come along with choosing to take contracts as a travel physical therapist. Finding short term housing, packing and moving often, being away from friends and family, and licensing hassles are all negative factors to consider. The key when trying to decide if Travel PT is right for you is weighing the pros and cons to determine if the pros for your specific situation make it worth it. The most common reason that physical therapists cite for choosing to travel, especially as new grads, is to make more money. That begs the question, do travel physical therapists really come out ahead financially when considering the additional costs involved?

Do Travel Therapists Really Make More Money?

This is actually a harder question to answer than you would expect and, again, varies based on the individual traveler’s circumstances. I was able to achieve financial independence in a very short amount of time as a travel therapist, but that isn’t the case for everyone. Let’s take a look at some of the factors that go into this to help determine if being a Travel PT makes financial sense for you.

While I’m focusing on Travel PTs, the information here also applies to prospective Travel Occupational Therapists (OT), Speech Language Pathologists (SLP), Physical Therapy Assistants (PTA), and Certified Occupational Therapy Assistants (COTA) as well since most of the factors are exactly the same.

What are the Variables that Impact Traveler Pay?

The main variables that impact how much you can realistically make as a Travel PT include: setting, location, which travel company you work with, if the contract is direct or through a third party vendor, and how desperate the facility is for a therapist. A travel physical therapist considering a SNF job with a lot of applicants in South Carolina through a Vendor Management System (VMS) with a big travel company is going to make significantly less than a Travel PT considering a home health job with no other applicants in California through a direct client with a small travel company. Let’s break down the factors above to illustrate this.

  • Setting: Home health contracts usually pay the most, on average, followed by outpatient, acute, schools, and SNF bringing up the rear. Of course this is only a generalization and the specific job will also be impacted by the other factors below.
  • Location: Some states have higher insurance reimbursement rates for therapy services than others, and some rural/critical access facilities receive additional government funding which allows them to pay higher. Facilities in locations with higher reimbursement rates can afford to pay travelers more money, so many really high paying jobs are on the west coast and in places like rural Alaska where reimbursement is better.
  • Travel Company: In general, smaller travel companies can pay travelers more due to lower overhead expenses, but this isn’t always the case. Every traveler wants to find the absolute highest paying travel therapy companies, but that’s not so easy since every travel company has its pros and cons including some intangible advantages that bigger companies often have over small companies. The amount that the travel company keeps on a contract varies but is often not as high as most new travelers think.
  • Direct vs. VMS Jobs: Direct client contracts will always pay better than jobs through a VMS with all things being equal, due to there not being an additional middle man involved taking a portion of the bill rate.
  • Supply/Demand: How in demand the contract is, meaning how many applicants they get, can massively change how much the facility is willing to pay for a travel physical therapist and how much negotiating power the therapist has. A facility in a desirable location that has 20 applicants for a travel position can get away with paying a lot less than a facility is a not so desirable location in desperate need of a traveler.

How Much do Travel Physical Therapists Actually Make?

On average, a travel physical therapist can expect to make between $1,700-$2,000/week after taxes for the vast majority of contracts, with where you land in that range being primarily driven by the variables above. There are some outlier contracts paying higher or lower, but those are usually less than 20% of the total available travel jobs and only in certain states (California mostly for over $2,000) and settings (home health for the highest paying jobs). We’ve seen Travel PT jobs listed for anywhere from $1,300/week to $3,300/week after taxes, so the range can be really big.

To compare travel pay, which is usually discussed in a weekly after-tax amount, vs. permanent job pay, which is usually discussed in an annual gross (pre-tax) salary, you’ll need to do some math and make sure you understand how to accurately make this comparison. To understand exactly how travel physical therapy pay works compared to that of a permanent physical therapy job, this guide will be very helpful.

But to give an example, an average travel therapist earning $1800/wk after taxes, working 48 weeks per year, would make the equivalent of a therapist at a permanent job making an annual gross salary of about $125,000/year.

How Much Could You Make at a Permanent PT Job?

Now that we know what you can likely expect to make as a travel physical therapist, we need to know what we’re comparing to in terms of the alternative at a perm position. Pay for permanent jobs can also vary a lot based on the location, your experience, the setting, and supply/demand. There are experienced PTs working home health jobs in Nevada making $120,000/year or more. There are also new grad PTs looking at outpatient jobs in North Carolina where they’re getting offers of $60,000/year or less.

Obviously these situations are relatively extreme, but you can easily see that the PT making twice as much wouldn’t think leaving a perm job to travel, just for the money, is as worth it financially as the PT making a salary on the low end. When trying to determine if traveling makes sense for you, it’s vital to do some research to determine how much you’d make back home at a permanent position vs. pursuing travel contracts (or compare to your current position if you’re already working).

How Much Higher Will Your Costs be as a Travel Physical Therapist?

When comparing finances between travel jobs and permanent positions, it’s really more about how much you can save than just how much you can make, since travelers have higher expenses to take into account. How much higher your expenses will be as a traveler will depend on where your permanent home is (your tax home) and what your expenses are at your tax home, plus how much short term housing costs in the area where you’re considering taking a travel contract.

For us personally, our tax home is in a pretty low cost of living area in Virginia, plus we “house hack” to reduce how much it costs us each month to maintain our home residence, but not every traveler is so lucky.

If, for example, you’re currently living in a high cost of living area with an expensive mortgage on a house that you don’t plan to sell, then your costs are going to be much higher maintaining that tax home than mine will be. Travel physical therapy won’t make as much sense for you financially since a portion of the extra money you make will go toward the housing expense back home. But, you have options and can consider improving your fixed expenses via house hacking and other strategies.

Short Term Housing Can be Expensive

Where you plan to travel and the cost of the short term housing in that area is important to consider as well. Usually pay is better in higher cost of living areas which can help to offset some of the costs. However, that’s certainly not always the case, especially in more desirable areas like Denver, Austin, San Diego, and Seattle. Often jobs in those areas are very sought after, which means they don’t pay very well, and then on top of that the short term housing prices can be extremely high, making it not a great financial choice. (In these cases, therapists are often choosing these areas for the experience even though they may not come out ahead financially).

Personally, most of our short term housing costs at our Travel PT locations have been in the $700-$1,000/month range, but we typically travel to lower cost of living areas. We know travelers that have taken jobs in cities like San Francisco where one bedroom furnished apartments rent for well over $2,500+ per month for short term leases. Our costs were higher when we took contracts in Hawaii ($1800/mo) and Alaska ($2400/mo), but again these contracts were more about the experience for us than making and saving the most.

There are other expenses that are higher as a traveler as well, but to a lesser degree than housing. As a traveler you can expect to spend more money on gas when driving from assignment to assignment and likely more on food since cooking at home isn’t always as easy depending on the kitchen set up at the housing your choose while on assignment. You also need to take into account wear and tear on your car from the extra mileage.

How Much Time Will You Take off Between PT Contracts?

As a traveler you do receive benefits through the travel companies that you work with while on assignment, but those benefits don’t include vacation time or PTO. That means that any time that you take off between travel physical therapy assignments will directly reduce how much you’ll earn over the course of a year. Most travel PTs take at least 4 weeks off per year (on average, one week between each contract) but it’s not uncommon for travelers to take several weeks off between jobs to spend time at home, travel for leisure within the US, or travel internationally.

In fact, the flexibility to take as much time off as we want is the reason that Whitney and I have been traveling for over 7 years now. Although all travelers enjoy this perk, it comes with the downside of reduced income over the course of a year. So depending on how much time you plan to take off between contracts can make a big difference in how much you make annually and how much you come out ahead financially as a travel physical therapist.

It’s Not Always About the Finances

As you can see, there are many factors that will determine whether travel physical therapy will be worth it for you financially. All of these factors are unique to you, so you have to judge for yourself based on your own circumstances.

For Whitney and I, working as Travel PTs put us in an amazing financial position very quickly, and I was actually able to semi-retire after only a little over 3 years working full time as a travel physical therapist. We actually encourage many PTs, especially new grads, to consider doing something similar with their own version of semi-retirement.

With all of that being said, there are other advantages to travel physical therapy that go beyond the finances. Traveling is a great way to try out different settings, explore new areas of the country, make new friends, check items off of your bucket list, and learn from a variety of different clinicians. Initially we thought our only reason for traveling was to save money and pay off student debt, but, to our surprise, the best aspects of Travel PT ended up being the flexibility and adventures that we were able to have both while on contract and between contracts. After 7 years as travelers, we’ve been to all 50 states, visited almost all of the US National Parks, and traveled to over 35 countries internationally while taking time off between contracts. Honestly, those experiences have been priceless and would have been worth it even if we didn’t come out ahead financially compared to working permanent PT jobs.

Is Travel Therapy Right for You?

If you are trying to decide if travel physical therapy is right for you, our free Travel Therapy 101 series is a great place to start learning about the basics. We’ve mentored thousands of new Travel PTs over the years, with one of the most important services we provide being helping travelers get connected with great recruiters and travel companies. If you’d like recommendations based on your personal situation and preferences, fill out our recruiter recommendation form to get connected.

If you’re ready to dive deeper into travel therapy and get a step-by-step guide on not only getting started but being financially successful as a travel physical therapist, our comprehensive travel therapy course is the perfect thing for you. If you have an questions about Travel PT that we haven’t covered in our articles and videos, feel free to contact us! Best of luck on your travel physical therapy journey!

Additional Resources

Jared Casazza
Written by Jared Casazza, PT, DPT – Jared has been a traveling physical therapist since 2015 and is an expert in the travel therapy industry