Is it possible and/or worth it to pursue travel therapy without a tax home? This a question we’ve been getting increasingly often lately. The answer can be complicated and of course depends on each traveler’s specific situation. You certainly can take travel therapy contracts without a tax home, but it’s often not the best move financially depending on the type of travel therapist you want to be. There are really two different situations in which a travel therapist may be considering traveling without a tax home, and I’ll cover each of them in this article so that you can gain some insight on if travel therapy without a tax home is a possibility for you.
Travel Therapy Tax Home Background
In order to be eligible to receive tax free stipends as part of your compensation package as a travel therapist, you need to maintain a tax home. Since the tax free stipends are a large part of why travel therapy is so lucrative, understanding this before beginning your travel therapy journey is vital. If you’re completely unfamiliar with what a tax home is and how to establish a tax home, then read this tax home article for a full explanation.
Essentially though, having a tax home almost always involves duplicating living expenses. Because paying for living expenses in both your home location and at your travel contract location can be costly, many new travel therapists look for ways to get around doing this, especially if maximizing finances is a priority.
When Whitney and I started traveling as new grad PTs in 2015, my goal was to reach financial independence as quickly as possible, so trying to minimize my costs for housing was something I spent a lot of time researching. While I ultimately decided on other ways to reduce expenses while still maintaining a tax home and duplicating expenses (i.e. lower rent at my tax home location and travel contract location), I did look into what it would be like to travel without a tax home. Below are some considerations and scenarios for who this might work for.
Local Travel Therapy Contracts
The first type of potential travel therapist usually asking about taking travel contracts without a tax home are those planning to take local travel contracts, commuting from where they live, just in one city or region. Local contracts may or may not be possible depending on how specific your needs are in terms of setting and the location where you live. You can learn more about that in this article.
Often these are people who have heard about the much higher pay that travel therapists earn and are burnt out on their current job, looking to take shorter term contracts in their area, and have the flexibility of contract work at various locations instead of a perm job. But, they don’t want to, or can’t, move for one reason or another. Often not wanting or being able to to move for traditional travel contracts is due to family or social obligations near their home. They think they’ll get the best of both worlds by taking travel contracts within driving distance of their home to make more money and have the perk of flexibility as well as the other benefits that come with being a travel therapist, all while not actually having to move.
Local Contract Implications and Pay
Unfortunately in this situation, the travel therapist won’t be eligible for tax free stipends due to not duplicating expenses. If you’re commuting to a contract job from your home address, then there’s no reason for the IRS to allow the stipends you receive to be tax free, since you aren’t actually incurring additional expenses by “traveling” to that job. So as a local travel therapist, you won’t be eligible for tax free stipends, but does that mean that it isn’t worth it? Well, that depends on what you would make at a normal permanent job in that area, how good your benefits would be at a permanent job, and how well the local travel job is paying.
Most local travel therapists can expect to make a similar rate to that of a PRN job. The average range of pay for a local travel travel contract (for PT/OT/SLP) is between $45-$60/hour. We have seen some pay higher but this is usually in rare circumstances. Where your local contract pay will fall in that range will depend on the setting and location of the contract, as well as how desperate the facility is to get a therapist in there quickly.
Pros and Cons of Local Travel Contracts
So now that we know the normal pay range of a local travel contract, it’s important to look at some of the pros and cons to determine if it’s worth it.
The two biggest pros of taking a local contract are higher pay than a permanent job, but with more consistency than most PRN jobs. After all, if the pay is similar to a PRN job, then why not just take a PRN job close to home? With a local travel job, there are often guaranteed, full time hours included in the contract, whereas with a normal PRN job, hours can be inconsistent. In most cases, a local travel contract will include at least a 32 hour guarantee, but sometimes even 40 hours. That means PRN pay but with full time hours which can be pretty lucrative.
In addition to the pay and consistent hours, you’ll also have the option of receiving benefits similar to a permanent job via the travel staffing agency, which you normally wouldn’t receive with a PRN job. Plus, by taking temporary travel contracts, you get the flexibility that travelers have, like switching jobs often if you want more variety or don’t like the facility, and taking longer periods off between contracts that you may not be able to do with a permanent or PRN job.
There are also some cons to taking a local travel contract. The biggest one is that your options will often be very limited (or potentially nonexistent) in most areas of the country, which makes finding a good facility and having consistent work year round difficult. This is obvious, but if there aren’t any facilities near you looking for a travel therapist, then there won’t be any local travel contracts available to you, unless you’re willing to think outside the box and contact places without listings to see if they would potentially be interested in hiring you on a short term contract basis.
Another con of local travel contracts is that you won’t receive all of the same benefits that you would at a permanent job. Vacation time and sick days don’t exist on travel contracts, so you’ll have to account for that with your own savings when you want or need time off.
Lastly, it’s much more likely that you’ll lose your job when taking a local travel contract than with a permanent or PRN job. This is due to the fact that it costs the facility more money to have you there as a traveler/contractor, which means that they’re almost always looking to replace your position with someone willing to work there permanently at a lower rate.
One final consideration, which may be a pro or a con depending on your lifestyle, is that a local travel job is only temporary and is usually only three months long. For some this is a deal breaker since they need consistent work throughout the year, whereas for others it’s a good thing because then you’re a free agent again to explore other options or take time off once the contract ends.
Travel The Country Without a Permanent Home
The other type of potential travel therapist who would be considering traveling without a tax home is someone who doesn’t want to keep a permanent home location and would prefer to be a nomad just moving from travel contract to travel contract. This might be someone who just graduated and doesn’t really have their own home aside from keeping a few things at their family’s home (but not wanting to deal with the tax headaches of establishing this as an official tax home), or someone who has been working and living on their own, but wants to sell their house or get rid of their lease and travel full time. In IRS lingo, this is called being an itinerant worker. In this situation, since you wouldn’t have a tax home, you also wouldn’t be eligible for tax free stipends due to not duplicating expenses. That doesn’t necessarily make it not worth it though. Even though your stipends will be taxed like with the local travel example above, not having to pay for any housing expenses back home can save you quite a bit of money.
Having your stipends taxed means less take home pay for you as an itinerant travel therapist for a couple of reasons. The obvious reason is that instead of receiving a large portion of your pay tax free, you now owe federal, state, and FICA taxes on all of the money you receive. The other reason that many travel therapists don’t consider when thinking about pursuing travel therapy without a tax home is that the travel company will also have additional taxes and expenses to pay on your behalf, which reduces how much they’re able to pay you. The travel company is responsible for paying FICA taxes on your behalf based on your taxable pay, which is higher as an itinerant travel therapist, and worker’s compensation insurance is also higher for them when your taxable pay is more.
All of that means that you’ll earn significantly less in after-tax dollars when working as a travel therapist without a tax home than you would as a regular travel therapist. How much less? Again this will depend on a variety of factors including: the bill rate of the travel contract (largely impacted by the setting, location, and demand for the job), the amount the travel company keeps for their overhead, and how much you earn in total throughout the year since tax brackets are marginal (including states taxes) meaning higher income earners pay a higher percentage.
Pay Difference When Traveling Without a Tax Home
The average weekly take home pay range for a travel therapist working as an itinerant worker is $1,200-$1,600/week. To compare, the average weekly take home pay range for a travel therapist traveling with a tax home is about $1,650-$1,900/week. This means that when traveling as an itinerant worker, you can usually expect to make about $300-$400/week less after taxes than you would if taking the same jobs while maintaining a tax home and receiving the tax-free stipends. That comes out to about $1,500/month less. Is that worth it to not have to worry about maintaining a tax home and duplicating expenses back home? Well, that depends on how much it would cost you in expenses back home and the hassles involved in your particular situation.
If you’re from a low cost of living area like Whitney and me, maintaining a tax home can pretty inexpensive, so we’d come out way behind if we chose to travel as itinerant workers. Our costs back home while on assignment have usually been $700/month each or less depending on if we were renting a room (which we did for the first 5 years or so of our travel careers) or house hacking a portion of our townhouse (which we do now). For others in very high cost of living areas, that may not be the case though, and you could really break even or come out ahead by not having expenses back home, plus skip out on the hassles of maintaining the tax home.
If you look at your own situation and determine that travel therapy without a tax home would be a good choice for you financially, then there are a few other things to consider.
- Where will you go between contracts or if you’re unable to find a contract for a few weeks?
If you don’t maintain a tax home then you’ll be paying for short term housing or relying on friends and family for a place to stay between contracts. For some this is fine, for others it may not be.
- Where will your mail go?
Most travelers have all of their mail go to their tax home and either forward it temporarily, go back to check it intermittently, or have someone at the home location help with the mail. Without a tax home, you may be changing your mailing address regularly which could be a hassle, or you’d have to look into alternative mail solutions.
- Where will you register your car, setup you insurance, get a driver’s license, get a bank account, etc.?
Without a permanent address, deciding what to do about all of your accounts can be difficult. Changing your address for everything each time you move to a new contract is complicated and can lead to issues.
Is Travel Therapy Without a Tax Home Worth it?
As you can see, there is no one size fits all answer here just like with most things in life. For most it will make more sense to maintain a tax home while traveling both financially and logistically to have a place to go back to between contracts and maintain your permanent ties. For some, working as an itinerant worker is the right choice, whether you’re taking local contracts while commuting from home, or want to be a nomad without a permanent residence. The most important thing is to be aware of all of the differences and to make an informed decision.
I hope this was helpful in guiding you on some decision making regarding tax homes as a travel therapist. If you have detailed questions about your own personal tax home situation, we highly recommend contacting a tax professional (NOT us) for the best advice. 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 personal tax home situation as a traveler or other travel tax related questions.
If you have general questions we can help you with, please feel free to send us a message. If you need help getting started with travel therapy, we have a lot of resources on our website that will be very helpful. And if you need travel therapy recruiter recommendations, fill out this form and we will get you connected!
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.