Locum Tenens Physician Reimbursements and Stipends: What’s Taxable?

The Tax Difference Between Stipends and Reimbursements

Locum compensation packages often include income other than a standard paycheck. In addition to traditional earnings, clinicians may receive:

• Housing stipends
• Travel stipends
• Mileage reimbursements
• Meal allowances
• Licensing reimbursements
• Credentialing reimbursements
• Completion bonuses
• Call pay

These payments usually fall into one of two categories: Stipends and reimbursements. Typically:

• Stipends are fixed sums of money that employers offer to cover recurring living, travel, and business expenses. They count as taxable income.
• Reimbursements are payments for specific out-of-pocket expenses incurred on behalf of the organization. They may not be subject to taxation when handled correctly.

Notably, whether a payment is a stipend or reimbursement isn’t determined by what the organization labels it. Instead, it’s based on rules and regulations set by the IRS.

A locum physician could receive a fixed sum of money from a staffing firm or hospital labeled as a travel reimbursement that actually fits the definition of a stipend.

Due to tax differences, reimbursements are typically preferable, as they increase your total compensation from an assignment without raising your taxable income.

The Three Income Buckets Locum Tenens Clinicians Must Understand

Keeping track of your taxable income as a locum doctor can be difficult. To make things simple, organize your earnings into three distinct buckets:

• W-2 income: This is income earned as an employee. It applies if you work locum assignments as a side gig from your full-time position. Taxes are generally withheld before payment by your employer.
• 1099 income: As income earned as an independent contractor, this includes your payments from locum tenens or any other temporary assignment. Clinicians are responsible for paying income taxes and self-employment taxes on these earnings. 
• Reimbursements and fringe benefits: Payments made to cover legitimate business expenses, like reimbursements and stipends. Depending on their structure, these may be excluded from taxable income.

Many locum physicians receive a mix of all three types of income. Proper tracking is essential to avoid misclassifying payments and limit your tax liability. 

Which Payments Are Taxable?

One of the most common misconceptions among locum tenens physicians is that housing allowances, travel payments, and other assignment-related compensation are automatically tax-free. In reality, the tax treatment depends on how the payment is structured and documented.

Examples include:

• Monthly housing stipends
• Fixed travel stipends
• Flat meal allowances
• Daily per diems paid without substantiation

Because these payments are not tied to documented expenses, they are generally treated as ordinary income and are subject to federal, state, and self-employment taxes for independent contractors.

For example, if an agency provides a $3,000 monthly housing stipend and doesn’t ask for receipts, that money will usually count as taxable income.

Bonuses, Call Pay, and Extra Compensation

Additional compensation is taxable regardless of how it is described.

Examples include:

• Assignment completion bonuses
• Productivity incentives
• Call coverage payments
• Retention bonuses

If a locum tenens provider receives a $5,000 assignment completion bonus, for instance, the IRS generally treats that payment the same as any other earned income. There’s no special tax treatment simply because the payment is labeled a bonus or incentive.

What’s Not Taxable When Done Correctly

Accountable Plans and Why They Matter

For many locum tenens clinicians, travel and housing costs are a normal part of accepting assignments. Fortunately, some of these expenses can be reimbursed without increasing your taxable income, but only when they are handled through an accountable plan. 

An accountable plan is an IRS-approved reimbursement method that allows a staffing agency or business entity to repay you for legitimate business expenses without treating those payments as income. 

Instead of receiving extra compensation, you’re just being paid back for money you spent while performing work-related duties. For locum tenens physicians, these roles are created and managed by staffing firms and typically follow strict guidelines. 

To qualify, three requirements generally must be met:

1. The expense must have a legitimate business purpose
2. There must be documentation, such as receipts or mileage logs
3. Any excess reimbursement must be returned within a reasonable period

When all three are satisfied, reimbursements can be excluded from taxable income.

For locums, accountable plan reimbursements are often the most tax-efficient way to cover assignment-related expenses. They help reduce taxable income while keeping you compliant with IRS rules.

Common Non-Taxable Reimbursement Categories

When properly documented under an accountable plan, non-taxable reimbursements may include:

• Airfare
• Mileage
• Rental cars
• Lodging
• Business meals (subject to applicable limitations)
• Medical licensing fees
• Credentialing expenses
• Continuing education costs related to the assignment

To ensure compliance, good documentation is critical. Clinicians should maintain receipts, invoices, mileage logs, and supporting records for all reimbursed expenses.

When Reimbursements Become Taxable

Non-Accountable Plans and Poor Documentation

The main reason some reimbursements are taxed is due to poor documentation. Consider a locum tenens provider who receives a $1,000 monthly travel reimbursement but never submits receipts or travel records. Because the payment is not substantiated, the IRS may treat it as taxable income.

Overpayments and Unreturned Excess Funds

Another common issue occurs when locum tenens doctors receive reimbursement that exceeds the actual expense.

For example, if a staffing agency gives you $2,500 for travel but your expenses were only $2,000, you’ll need to return the extra $500. Otherwise, the reimbursement will be treated as taxable income.

How to Track Income and Reimbursements Correctly

Set Up Three Core Tracking Categories

To simplify tax reporting, create separate categories for:

1. Income (1099 payments)
2. Reimbursements (non-taxable payments)
3. Expenses (business deductions)

Keeping these categories separate helps you avoid double counting and mistakes when reporting.

Build a Simple Monthly Workflow

A straightforward process often works best. Here’s a monthly workflow to follow:

1. Record all income received.
2. Save receipts and invoices.
3. Categorize expenses monthly.
4. Track reimbursement status.
5. Reconcile records before month-end.

Being consistent is more important than having a complicated system. Use a tool like QuickBooks, Expensify, or even a spreadsheet-based tracking system to stay organized.