Stipends

Sunset Cliffs, San Diego, CA

Explanation of Stipends

Overview

As discussed earlier, a travel contract should include taxed and tax-exempt “buckets." Travelers make the most money by allocating as much money as possible to the tax-exempt buckets, and tax-exempt stipends are the heavy lifters in the tax-exempt bucket (with tax-exempt reimbursements being the other contribution to this bucket). Stipends provide daily tax-exempt pay which is written into the contract. There are two different methods for calculating tax-exempt stipends: the GSA method and the High-Low method. Neither the GSA or High-Low methods is automatically better, and the method that gives you more tax-free stipends will depend on the location of your travel contract. In our experience, some companies tend to use one method over the other. This infographic provides an overview of how you get paid, including stipend information.

Methods Explained

GSA Method

The GSA method for stipends gives you two daily tax-exempt stipends: “housing” and “meals + incidentals." These stipends are technically called "per diems," as they are given daily. The government sets reimbursement amounts for all locations/cities in the United States and those numbers represent the highest stipend amount that can be reimbursed daily, if the staffing agency is using this method. This amount varies based on cost of living and other factors that are beyond our scope of understanding. Luckily, the calculations have been completed by the IRS and you can find the per diem amounts/check a recruiter’s work yourself by visiting this website and entering the contract city/location.

High-Low Method (High-Low Substantiation Method)

The High-Low method is an alternative stipend method to the GSA method. In the High-Low method, the government has classified cities as either high or low cost of living areas and sets a specific daily rate for all tax-exempt stipends for each high and low areas. As of 2024-2025, the high rate is $319/day and the low rate is $225/day. With this method, your daily tax-exempt stipend is one amount based on the high or low rate instead of being broken into the separate housing and meals + incidental stipends. See annual High-Low rates here (Page 2) and an explanation of the High-Low method from the IRS here (Page 24 per page number, Page 26 in document).

Stipends in Action (Examples)

If this concept of different stipend methods isn’t making sense, take a recent example from one of our contracts:

Salem, NH using the High-Low method: Salem is a low cost of living location. Therefore, we would be eligible for up to $225/day. $225 x 7 = $1,575 per week of an eligible tax-exempt stipend.

Salem, NH with the GSA method: Housing: $110, Meals + Incidentals: $68 = $178/day. $178 x 7 = $1,246 per week of eligible tax-exempt stipends (per diems).

Therefore, in this situation, the High-Low method was able to provide more tax-exempt stipends than the GSA method. Staffing agencies can make up for this difference by providing more reimbursements for licensure, travel, continuing education, etc. The main thing to make sure is that your contract includes as little as possible in taxed pay (think $18-$22/hour).

Remember!

Unfortunately, just because a contract may be eligible for a certain amount of stipends does not mean you automatically get paid that amount. In the Salem, NH example above, the staffing agency only provided $1,550 tax-exempt stipends per week even though per the IRS, we were eligible for $1,575 with Salem being a low cost of living city. This is because the pay package was maxed out with our $20/hour salary ($800 weekly), the $1,550 stipends, and a one-time $500 license reimbursement. If the client paid more, there would be more in the overall pot of money which would allow stipends to increase to the full $1,575 per week.