A recruiter tells you the assignment includes a $2,400 monthly housing stipend and a $65 daily meal per diem, tax-free. You accept. Fourteen months later you receive a -NEC that includes every dollar of it, or a W-2 with the stipend folded into box 1, and you owe ordinary income tax plus self-employment tax on roughly $40,000 you had already spent on apartments and airport meals.
Nothing went wrong administratively, and it does not matter whether you booked the assignment through an agency or contracted directly — a distinction that governs almost everything else about locums, as agency versus direct contracting lays out, but nothing here. The reimbursements were taxable from the first day, because tax-free travel reimbursement is not a property of the payment. It is a property of your situation, and specifically of whether you have a tax home you are traveling away from. Travel reimbursements are excludable only if you are "away from home" in the sense the Internal Revenue Code means, and the Code does not mean the house where your family lives. For a physician working locums full time, this is the single highest-stakes issue in the arrangement, and it is decided before the assignment starts.
The statute pays for travel away from home, and home is a place of business
Section 162(a)(2) allows a deduction for "traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business." Everything turns on the word home.
Publication 463 states it in two sentences that physicians consistently misread: "Your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. It includes the entire city or general area in which your business or work is located."
Read the phrase "regardless of where you maintain your family home" twice. A hospitalist who owns a house in Denver, has a spouse and two children living in it, and works exclusively at a hospital in Sioux Falls does not have a tax home in Denver. The tax home is Sioux Falls. Flights back to Denver are personal commuting, and lodging in Sioux Falls is not "away from home" — it is at home. Nothing about the mortgage, the school district, or the driver's license changes that analysis.
Key insight
Tax home follows work, not family. The physician most exposed is the one whose personal life is most rooted: a long-standing family residence in one state and all clinical income earned in another creates the strongest emotional case for a tax home and the weakest legal one.
If you have no regular place of business anywhere, you may be an itinerant with no tax home at all
Publication 463 provides a fallback: "If you don't have a regular or a main place of business because of the nature of your work, then your tax home may be the place where you regularly live." This is the provision full-time locums physicians rely on, and it is conditional, not automatic.
To claim your residence as the tax home when you have no main place of business, Publication 463 applies three factors:
- You perform part of your business in the area of your main home and use that home for lodging while doing business in the area.
- You have living expenses at your main home that you duplicate because your business requires you to be away from that home.
- You have not abandoned the area in which both your historical place of lodging and your claimed main home are located, you have a family member or members living at your main home, or you often use that home for lodging.
Satisfy all three and the residence is your tax home. Satisfy two and the answer depends on the full facts and circumstances. Satisfy one or none, and Publication 463 is blunt: "You are an itinerant; your tax home is wherever you work and you can't deduct travel expenses." The same three-factor structure appears in Rev. Rul. 73-529, 1973-2 C.B. 37, which is where the test originates.
Important
Factor one is where full-time locums physicians fail. A physician who works exclusively away and performs no clinical or business activity in the home area satisfies factors two and three easily and factor one not at all. That is the two-of-three case, decided on facts and circumstances, and the outcome is not favorable by default. If you intend to hold a tax home at your residence, generate real business activity there: per diem shifts at a local hospital, a telemedicine panel run from a home office, or an independent medical examination practice. Document the days.
Factor two is the duplicated-expense requirement, and it does more work than physicians expect. If you sell the house, put your belongings in storage, and live entirely in assignment housing, you are not duplicating anything. There is no second set of expenses being carried while you are away, because there is no first set. A physician in that position is an itinerant, every housing and travel dollar the agency pays becomes taxable income, and no offsetting deduction exists.
The one-year rule converts a temporary assignment into a new tax home
Even with a valid tax home, the away-from-home deduction requires the assignment to be temporary. The flush language of §162(a) is a hard statutory rule: "For purposes of paragraph (2), the taxpayer shall not be treated as being temporarily away from home during any period of employment if such period exceeds 1 year." That language was added by §1938 of the Energy Policy Act of 1992, effective for costs paid or incurred after December 31, 1992.
Rev. Rul. 93-86, 1993-2 C.B. 71 supplies the test, and it is a test of expectation rather than outcome:
- Realistically expected to last one year or less, and it does — temporary, absent contrary facts.
- Realistically expected to exceed one year, or no realistic expectation of one year or less — indefinite from the start, regardless of whether it actually runs past a year.
- Expected to last one year or less, then the expectation changes — temporary until the date the expectation changes, indefinite from that date forward.
The third rule is the one that traps physicians. It does not require an actual extension. It requires only that you come to realistically expect one.
Example calculation
Assumptions, stated explicitly: an emergency physician with a valid tax home in Portland accepts a locums assignment in rural Montana beginning January 1, 2026, initially contracted for nine months. In August 2026 the facility offers an extension through December 2027 and the physician accepts. Assignment housing and travel reimbursements run $3,800 per month. Marginal federal rate 32 percent, state 5 percent, self-employment tax on the 1099 at an effective 2.9 percent Medicare rate because the Social Security wage base of $184,500 is already exceeded by clinical income.
Months 1 through 8 (January through August 2026), while the realistic expectation remains nine months: Reimbursements: 8 x $3,800 = $30,400 Tax treatment: excludable under an accountable plan Tax cost: $0
Months 9 through 12 (September through December 2026), after the expectation changes to 24 months total: Reimbursements: 4 x $3,800 = $15,200 Tax treatment: the Montana location has become the tax home; these are taxable Federal 32% + state 5% + Medicare 2.9% = 39.9% Tax cost: $15,200 x 0.399 = $6,065
Calendar year 2027, full year at the new tax home: Reimbursements: 12 x $3,800 = $45,600 Tax cost: $45,600 x 0.399 = $18,194
Total additional tax from a single acceptance in August: $24,259.
The extension raised gross pay by nothing. The physician accepted it as a schedule decision and it cost roughly $24,000, all of which was avoidable by declining the extension, structuring it as a separate arrangement after a genuine break, or negotiating a gross-up.
Before accepting any locums extension, calculate whether it pushes the realistic expectation past twelve months from the assignment's start. If it does, the location becomes your tax home and every housing and travel dollar from that date forward is ordinary income.
An accountable plan is what keeps the money off your W-2 or 1099
Having a tax home and a temporary assignment is necessary but not sufficient. The payment mechanism also has to qualify. Treas. Reg. §1.62-2 sets three requirements:
- Business connection — §1.62-2(d). The advance, allowance, or reimbursement covers only deductible business expenses incurred in connection with performing services.
- Substantiation — §1.62-2(e). Each expense is substantiated to the payor as to amount, time, place, and business purpose.
- Return of excess — §1.62-2(f). Amounts paid in excess of substantiated expenses are returned within a reasonable period.
The fixed date safe harbor at §1.62-2(g)(2) defines reasonable: an advance made within 30 days of the expense, substantiation within 60 days after the expense, and return of excess within 120 days after the expense. A periodic statement method permits statements at least quarterly with substantiation and return within 120 days of the statement.
Miss any of the three requirements and the arrangement is a non-accountable plan. Under a non-accountable plan, the entire payment is included in Form W-2 box 1 wages and is subject to income tax withholding and employment taxes, or flows into 1099 gross receipts. Note that for a W-2 physician, unreimbursed employee travel expenses are not currently deductible as miscellaneous itemized deductions, which means a non-accountable plan produces taxable income with no offsetting deduction — confirm the current-year status of that suspension with your tax preparer. For a 1099 physician the expenses remain deductible on Schedule C, so the damage is smaller but the recordkeeping burden lands entirely on you. The W-2 versus 1099 decision walks through how that fork changes the rest of your tax picture.
Per diem versus actual, and the rates that define "reasonable"
You can substantiate actual costs with receipts, or use federal per diem rates, which substitute a deemed amount for the amount element of substantiation. You still must substantiate time, place, and business purpose.
| Method | 2026 rate | Instrument |
|---|---|---|
| GSA standard CONUS per diem, FY2026 | $110 lodging + $68 meals and incidentals = $178 per day | GSA Per Diem Bulletin FTR 26-01, effective Oct 1, 2025 through Sep 30, 2026 |
| IRS high-low, high-cost localities | $319 per day ($86 meals and incidentals portion) | IRS Notice 2025-54, travel on or after Oct 1, 2025 |
| IRS high-low, all other localities | $225 per day ($74 meals and incidentals portion) | IRS Notice 2025-54 |
| Business standard mileage, Jan 1 – Jun 30, 2026 | 72.5 cents per mile | IRS Notice 2026-10 |
| Business standard mileage, on or after Jul 1, 2026 | 76 cents per mile | IRS Announcement 2026-11, IRB 2026-29 |
Locality-specific GSA rates exceed the standard CONUS figure in many metropolitan areas, so check the actual destination rather than defaulting to $178. A stipend materially above the applicable federal rate is not automatically taxable, but the excess over the federal rate generally is, which is a reason to ask the agency which rate table it uses before signing.
Quick takeaway
Three conditions must all hold for a housing or travel payment to reach you tax-free: you have a tax home, the assignment is temporary under the one-year rule measured by realistic expectation, and the payment runs through an accountable plan meeting §1.62-2. Failing any one of the three converts the entire payment to ordinary income, and the failure is usually invisible until the tax form arrives in January.
Common questions
I own a home and my family lives there full time. Is that not my tax home?
Not by itself. Publication 463 sets the tax home at your regular place of business "regardless of where you maintain your family home." Your residence becomes the tax home only when you have no regular or main place of business because of the nature of your work, and then only if the three-factor test supports it. Owning the house helps factors two and three. It does nothing for factor one.
What if I work six different assignments in six different states in one year?
That pattern is the strongest case for having no main place of business, which routes you to the residence test rather than defeating it. But you still need factor one — business activity in your home area — and you still need genuine duplicated expenses. Rotating constantly while maintaining no home-area work and no home-area costs is the definition of itinerant.
Does a break between assignments reset the one-year clock?
Rev. Rul. 93-86 turns on realistic expectation regarding a period of employment, not on calendar mechanics, and there is no bright-line break length that guarantees a reset. Short gaps within what is functionally one continuous engagement at one location are unlikely to help. This is the point at which the cost of an hour with a tax adviser is trivially small relative to the exposure. How to evaluate that adviser is covered in locums economics.
Can I just take the stipend and deduct my actual expenses instead?
If you are on a 1099, yes — the expenses are ordinary and necessary business expenses on Schedule C, provided you have a tax home and the assignment is temporary. The deduction and the exclusion both die on the same condition. If you have no tax home, the reimbursement is income and the expenses are personal, and there is nothing to deduct. The 1099 business expense guide covers what does and does not survive.
What to do next
- Write down, in one sentence, where your regular place of business is. If the honest answer is "wherever the current assignment is," you are working without a tax home and every stipend is taxable. Verify that conclusion before the assignment starts, not at filing.
- Run the Publication 463 three-factor test against your actual year, factor by factor, and be specific about factor one: how many days did you perform clinical or business work in your home area, and can you document them?
- Total your duplicated living expenses — mortgage or rent, utilities, insurance, property tax — carried while you are away. If that total is zero, stop and get professional advice before accepting travel reimbursements.
- For every current and prospective assignment, write the start date and the realistic expected end date, and flag any assignment where the expectation reaches twelve months. Do this before signing an extension, not after.
- Ask the agency or facility in writing whether the travel and housing arrangement is an accountable plan under Treas. Reg. §1.62-2, what substantiation is required, and on what schedule. A firm that cannot answer this in writing has told you something.
- Compare the offered stipend against the applicable GSA locality rate for the destination, not the standard CONUS rate, and ask how any excess will be reported.
The tax-home question is unusual because it is decided by facts you control before the first shift, and effectively unfixable afterward. A physician who structures a genuine home-area practice, keeps duplicated expenses real and documented, and declines the extension that crosses twelve months keeps reimbursements out of income entirely. A physician who does none of those things pays full marginal rates on money already spent on apartments. Both physicians work the same shifts and see the same patients; the protocol above works with or without us. This is education, not individualized financial advice.