It’s April, which means that tax season is upon us. If you’re like me, filing for taxes has been the last thing on your mind given the impact of the COVID-19 crisis, but fortunately, the IRS has pushed the deadline to file back to July 15. Hopefully this provides some much-needed breathing room for all of you who are focused on other priorities at the moment. When you are ready to file, this post will offer some useful information, especially for those of you who are new to travel nursing.
Before I get to the advice, I want to note that while I’ll be going over travel nurse tax basics in this article, it’s important to include the disclaimer that I am not a tax professional (just a nurse!).This article is for general educational purposes only. For questions on your unique circumstances, I recommend you reach out to the IRS or a tax professional directly.
One of the most important concepts to familiarize yourself with as a traveler is a tax home. The IRS defines a tax home as “the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home.” For most people, their tax home and their permanent home are the same place, but travelers fall into a small category of people, like professional athletes and truck drivers, who earn money outside of their tax home.
As a travel nurse working outside of your tax home, you are eligible for tax-free stipends, in addition to the hourly wages you earn. It’s also worth really familiarizing yourself with the tax implications of working in a different state, as the wage component of the total compensation package will translate differently as take-home pay from one state to the next.
There are a few different scenarios that will determine where your tax home is, and this guide provides a comprehensive explanation of some of the most common cases. It’s important to note that you run the risk of the IRS considering a new tax home if you spend too much time in any one geographical location. So if you continue to renew a contract in another state, that could eventually become your tax home. To avoid this, a general rule of thumb, though not an explicit rule, is to avoid staying in any one tax region for more than 12 out of every 24 months while ensuring you’re maintaining (or re-assessing) your tax home.
You should also try to return to your permanent residence between contracts, or whenever possible. The IRS isn’t explicit about how much time they expect for you to spend in your permanent residence. Based on a previous ruling, around 30 days a year was found acceptable to maintain a permanent residence.
There are a handful of important tax advantages to be aware of as a travel nurse, primarily in the form of stipends and reimbursements. Reimbursements are business-related expenses that you have paid for out-of-pocket that your employer pays you back for. This is typically done in the form of an expense report. You incur expenses, save all receipts, submit it to your employer, and the money you’re reimbursed is tax-free. Conversely, stipends are lump sums paid to you periodically in order to cover expenses while on an assignment. For travelers, stipends are tax-free when they are used to cover duplicated expenses, such as lodging and meals, and do not have to be reported as taxable income.
Under the new 2018 tax laws, deductions or write-offs are no longer an option for travel nurses. This means travel nurses can no longer deduct travel-related expenses such as food, mileage, gas, and license fees, and the only way to recuperate this money is either through a stipend from your travel agency or in the form of reimbursements for expenses you actually incurred.
Audits & How To Handle Them
While the chances of any one person being audited are relatively low, it’s always important to be prepared. The best way to do this is to document everything (something that as a nurse, you’re probably already quite good at!). As a traveler, the most important thing to keep track of is proof that you are maintaining a permanent home and duplicating living expenses. Be sure to maintain documents for as many of the following things as possible:
- Mortgage or rent payments
- Gas, electric and cable bills
- Receipts for rental cars, flights, or public transportation to/from assignments
- Mileage logs to and from your assignments
- Copies of all your assignment contracts
One of the benefits of being a travel nurse is the ability to maximize your income. However, it’s really important to understand the tax implications and filing requirements that come along with it. It can be intimidating at first, but once you get the hang of it, taxes as a traveler can become almost second nature. That said, you should always consult an accountant or other tax professional, especially if it’s your first time filing your taxes as a traveler to be sure that you are doing everything correctly.
Sarah is the Founding Clinician at Trusted Health, the career platform for the modern nurse. Sarah is a graduate of the University of Pennsylvania’s Nursing School and began her nursing career at UCSF Benioff Children’s Hospital. Prior to moving away from the bedside, she was a Clinical Nurse III and an Evidence Based Practice Fellow, and served on multiple hospital-wide committee boards. At Trusted, she utilizes her clinical insight and passion for innovation to change how nurses manage their careers and solve for inefficiencies within healthcare staffing.