Navigating taxes can be slightly different for travel nurses compared to traditional nursing staff. In the travel nursing industry, travelers are paid differently than staff nurses because they receive both a taxed base hourly pay and additional “payments” that are non-taxed to make up their “total” pay. When you agree to commit to a travel nurse position, you’ll receive a pay package, which will detail all of the different aspects of what will make up your actual compensation.
To ensure you receive the most out of travel nursing and combat a combination of anxiety, confusion, and any lack of resources, we’ll cover a few tax topics to answer the questions you may have below. Taxes are tricky enough to maneuver through, especially travel nurse state taxes, so we’re here to make it easier. If you still have questions about where to start, remember that you can always talk to a tax professional.
Tax Homes vs. Permanent Homes
They say home is where the heart is, but the IRS needs a little more than that. To benefit from tax-free income from your travel nurse assignments, you must establish a tax home, which usually differs from your permanent residence. For most people, their tax home and permanent home are the same places, but travel nurses fall into a small category, like professional athletes and truck drivers, who earn money outside their homes.
A general rule for travel nurses is not to stay at one travel nurse assignment for more than 12 months to maintain eligibility for tax-free stipends. To ensure you qualify for a tax home in the eyes of the IRS:
- Keep proof of any payments you make to show that someone else maintains your primary residence. (I.e., receipts for a house sitter, mortgage, rent, utilities, or home maintenance expenses).
- Maintain your driver’s license and voter registration in your home state.
- Keep your car registered in your home state.
- Return to your permanent home between every contract.
- File a Residence Tax Return with your home state.
There are a handful of significant tax advantages to be aware of as a travel nurse, primarily stipends and reimbursements.
Reimbursements are business-related expenses that you have paid for out-of-pocket that your employer pays you back for. You incur expenses, save all receipts, submit them to your employer, and the money you’re reimbursed is tax-free. This is typically done in the form of an expense report. Conversely, stipends are fixed amounts of money (lump sums) paid periodically to cover expenses. For travel nurses, stipends are tax-free when they are used to cover duplicated costs. They do not have to be reported as taxable income if you can prove this duplication of living expenses.
Under the new 2018 tax laws, travel nurse tax deductions or write-offs are no longer an option. This means travel nurses can no longer deduct travel-related expenses—food, mileage, gas, and license fees—and the only way to recover these funds is either through a stipend from your travel nurse agency or in the form of reimbursements for expenses you actually sustained.
While the chances of any one person being audited are relatively low, it’s always important to be prepared and have documentation for everything. In travel nursing, it is essential to keep a paper trail of permanent home maintenance and duplicating living expenses—documentation is everything. If you claim shared expenses, always have proof of the gas, electric, cable bills, etc., under your name.
As a travel nurse, you may be more at risk for an audit if you display high expenses and low income. For instance, if your mortgage is $10,000 a month, but your overall income with your base pay as a travel nurse is only $20,000 annually, the IRS may have a few questions about how you’re actually affording your lifestyle. To get through or avoid an audit altogether, find a certified tax professional familiar with traveling healthcare professionals and do not solely rely on your travel nurse advocate or travel nursing agency for tax advice.
One of the benefits of being a travel nurse is maximizing your income. It can be intimidating at first, but travel nurse taxes can almost become second nature once you get the hang of it. If you have more questions about the travel nursing industry, take a look at our blog.