Everything You Need to Understand about Traveling Nursing Taxes

Guest Post: Anil Grandhi, Founder & CEO of AG FinTax

Traveling is an exciting adventure, and the opportunity to work and earn a living while traveling is an amazing experience. One group of people that has such a potentially rewarding opportunity is nurses, specifically travel nurses. 

As wonderful as this opportunity can be, however, it presents a unique set of challenges. One of these challenges can be keeping track of how and when to pay taxes on your income earned through travel jobs. How much should you pay in taxes? Where should you pay them, in your home state or in the state(s) where you work? Learning about and keeping track of certain details regarding your income taxes can help you maintain your excitement and passion for your work, while allowing you to freely earn a rewarding income. 

What is a “tax home”? Where do travel nurses pay state income taxes? 

You will pay state income taxes in whichever state you work. Make sure to check state laws, as you may end up paying state income taxes in more than one state if you live in one but work in another. If you have questions about which states you will owe taxes in, it’s advisable to contact a CPA or other tax professional. 

One of the primary terms you will hear when filing your taxes as a traveling nurse is “tax home.” Simply put, your “tax home” is the state where you earn most of your nursing income. For example, if you live in Arizona and take a nursing job in Oregon that lasts for several months, your tax home might end up being Oregon rather than Arizona, simply because you spent more time living and working in Oregon. However, in nearly all circumstances, applicable state taxes will be owed in the state(s) in which you worked throughout the year and the amounts owed are based upon the wages earned in said state(s) you have worked throughout the year.

If this is the case, your tax home becomes the place where you pay your state taxes. To follow our example, this means that even though your physical home may be in Arizona, you will pay taxes in Oregon because you primarily lived and worked there for the tax year. 

Note: several states have no state income tax, including Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Consider these states when searching for travel jobs. 

What about per diems, or non-taxable wages? 

One of the many incentives medical companies may use to entice traveling nurses is through the use of “per diems,” wages paid for daily living expenses such as food, gas, or other basic expenses. Your hourly wages are taxable, but these per diems are not. 

One note here: as you interview for and are offered travel nursing jobs, pay close attention to the ratio of paid hourly wages to per diem levels. Research market values in the area for hourly vs. per diem wages; if the per diem wages seem disproportionate, this may mean that the hiring company is seeking to pay less taxes themselves. Ask those conducting your interviews about any discrepancies you notice. 

What about deductions? 

When filing our taxes, all of us are looking for “deductions,” items that lower our tax liability. As a travel nurse, there are some deductions that can save you a significant tax burden, such as, maintaining the things necessary to create a “tax home”, travel expenses to your place of work (if your tax home is separate from your place of employment), and professional expenses. Professional expenses can include things like professional licensing, continued education, and any costs related to keeping up with your job, such as phone, internet, and technological expenses. 

Overtime pay/extra hours

When you are hired for your travel job, there will be an agreement between you and your employer about the number of hours you will be expected to work, and thus be compensated for. But many nurses find that they often work extra hours, beyond what they have been contracted to work. Are these hours’ wages taxable? 

Before you take any travel job, negotiate your taxable wages with your potential employer, as the overtime pay structure can end up costing you more than the overtime pay is worth. Again, contact a tax professional for advice specific to your situation. 

Common Mistakes Travel Nurses Can Avoid 

As with most tax issues, there are a couple of common mistakes. One frequent mistake traveling nurses make is not applying for state income tax credits on tax returns filed in your tax home state. Be sure to carefully read and file the tax return for your tax home state, as that is where you will apply for those credits. 

Another common mistake is not maintaining a clear tax home. Failure to clearly designate, and file taxes for, your tax home state will affect your ability to receive tax-free stipends such as per diems and other non-taxable wages. 

Make Sure You Talk To A Professional 

One of the best ways to protect yourself and your income as a traveling nurse is to make sure you have a reputable Certified Public Accountant (CPA) on your side. AG FinTax is proficient in helping individuals keep their taxes in order. Their knowledgeable tax professionals will help you navigate the cloudy waters of tax preparation and filing, from clarifying deductions to properly maintaining your tax home. 

They can also help navigate multi-state returns, a regular concern with travel nurses when filing their taxes. If and when possible, contact AG FinTax to make sure to begin your tax preparations early so you are not caught unaware when filing is due. Contact AG FinTax today!

learn more