Travel nurses are a unique group of people who work in multiple different hospitals and cities throughout the year. Your tax considerations are just as unique as your job, so it is essential to understand your special tax situation when you file your taxes.
To start, let’s look at what a tax home is and why it is important.
Defining Your Tax Home
Understanding your travel nurse tax home is vital for travel nurses, but what is a tax home? According to the IRS, your tax home refers to “the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home.” Essentially, it’s where you work. For example, if a person works full time in one state but lives in another state, their tax home is their place of employment.
Since travel nurses move to new cities frequently and do not have the same place of employment throughout the year, it is difficult for them to claim their place of employment as their tax home. Instead, your tax home could be the place you regularly reside or where you return between assignments.
Do I Need To Establish A Tax Home?
Whether or not you need to establish a tax home depends on your own personal situation and each individual assignment contract, so it is important for you to look at the details of your contract. For example, if you are getting housing, meals, or gas stipends, that money is generally tax-free if you are duplicating living expenses, meaning you would not have to pay taxes on that portion of your paycheck.
So, your travel company may not withhold any taxes and will pay you the full amount, but you must be careful. If you are not able to prove you are duplicating living expenses, then when you go to file your taxes, you may end up with a big tax bill. If you have any questions about your contract agreement, your stipends, or your paycheck, reach out to your recruiter for more information. They can’t give you tax advice, but they can help you figure out what is written in your contract.
What Does It Mean To Duplicate Living Expenses?
Duplicating living expenses means you are paying to maintain a permanent home while you are working temporarily away from home. This is important if you don’t have a tax home associated with your employment. Instead, you will establish a tax home based on your permanent residence. This means more than giving your travel company an address 50 miles away from your travel assignment.
You must prove you maintained a permanent residence by having mortgage/rent receipts or utility bills. If you do not have a permanent residence, then your stipend is considered taxable income. If you are audited and cannot prove your duplicate home, you may face tax penalties and may have to pay a fine in addition to paying back the money you owe.
Utilizing Your Parents’ Home
Your parents’ home can serve as your tax home, but again, you must prove you’re financially contributing to its upkeep. You must have receipts showing rent payments or utility bills you have paid in your name. If you do not have receipts or documentation proving you are living at this address between assignments, then you might have to pay taxes on your stipend.
Understanding the “50-Mile Rule”
Many travel companies require a traveler to work at least 50-miles away from their permanent residence, but the 50-mile benchmark is not rigid. For tax purposes, you do not have to be 50-miles away. Instead, you must show you need to rest away from your permanent home after work.
According to Josh Kratz, CPA at Universal Tax Professionals, “You are traveling away from home if: You need to sleep or rest to meet the demands of your work while away from home. This rest requirement isn’t satisfied by merely napping in your car.” In other words, if the distance requires you to stay overnight for adequate rest, even if it’s less than 50-miles, it constitutes duplicating your tax home.
What The “50-Mile Rule” Means for Local Travelers
For local travelers who work with a nurse travel company, it is important to read your individual contract when it comes to stipends. If you do not stay somewhere overnight to rest, your stipends may be taxable income. If you are unsure, it is important to reach out to a tax expert to learn more. If your local contract has you traveling far enough away that you do stay at a hotel or other lodging, then you may be eligible for a tax-free stipend. Every assignment and every contract is different, so it is important to understand the terms and conditions.
Understanding the “One-Year Rule”
Another important rule to understand is the one-year rule. According to the IRS, “Any work assignment in excess of one year is considered indefinite.” In other words, if you stay on an assignment for longer than one year, your place of employment will become your permanent tax home, and you will not qualify for tax-free stipends. Therefore, it may be important for you in regards to taxes to change not only the hospital you work at but also the city you work in at least once a year.
Filing State Taxes in Multiple States
If you work in multiple states throughout the year, you must file a state tax return for each state you have worked in. It is important to follow the tax guidelines of each state. Generally, you will have to file state taxes in each state you work in, as well as the state you keep your permanent home, but there are some exceptions.
For example, Alaska, Nevada, Florida, Tennessee, Texas, New Hampshire, South Dakota, Washington, and Wyoming are tax-free states, meaning you should not have to file a tax return in those states. If you need clarification about state taxes, it is important to reach out to a tax professional. Washington, DC, also has special tax considerations. If you worked in Washington, DC, look into whether you will need to file a tax return.
Nurses Without Permanent Residence or Tax Homes
For travel nurses constantly on the move, living in an RV or converted van has a special tax circumstance. As per the IRS, they’re considered itinerant, which is a person who travels from place to place without a permanent tax home. If this is your situation and you are not duplicating living expenses, then you may be required to pay tax on your stipends, but you may be able to deduct some of your living costs as part of your employment. Reach out to a tax expert to learn more.
What Else Can Travel Nurses Deduct?
Besides your stipends, there are other expenses you may be able to deduct from your travel nurse taxes. These include:
1. Travel expenses such as gas, train tickets, or airfare.
2. Cost of taxis or buses to get to and from work.
3. Moving cost of any baggage or display materials.
4. Mileage rate, tolls paid, and parking fees.
5. Lodging expenses and non-entertainment-related meals.
6. Dry cleaning and laundry.
7. Business calls made while on assignment. This could be a portion of your phone bill.
8. Any tips paid while conducting business.
9. Other expenses related to business, for example, computer rental fees, etc.
It is important to keep track of these expenses with receipts along with notes to explain each expense. You should also talk with a tax professional to fully understand what deductions you can use.
Importance of Seeking Professional Advice
Every travel nurse has a different experience depending on their contracts, the states they work in, and whether they have maintained a permanent home. Given the complexity and variability of tax regulations across states, consulting a tax professional may be needed if you are unsure or have any questions.
To Review
When you sit down to do your taxes this year, consider each of these situations:
1. Do you have a permanent tax home?
2. Did you require rest away from home in between each shift?
3. Do you have documentation to prove you are still maintaining a permanent home?
4. Do you need to file state taxes in multiple states?
5. Did you work at a particular hospital or in a certain city for less than a year?
Taxes are complicated. Stability wants to ensure our travel nurses understand their unique tax situation. If you have any questions about your contracts, contact your recruiter to get more information. If you have any other tax concerns, reach out to a tax specialist.
This article is not tax advice. You should consult a professional tax advisor for more information about your unique situation.
