The content contained in this travel nurse tax guide is meant for general informational purposes only. We are not tax professionals. Please consult with your tax advisor before filing your taxes.
When compared with a traditional staff nurse, filing taxes for a travel nurse can be a bit more complicated. From being able to prove your tax home status to knowing what states to file in, the process can seem initially overwhelming. This travel nurse tax guide has the information you need to start making sense of this daunting process.
Travel Nurse Tax Tips
1. Maintain a Tax Home
When it comes to protecting your earnings as a travel nurse, one of the most important things that you can do is establish and maintain a tax home.
What is a tax home?
The Internal Revenue Service (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.” In other words, your tax home is the geographical region where you earn most of your nursing income.
For most travel nurses, their tax home and their permanent address are the same. However, if a travel nurse spends too much time in a geographical region that is not their tax home, the IRS may consider this new location their tax home (regardless of where their permanent address is).
As a best practice, travel nurses are encouraged to return to their permanent residence between contracts. However, the IRS has never explicitly stated how much time they expect a travel nurse to spend at their permanent residence to maintain it as a tax home. Previous rulings indicate that 30 days per year is an acceptable length of time.
Why should travel nurses establish a tax home?
As part of their compensation package, most travel nurses are given a stipend to cover the cost of typical living expenses (e.g., lodging, meals, incidentals). Since these stipends are meant to cover the cost of duplicate expenses incurred as a result of travel nursing, they are given on a tax-free basis. Travel nurses that do not have a tax home (or do not meet the qualifications for having a tax home) are taxed on these stipends, lowering their total compensation.
What are the criteria for establishing a tax home?
Per IRS Publication 463, three factors are used to determine if a location/residence qualifies as a tax home. These are:
- 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 member(s) of your family living at your main home; or you often use that home for lodging.
Travel nurses must meet two out of the three criteria to qualify their permanent address as their tax home (usually the second and third criteria). If only one or none of these criteria are met, the travel nurse will be considered “itinerant” and will not be entitled to receive tax free stipends.
How can travel nurses maintain their tax home status?
The following list illustrates the types of activities that a travel nurse should undertake to maintain their tax home status:
- Establish a permanent residence in your tax home by paying rent or a mortgage.
- Keep all receipts that prove you are paying to maintain your primary residence (e.g., house sitters, utilities, home maintenance expenses).
- Maintain a regular job in the same vicinity as your tax home (e.g., PRN and agency jobs).
- Maintain your driver’s license and voter registration in your home state.
- Keep your car registered in your home state.
- Return to your tax home at least once a year between assignments.
- File a tax return in your home state.
2. File in Every State Where You Worked
In addition to filing federal income taxes, travel nurses are required to file taxes in each of the states where they worked and the state where their tax home is located. Even if a travel nurse does not work in their tax home state, they are still required to file annual taxes there. Failing to file in each of these states could jeopardize their professional practice license.
The amount of tax that travel nurses will be required to pay will vary by state. For more information on multi-state tax filings, check out this blog post from The Gypsy Nurse.
3. Be Prepared for Audits
While the chances of getting audited as a travel nurse are relatively low, it is always best to be prepared. The best way to prepare for an audit is by gathering and organizing all your relevant documents into one place. Generally, auditors are looking for proof that you are maintaining your tax home and duplicating your living expenses. To that end, it is a good idea to hang onto the following documents for seven years:
- Copies of mortgage or rent payments;
- Copies of utility bills (e.g., gas, electricity, cable);
- Mileage logs to and from your assignments;
- Receipts for rental cars, flights or other transportation to and from your assignments; and
- Copies of all your travel nursing contracts.
The following resources (listed below) can help keep all the important documents (listed above) organized in one central, secure location:
4. Consider Using a Tax Advisor
As with most things in life, it is best to consult with an expert. Filing your travel nurse taxes is no exception. A tax advisor will not only be able to guide you through the process of multi-state filings, they will also be able to advocate on your behalf should something go awry. While you will have to pay for their time and services, it is a small investment when you consider how costly a mistake could be.
Knowing how to file your travel nurse taxes can be initially overwhelming. However, with patience and persistence this process will become second nature. Remember, there is no need to go it alone. A travel nurse tax advisor can help ensure that every “i” is dotted and every “t” is crossed.