Travel Nurse Tax Guide
In this 2018 Travel Nursing Tax Guide we will cover: Travel Nurse Tax Deductions such as Tax-Free Stipends and Reimbursements, Tax Homes, Reasons for Taxable Income and Tips to pay less tax and decrease any chance of an audit. This Travel nurse Tax Guide is only a guide. If there are any unanswered questions please consult a Tax Professional.
If you’d like to read about how Trump’s Tax Cut Affects Travel Healthcare Professionals, click here.
Travel Nurse Tax Deductions
One of the biggest reasons Travel Nurses make more money than staff nurses are Travel Nurse Tax Deductions. The most prominent Travel Nurse Tax Deductions are Tax-Free Stipends for Housing, Meals & Incidentals, Travel Reimbursements and Professional Development Costs. The only condition to qualify for Tax-Free income is that the traveler must be working in a state that is not their tax home.
Travel Nurse Tax Deduction #1: Tax-Free Stipends for Housing, Meals & Incidentals.
In California, Tax-Free Stipends can be as much as $1800 per week for housing in San Francisco and $500 per week for Meals and Incidentals, M&IE.
Travel Nurse Tax Deduction #2: Travel Reimbursements
Make sure you track every travel expense including airfare, gas money and public transportation to and from your travel nursing destination. Make sure to deduct any travel reimbursements from the travel nursing agency. In 2017 the IRS allows for write-offs at the standard mileage rate of 53.5 cents per mile. For a 1,500 mile trip, you can deduct $802.50
Travel Nurse Tax Deduction #3: Professional Expenses
When filing taxes, you can deduct any of the following professional expenses so long as they’re necessary in maintaining/improving your skills required for nursing.
- Tuition for courses, books, and supplies of schooling necessary for furthering your nursing career.
- If you’re a member of any professional organizations or associations you can write off membership fees or dues.
- Malpractice insurance protects you from personal liability for anything that could happen while on the job
- Dry cleaning expenses for work clothing
What is a Tax Home and Why do I Need One?
In order to take advantage of the Travel Nurse Tax Deductions listed above, you need to pay for and maintain, a home/apartment in their declared tax home. A permanent residence and a tax home are not necessarily the same thing. A permanent residence must fulfill two of the following three qualifications in order to qualify as a Tax Home.
- Does the Traveler have significant income at home?
- Does the Traveler have substantial maintenance expenses, like rent or utilities, for their primary residence that are duplicated when on assignment?
- Has the individual left their historical place of lodging and work?
Very rarely do travelers work at home, so most travelers fulfill qualifications two and three.
Some keep PRN work at home and are able to satisfy 1 and 3. The IRS requires travel nurses to have a tax home, else they pay taxes on all of their stipends and reimbursements.
Documents that can help prove the validity of a tax home are:
- Driver’s License
- Car Registration
- Voter Registration
When situating your Tax Home Consider that some States have no Income Tax at all.
- No Income or Sales Tax
- Relies on estate, excise and gift taxes
- Higher property Taxes
- High sales tax 8%
- Tax gambling industry
- New Hampshire
- No sales tax except alcohol
- High property tax
- South Dakota
- Taxes Alcohol and Tobacco
- Low sales and Property taxes
- High sales and sin tax
- Texas Constitution forbids income tax for good
- High sales and property taxes
- Has never had income tax
- High sales taxes
- No income taxes for personal or corporate
- Low sales and property taxes as well
- Tax fossil fuel industry
When you go to file your taxes in April, or quarterly, you must pay income taxes in all of the states you worked and your home state. You have to pay in your home state even if you didn’t work there.
If one of the states above is your tax home, you only have to pay income taxes in the states that you work. Now if your home state has a higher income tax than the states your working in, you don’t pay twice. The amount you pay in the state where you’re working will count as a credit towards the overall sum your home tax state requires.
Example A: Your Tax Home is Florida and you also worked in Texas and Washington
No income tax owed.
Example B: Your Tax Home is Florida and you worked in California and North Carolina.
You owe California 6% of income earned in California and North Carolina 5% of income earned in North Carolina. You owe no income taxes in your home state.
Example C: Your Tax Home is California and you worked in New York and North Carolina.
You owe 5.5% of income earned in New York to New York and .5% of income earned to California.
You owe 5% of income earned in North Carolina to North Carolina and 1% of income earned to California
I cannot let you finish this Travel Nurse Tax Guide without giving you a few important arguments for Taxable Income.
Reasons against tax-free stipends
- Overtime Pay
If you’re considering working overtime for the extra money, you should consider asking for a higher taxable. Overtime laws stipulate that overtime pay is at least paid time and a half of all taxable income. A larger taxable income can help you earn more with Overtime Pay.
- Loan opportunities. If you’re applying for a mortgage or a loan, banks do not consider tax free stipends or reimbursements in their accounting procedures. Banks will only look at your taxable income
- Social Security. The check you get when you retire depends on the 35 years of your highest taxable income. Tax-free stipends or reimbursements are not considered for Social Security.
- Chance of Injury. If you get hurt and can’t work you’re entitled to 2/3 of your taxable pay. This rate does not take into account tax-free stipends or reimbursements
Travel Nurse Tax Tips
To finish the Travel Nurse Tax Guide, here are 6 Travel Nurse Tax Tips that should help you in your travel nursing journey. If after these Travel Nurse Tax Tips, you still have any questions can help please check the IRS guide on travel expenses here
Travel Nurse Tax Tip 1: Keep hard copies of all contracts and paperwork. Make sure you have paperwork proving your start and end dates to prove temporary work
Travel Nurse Tax Tip 2: Maintain a mileage Log and keep all your receipts
Travel Nurse Tax Tip 3: Don’t work in one location for more than 12 months in a 24 Month period. This will demonstrate to the IRS that you’ve abandoned your Tax Home
Travel Nurse Tax Tip 4: If you rent out your primary residence while traveling, it may impact your eligibility for Tax-Free Stipends
Travel Nurse Tax Tip 5: Get a regular PRN job in your tax home and if the income is substantial enough you don’t have to prove your financial obligation in the tax home. Criteria 1 and 3
Travel Nurse Tax Tip 6: Just like how the travel nurse tax guide is just a travel nurse tax guide, these Travel Nurse Tax Tips are just Tips. If you have any concerns, do yourself a favor and hire a Tax Professional. By allowing a CPA to file for you, you can very possibly save more money and lessen the risk of an audit