Navigating the world of taxes when you take your first travel nurse job or allied health assignment can feel like a daunting task. With unique income structures, tax homes, and multi-state tax filing, it's no wonder that tax season can feel overwhelming.
But don't worry! This guide will help you understand the ins and outs of travel nurse taxes, travel nurse tax homes and tax deductions, and other tax rules you should be aware of while traveling! Keep in mind that individual circumstances can greatly impact your taxes and stipend eligibility, so be sure to connect with a tax professional for personalized advice! Trusted Health cannot provide you with personal tax advice, as we are not aware of your unique circumstances.
Let’s get started!
- Understanding Your Income
- Contract Types
- Qualifying for Stipends
- State Taxes
- Lower Taxable Income Considerations
- Audits and Travel Nurse Taxes
- FAQ’s
Travel Nurse + Allied Health Taxes: Understanding Your Income
Travel nurses and allied health professionals have a unique pay structure compared to traditional staff. You can read our blog on how much travel nurses make to learn more details, but we’ll go ahead and provide a quick overview!
Travelers earn hourly pay for the hours that they work. That hourly pay is pay is subject to all applicable payroll taxes. Travelers that are eligible also may receive expense reimbursements for lodging, meals and incidentals that are called “per diems”, or stipend payments. These stipend payments are generally not taxed. It’s important to remember, though, that you must meet certain criteria to be eligible for stipends and avoid any issues with the IRS! We’ll get into those details soon.
Contract Types: Travel vs Local Contracts
It’s also important to understand that you don’t have to qualify for stipends, or choose to receive stipends, in order to take travel assignments. There are some circumstances in which someone does not qualify for stipends. In these cases, you can still take a local contract. If this is the case for you, be sure to let your Nurse Advocate know!
Travel Nurse + Allied Health Stipend Rules: Qualifying for Non-Taxable Income
To be eligible to receive for tax-free stipend payments, the IRS requires you to have a "tax home" and be working on a temporary assignment away from it. The 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.” This may sound a little bit confusing, so let’s break it down.
Generally, your tax home is the city or area where your regular place of work is located. If you do not have a regular place of work, then your tax home may be the place where your residence is located, depending on whether the following criteria, established by the IRS, are satisfied:
- You perform part of your work in the area of your residence and still use your residence for lodging while performing your work in the area.
- You have living expenses for your residence (for example, mortgage, rent, utility bills) and you incur additional living expenses while away on a temporary work assignment.
- You meet least one of the following criteria:
- You have not abandoned the area in which your historical place of residence located; or
- You have at least one family member living at your residence; or
- You utilize your residence frequently for the purpose of your own lodging.
If none or only one of criteria 1, 2, or 3 are true for you, then you do not have a tax home. This means you are not eligible for stipends for lodging, meals, and incidentals. If all three of the above factors are true for you, then you have a tax home at the place of your residence (again, assuming you do not have a regular place of work).
If two out of three of the above factors are true for you, then you must evaluate all of your facts and circumstances to determine whether your place of residence is your tax home. Issues to consider include whether your residence is the same as: your address on your income tax returns; your address for purposes of utility bills, bank statements and credit card bills; the address on your driver’s license and car registration; your address of record for your professional licenses; the place where you have your primary bank accounts; where you are registered to vote; and the place where you have other personal associations (for example, membership in a local club or religious institution).
It’s important that you’re able to show that you’re duplicating expenses by traveling, meaning you’re paying for the same types of expenses at your tax home and while on assignment in your new location. This means that if you rent out your home while you’re gone, you cannot classify it as a tax home, because you’re not duplicating your expenses.It’s important to know that as a travel nurse or allied health professional, you need to file taxes in every state you work in, as well as the state that serves as your permanent tax home. Keep in mind that working a travel assignment (under 12 months in one location) does not necessarily mean that you have moved your primary state of residence in the eyes of the IRS, if you maintain your residence with the intention of returning. Instead, you’re just away from your home temporarily, which is the important distinction noted above in regard to maintaining a tax home.
Travel Nurse + Allied Health Tax Rules: State Taxes
It’s important to know that as a travel nurse or allied health professional, you need to file taxes in every state you work in, as well as the state that serves as your permanent tax home. Keep in mind that working a travel assignment (under 12 months in one location) does not necessarily mean that you have moved your primary state of residence in the eyes of the IRS, if you maintain your residence with the intention of returning. Instead, you’re just away from your home temporarily, which is the important distinction noted above in regard to maintaining a tax home.
You may be able to deduct unreimbursed job expenses on your state income tax return. You should consult a tax professional to assist you in determining which tax deductions you may personally be eligible to take. In general, it’s a good idea to keep copies of your pay stubs and receipts for things like:
- Housing and lodging expenses while traveling
- Mileage or airfare to and from assignment location
- Mileage to and from work while on assignment
- Parking expenses while on assignment
- Uniform and scrub expenses
- Work-related expenses such as CEU’s or certifications
- Meals while on assignment
- Utilities
- Mortgage or rent payments for your residence at your tax home
Keeping record of these expenses can help make tax preparation easier. It’s a great idea to snap a picture of these on your phone or use a document scanner app to keep these organized as PDF files, ready to submit with your taxes.
Tax Audits
Because of the low taxable income you receive in addition to stipends for expenses incurred while working away from your tax home, the travel nursing industry tends to be scrutinized closely by the IRS. As a travel nurse or allied health professional, you may be more at risk for an audit if you're displaying high expenses and low income.
We say this not to worry you, only to highlight the importance of working with a trusted tax professional.
Tax FAQs
How do I receive stipends?
You are eligible to receive stipends if you have a tax home, are working away from that tax home on assignment and incurring travel-related expenses for lodging, meals and incidentals. Be sure to read the section above and check in with your tax consultant for eligibility!
Do I need to file taxes in every state I work in?
Yes, unless a particular state does not have an income tax, you'll likely need to file a tax return in every state where you've worked in within the past year, as well as the state where you have a permanent tax home.
What happens if I work in a state with no income tax?
If you work in a state with no income tax, you won't owe state income tax for that state. However, you may still owe income tax to your home state, unless your home state also has no income tax.
Am I more likely to get audited as a travel nurse?
The travel nursing industry tends to be scrutinized closely by the IRS, so you may be more at risk for an audit. Working with a certified tax professional can help you navigate this risk.
What happens if I extend in one location for greater than 12 months?
It's best to consult your tax professional as to how you handle your contract as you approach the one year mark! The answer to this question will depend on your unique circumstances. We do offer local contracts, or some nurses choose to take some time off between contracts, then extend. Since everyone's situation is different, your tax advisor would be the best person to consult. Once you do so, let your Nurse Advocate know how we can help!
Can I handle my taxes myself, or should I hire a professional?
While you can handle your taxes yourself, it's often beneficial to work with a tax professional who is familiar with the unique tax situation of travel nurses. They can help ensure you're meeting all tax obligations and taking advantage of any potential deductions.
Are there specific tax deductions for traveling healthcare professionals?
Travel nurses and allied health pros can take advantage of numerous tax breaks and deductions related to their assignments. Tax deductions reduce your taxable income to help you save money on your tax bill. Read more on this topic in our blog on tax deductions for traveling healthcare professionals.
What records should I keep for tax purposes?
You should keep records of all your income, including your pay stubs and W-2 or 1099 forms, as well as receipts for any tax-deductible expenses. This can include receipts for travel, housing, meals, uniforms, continuing education, and any expenses related to maintaining your tax home. You’ll also want to make sure that you save a copy of each assignment you take, showing your contract dates and pay breakdown.
Final Thoughts
Stay informed, stay prepared, and you'll be able to focus on what you do best - providing exceptional care to those who need it most. Remember, this guide is meant to provide general information and should not be considered tax advice. Always consult with a tax professional to ensure you're meeting all tax obligations and taking advantage of any potential deductions.
At Trusted Health, we're here to support you every step of the way. From finding the perfect assignment to helping you navigate the complexities of travel nurse taxes, we're committed to making your travel nursing journey as smooth and rewarding as possible.
Sign up with Trusted Health today and join a community of healthcare professionals who are transforming the future of healthcare. Let's navigate this journey together!
