Are you a nurse who’s been bitten by the travel bug? Becoming a travel nurse can cure your wanderlust and fulfill your urge to help others. But the particular pay policies of the profession can make tax time tricky. Keep reading for the answers to your travel nurse tax questions before embarking on the career.
What’s a travel nurse?
Travel nurses are nurses who work short assignments of 13 to 26 weeks in different locations of the country throughout the year instead of working for one employer as a full-time staff nurse would.
The benefits are mutual for travel nurses and the facilities and communities they serve. Travel nurses often help fill a shortage of healthcare professionals in a certain location. Meanwhile, the nurses get to travel the country while enjoying significant tax benefits.
How do travel nurses get paid?
Traditional full-time nurses receive a taxable salary from a single employer. Travel nurses, on the other hand, receive a base rate and a reimbursement or an allowance for housing, food, and other travel expenses. The base rate is taxable, but the reimbursements or allowances may be tax-exempt if you’re working away from your tax home. Your tax home is the city or general area where your primary place of work dwells. It might not be the same as your family home.
What tax issues do travel nurses face?
The concept of tax-free reimbursements or allowances introduces tax complications that leave many nurses with travel nurse tax questions.
Let’s say you can prove you were working away from your tax home as a travel nurse. You would still have to account for all your travel expenses with your employer to enjoy tax-free reimbursements and allowances. You would also need to return any excess reimbursements or allowances.
Unreturned excess reimbursements or allowances may count as income. And you might underpay taxes if you under-report your income.
An even bigger problem? Many travel nurses can’t prove they have a tax home at all because they work short stints for multiple employers in a year. As a travel nurse without a regular place of work, the IRS will still consider you to have a legitimate tax home if you can prove that:
- You partly work in your primary residence but also lodge in it
- Living expenses you incur at the main home that you duplicate because your work takes you away from that home
- You haven’t left the place where your historical place of lodging and your main home dwell; one or more family members live at your main home; or you often use that home for lodging.
You have to meet all three criteria to definitively prove your tax home if you don’t have a regular place of work. However, tax courts will still consider your claim of a tax home if you meet two of the criteria.
If you meet only one of the criteria, you will be considered an itinerant worker. You are usually ineligible for tax-free reimbursements and allowances as an itinerant worker.
Lastly, travel nurses often need to deal with multiple W-2 forms from various employers they worked for during the year. Traditional staff nurses who work for one employer throughout the year usually only have to contend with a single W-2.
What are some tax deductions for travel nurses?
Tax-free reimbursements or allowances aren’t the only financial perks of being a travel nurse. Travel nurses can also claim tax deductions for legitimate business expenses in excess of reimbursements or allowances.
These include expenses for transportation, lodging, and meals. However, a 50 percent limit applies to deductions for business meals and entertainment.
Don’t forget to deduct professional expenses such as business insurance and the costs of continuing nursing education.
See IRS Publication 463 for more information about how to treat reimbursements and allowances for tax purposes.
MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.