Being a travel nurse is such a wonderful opportunity. It allows you to do what you love while exploring different cities. However, travel nursing comes with a different tax implication that could be quite a challenge when preparing for US tax returns.
Typically, travel nurses are required to file for a resident state tax return in their home state and a non-resident state tax return in every state where they performed work or services with the exception of nine states that have no income tax on wages:
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
When filing for a resident state tax return, travel nurses will be subject to paying taxes on income earned everywhere. In contrast, for the nonresident state tax return, travel nurses would only be subject to paying tax on the income they earned in that state.
This means that travel nurses’ wages can be taxed twice. Once by their home state and another by the state where they performed the service. To prevent double taxation, travel nurses must claim the available tax credit paid to the state where they performed work against their home state income.
Tax Advantage
Travel nurses, unlike the usual staff nurse, are paid a base salary which is an hourly rate, and an additional payment called a stipend for housing, meals, travel, and other essential work expenses.
The base salary, just like any other income, would be taxable, but the stipend could be claimed as non-taxable income if the taxpayer proved that he or she has a tax home and has used the stipend to cover duplicated expenses.
Tax Home
A tax home is generally the city or area in which a taxpayer’s main place of work or business is located and where he or she earns the most income. As a travel nurse who keeps moving from one place to another, this could be quite difficult to maintain.
However, under the IRS rules, a tax home is also where the taxpayer maintains an abode or residence.
As a travel nurse, one of the ways to maintain a residence is to return home for at least 30 days during the year. It’s also very important to demonstrate strong ties to the state which you consider to be your tax home.
These include but are not limited to:
- Continuing to make payments for a home while away – mortgage payments, rent, utilities, home insurance, etc.
- Paying another person to watch the home while the taxpayer is away
- Maintaining and keeping current a driver’s license, auto registration, auto insurance, and voter’s card in the taxpayer’s home state
- Using credit cards when returning to the home state for a visit
- Filing as a resident taxpayer in the home state
Duplicate Expenses
Since stipends are used to cover housing, meals, and travel expenses, it’s important that your work location is far enough away from your main residence that it would require you to pay for the above expenses.
We consider these expenses duplicated in the sense that you are still paying rent or utilities on your main residence, and the work assignment would also require you to pay for a short-term rental to sleep in.
Work Assignment
Keeping your receipts would be extremely helpful when preparing your tax returns. Additionally, in case of an IRS (or state) audit, you will have an accurate and complete record of all their travel, housing, meals, and work-related expenses to be able to substantiate that the per diem allowances or other stipends paid to them qualified as tax-free.
Here’s a list of what a travel nurse should keep a record of, both paper and digital copies:
- Rental housing, hotel or other lodging expenses incurred while traveling
- Utilities paid for rental housing or other lodging
- Airfare and car rental expenses (if applicable)
- Auto expenses (gas, tolls, parking, etc.)
- Meals incurred while traveling
- Work-related expenses (including professional certifications, continuing education courses, nurse scrubs or uniforms)
Another useful tool for travel nurses to substantiate their business travel is to maintain mileage logs for their travel by car.
Keep a Record
Keeping your receipts would extremely be helpful when preparing your tax returns. Additionally, in case of an IRS (or state) audit, you will have an accurate and complete record of all their travel, housing, meals, and work-related expenses to be able to substantiate that the per diem allowances or other stipends paid to them qualified as tax-free.
Here’s a list of what a travel nurse should keep a record of, both paper and digital copies:
- Rental housing, hotel or other lodging expenses incurred while traveling
- Utilities paid for rental housing or other lodging
- Airfare and car rental expenses (if applicable)
- Auto expenses (gas, tolls, parking, etc.)
- Meals incurred while traveling
- Work-related expenses (including professional certifications, continuing education courses, nurse scrubs or uniforms)
Another useful tool for travel nurses to substantiate their business travel is to maintain mileage logs for their travel by auto.
Do you have questions about taxes for travel nurses? Feel free to contact Universal Tax Professionals today.
