Travel Nurse Stipends
What you need to know
Written by: Josh Katz, CPA
In the dynamic world of healthcare, travel nursing has emerged as a popular career choice for professionals seeking adventure and diverse work experiences. One of the key perks that make travel nursing so attractive is the provision of stipends. You can utilize these stipends to pay for various expenses while working temporarily away from home.
Travel Nurse Stipends
Travel nurse stipends are financial allowances provided to cover various expenses incurred while working away from a nurse’s primary residence. These stipends typically include housing, meals, and incidentals. The goal is to ensure that travel nurses are not burdened with additional costs, allowing them to focus on delivering exceptional patient care.
Types of Stipends
1. Housing Stipend
The housing stipend is designed to offset the accommodation costs for travel nurses. Unlike traditional housing allowances, which may be taxable, housing stipends are often provided as non-taxable income. This presents a significant financial advantage for travel nurses, enhancing the overall appeal of this career path.
2. Meal Stipend
Travel nurses must ensure a balanced and nutritious diet to maintain peak performance. Meal stipends are allocated to cover food costs, offering flexibility and choice in meal selection. This stipend contributes to the nurse’s well-being and allows them to adapt their diet to the demands of their unique assignments.
3. Incidental Stipend
Incidental stipends are a financial cushion for miscellaneous expenses that may arise during a travel nursing assignment. From laundry to transportation costs, this stipend provides the flexibility for nurses to navigate unforeseen expenses seamlessly.
Maximizing Stipends: Tips for Travel Nurses
Researching Local Costs
To optimize stipend utilization, travel nurses should conduct thorough research on living costs in their assigned locations. Understanding local expenses helps negotiate a stipend package that adequately covers the essentials.
Creating a detailed budget is crucial for managing stipends effectively. Allocating funds for housing, meals, and incidentals ensures that travel nurses can make informed financial decisions throughout their assignments.
Table of Contents
Tax-Free Stipends for Travel Nurses
Maintaining the tax-free status of travel nurse stipends is crucial for maximizing the financial benefits associated with these allowances. To ensure tax compliance and tax-free treatment eligibility, travel nurses must fulfill specific criteria.
Establish a Tax Home as Travel Nurses
Having and maintaining a tax home is crucial to working as a travel nurse. Your tax home is not always the same as your primary residence.
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.
In situations where a taxpayer lacks a main workplace or business, such as a travel nurse who extensively travels for work, the tax home, according to US federal tax rules, is established based on where the taxpayer maintains a residence or abode. It is where you have established ties, such as owning or renting a home, paying bills, and having a driver’s license or voter registration.
Here are some tips for establishing and maintaining a tax home as a travel nurse:
You must choose a permanent residence, such as a house or an apartment. You need a place where you intend to return after completing your travel nursing assignments.
Maintain ties to your permanent residence
You must maintain ties to your permanent residence to prove it is your tax home. This can include paying bills, having a driver’s license, registering to vote, and keeping personal belongings in your residence.
Spend time in your tax home
To maintain your tax home status, you must spend significant time in your permanent residence. This can be challenging for travel nurses who spend considerable time away from home.
TIP: If you can return to your home residence at regular intervals during the year for a total of 30 days, as opposed to returning to the tax home for a full 30-day period, say for the year-end holidays, that is an equally acceptable method of demonstrating to the IRS that you are continuing to maintain tax home ties.
Work Away From Your Tax Home
To work away from home as a travel nurse, you must find work assignments in other locations. These assignments may be in different cities, states, or even countries, depending on your preferences and the needs of healthcare facilities. Some travel nurses work for travel nursing agencies, which help match nurses with temporary assignments in various locations.
IRS One Year Rule for Travel Nurses
Your travel nursing assignment must be temporary, meaning it should last less than one year. If your work lasts longer than one year, you may not be eligible to claim your stipend tax-free.
Meet the "Duplicating Expenses" Requirements
To be eligible for the tax-free stipend, you must have duplicating expenses. This means that you are paying for things you would only have to pay if you were working away from your primary home, such as rent, utility bills, and other expenses.
The assignment must be far enough away from your home abode or residence that you will need either to stay overnight in an accommodation such as a hotel or lodge, or to pay rent to stay in a leased apartment or house.
Maintaining precise documentation of your travel costs, including receipts for lodging, meals, and other incidental expenses, is important. Doing so can assist you in proving your eligibility for tax-free stipends to the IRS.
How to Ensure Travel Assignments Retain their Tax-free Treatment?
As a travel nurse, it is important to note that, under US federal tax rules, you may will not be eligible for the tax-free treatment of your stipends if your assignment lasts more than one year or is intended to last longer than one year.
If it crosses the one-year threshold or gets extended at any time beyond the one-year mark, the IRS then deems the travel assignment to be indefinite in duration and as a result, all stipends are considered taxable, from the date the assignment gets extended or the one-year threshold is crossed, whichever is earlier.
Need help with your US taxes as a travel nurse?
Here are some tactics you can employ to start a new travel assignment when the one-year mark is approaching to ensure tax-free treatment of your stipends continues into the new assignment:
Take a break
If your assignment lasts longer than one year, you can take a break from work and return to your tax home for at least 30 days. This will reset the clock on your temporary work assignment and allow you to continue receiving the tax-free stipend.
Change your job duties
If you switch to a different department or undergo significant changes in your job duties, it could be viewed as a new job assignment, even if you remain employed by the same organization.
Change your location
It may be considered a new job assignment if you work for the same employer but in a different location. The IRS considers the location of the job, not the employer, when determining whether an assignment is temporary.
Additionally, both the travel nurse and the travel nurse employment agency must keep in mind, in concluding a travel assignment contract, that an assignment must, in fact last, and be expected to last, only one year or less, to maintain tax-free treatment of the stipends.
If you are unsure about your eligibility for the tax-free stipend or have questions about how to maintain your eligibility, feel free to consult with Universal Tax Professionals. We can provide specific guidance to your tax situation as a travel nurse.