It’s tax time. Do you understand your tax situation as a travel nurse? Recently, we interviewed industry expert, Joseph Smith to learn more about travel nurse taxes.
Joseph is a former traveling respiratory therapist, and now the owner of TravelTax. With 30 years of experience, he specializes in multi-state taxation among healthcare travelers and other professions. He’s available year-round for advice and assistance with your tax needs.
Check out the full video interview on our Facebook page, and see the summary below of frequently asked travel nurse tax questions.
1. What are the tax advantages for travel nurses?
Travel nursing is a lucrative career choice. As Joseph mentions, travel nursing is advantageous because of the experience alone, but if you can minimize your housing expenses on the road and at home, you can make a lot of money. Travel nurses and healthcare professionals can qualify for non-taxable stipends for meals and incidentals. This tax-free money is a major benefit to travel nursing because it keeps more money in your paycheck and boosts your take-home pay.
2. What is a tax home and why do travel nurses need one?
The IRS defines a tax home as “your regular place of business or post of duty, regardless of where you maintain your family home. It includes the entire city or general area in which your business or work is located.”
In other words, a tax home is a location where you earn your income regularly. As a traveler, you are duplicating your expenses between your tax home, and temporary job location. Therefore, the IRS allows you to take deductions for travel expenses to other cities or states while keeping the untaxed income in your contract untaxed.
3. What are the steps to establish a tax home?
To avoid being taxed on reimbursement payments, you must prove that you a tax home to the IRS.
Joseph informs travel nurses can qualify for a tax home by:
1. You can prove you have a tax home if your primary residence is also your main area of income. But for 95% of travelers, this doesn’t apply.
2. Your primary residence (either home with a mortgage or rental) is your tax home. You should visit your primary residence at least once every 12 months and prove that you are paying for expenses to maintain it.
If you can’t prove that you have a tax home, or don’t meet the qualifications for having a tax home, you called (“itinerant”) will be taxed on the stipend payments you receive as part of your travel nurse contract.
4. Which tax records should a travel nurse keep?
It can be tedious, but keeping records is important to file accurately and helps make tax preparation easier. Remember the IRS can audit you for up to 6 years after you’ve filed a return.
Important documents to keep:
- Expense receipts - for housing, lodging, meals, uniform, and work-related (continuing education) expenses while traveling
- Copies of your travel contract – to prove where you worked and the duration
- Mileage log – to record your odometer reading from January 1 to December 31
5. Can you rent out your tax home?
You can rent out your tax home, but you must keep a portion of the home for yourself, and under the right conditions. Renting out your primary residence could impact your eligibility for tax-free stipends. If you occupy it more than 10% of the year then it can still qualify as your residence. Beyond that, you are “abandoning” your tax home, and this residence is an investment property.
How can COVID legislature impact travel nurse tax filings?
Joseph Smith explains that there are tax ramifications. For example, the stimulus payments were a credit. And you must claim it on your taxes. Also, there are other considerations such as retirement and student loan interest payments, that may look different on your taxes this year.
Joseph encourages nurses who have earned substantial amounts with crisis pay to talk with a tax professional because if you didn’t have your tax withholding, you’re going to end up owing a lot. Joseph informs that just like nurses, tax professionals specialize in many things. It’s important to find a tax professional that can holistically help you, and work with you long-term to reduce your tax bill. Especially as a new travel nurse, it’s important to ask the right questions. Smith encourages nurses with crisis pay – to talk with a tax professional about future wealth management, retirement, or saving to go back to school.
**Note: Vero RN does not offer professional tax services. If you have any questions, talk with a tax professional to help you save more money and lessen the risk of an audit. Feel free to contact Joseph Smith at TravelTax.com directly regarding any travel nurse tax questions.