Travel Nurses: Don’t File Your Taxes Until You Read This
In addition to patient care skills, a good bedside manner, and medical knowledge, travel nurses also need to be well-versed in financial matters if they want to maximize their earnings and survive tax season. Because of the “blended” rate that many travel nurses earn – which combines taxable and non-taxable income – it can be tricky to know which deductions are and are not allowed when it comes time to file your return.
The fact is, even though some agencies offer what seems to be a substantial amount of tax-free compensation, you may still qualify for further tax deductions.
Below, we break down some of the key tax deductions that travel nurses should look into.
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About That Tax Home
Before you can even think about tax deductions, it’s important to understand the IRS’ main rule when it comes to travel nursing, that being, you must have a “tax home.” A tax home is defined as a permanent residence for which you incur expenses while you’re working in another location. Having a tax home means that you pay a mortgage on a home or rent an apartment, and also have ties to that address that go beyond the bills. For instance, your driver’s license should be for your home state, you should be registered to vote there, and that should be your permanent mailing address.
If this is your first year as a travel nurse, or you’re considering the career, it might be a wise idea to speak with a tax professional to fully understand the concept of a tax home, and if you meet the qualifications. If you do, then you can take advantage of the tax-free income; if not, you can still be a travel nurse, but all of your income may be subject to tax.
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Once you confirm your tax home status, there are some additional expenses that might be tax deductible for travel nurses. The key is to figure out how much your agency is already paying you in non-taxable income, and then determine if your qualified expenses go beyond that.
Start with these categories:
Lodging and Meals
Many travel nursing agencies pay a daily rate to cover room and board, meals, incidentals, travel expenses, and more. This is what is usually referred to as a daily stipend, or per diem rate. This portion of your paycheck is not taxed. The General Services Administration of the United States Government (GSA) determines what the maximum daily lodging and meals and incidental expenditures (M&IE) is by location. Although some agencies go by those figures, others pay less than that amount. The IRS says that if that’s the case, you are allowed to deduct any additional expenses you pay out of pocket up to the maximum allowance – assuming you have a valid tax home, and keep meticulous records of your expenses.
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The minute you hit the road toward your first travel nursing job, you can begin tracking your travel expenses. This includes airfare, driving your car, and other modes of transportation. Just be sure you deduct any reimbursement that the agency is already paying you for travel from your total expenses.
For drivers, the IRS says to use the 2017 standard mileage allowance of 53.5 cents a mile. So a 1,000-mile trip would mean you can deduct $535 in deductions. Other than that, you can also deduct tolls, parking costs, cab fare to and from airports, car maintenance, etc.
You can also count the expenses incurred when you travel back home when your assignment is over. As for the travel you do during the actual weeks in your new location, it’s likely that your agency is already paying you for that, but talk to your tax accountant to be sure.
As you know, nurses are required to keep up with their continuing education and keep state licenses up to date. The good news is that you can usually deduct any professional expenses that involve maintaining your skills and professional credentials. Some of them include:
- Tuition for courses, books, supplies, laboratory fees, and similar items related to schooling. The IRS does say, however, that the education must be to maintain/improve your current skill set or be required by your employer or state law. In other words, if you want to go for an MBA or take a photography class for fun, that wouldn’t count.
- Dues and membership fees for professional organizations and associations. This can also include attending professional conferences and seminars, and the money spent on travel, meals, and lodging during those events.
- Malpractice insurance is another deductible expense since it protects you against personal liability for wrongful acts on the job.
- Uniform and dry cleaning expenses can be deducted, assuming that your work clothing is used strictly for the job, and not regular clothing you’d wear everyday.
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- It was mentioned above, but it bears repeating: Keep receipts for everything! Whether you collect them all in a shoebox or prefer to keep digital copies, find a system that works for you.
- Consider working with a tax professional since your returns can be complex.
- Don’t get greedy and try to stretch the definition of what’s deductible (for instance, that photography class, or travel expenses that were not work-related) – that could raise suspicion and subject you to an audit.
Once you get the hang of how travel nursing tax deductions work, you’ll come to realize that the tax benefits will be worth your time and effort.