Prolink Blog Travel Nurse Tax Deductions: What You Need to Know

Prolink Blog Travel Nurse Tax Deductions: What You Need to Know

June 28, 2022

The benefits of travel nursing are well known. You get to traverse around the country – or even the world – while earning a living doing what you love. The position comes with an elevated salary and a benefits package that includes things like travel reimbursements and a tax-free housing stipend. What’s not to love? Well, taxes, for one thing. 

If there is one aspect of travel nursing that frustrates most professionals in the field, it’s the fact that taxes can be downright confusing. A big question travel nurses often ask of their staffing agency recruiters is: What deductions can I claim as a travel nurse? Because the last thing you want to do is get on the bad side of the IRS. 

Not to worry. Here is some advice you can take to the bank that will help you remain tax compliant with the Internal Revenue Service all year long. We’ll discuss the deductions you can claim and a few scenarios that will make filing your taxes easier as a travel nursing professional. Let’s get started.

Why Are Travel Nurse Taxes So Complicated?

Filing your taxes as a nurse who travels to and from various medical facilities can quickly become overly complex for a few important reasons.

As a Travel Nurse, You May Work in Two or More States Throughout the Year

As a travel nurse, you have the freedom to travel anywhere you want, as long as there is a position open, and the medical facility needs a travel nurse like you.

Here is where taxes get tricky. If you travel to more than one state in a given year as a travel nurse, you will be forced to file taxes in each state. That’s right. If you live in Michigan and travel to Maine, then New York in any given year, you have to file three separate tax returns. Talk about a headache!

Things get really complicated because each state's return cannot be prepared in a vacuum. Each tax return may be dependent on another. You can see where mistakes may be made.

Taking our above example, let’s assume your home state is Michigan. When you file your Michigan state tax return, your home state will tax all the income you’ve earned everywhere you have worked, regardless of where the income was sourced. The IRS doesn’t care that some of your income wasn’t earned in Michigan. All of it will be taxed by your home state.

You may be asking: Why would I file separate returns for Maine and New York? Wouldn’t I be double taxed in those cases?

Here is the answer to your question. The locations where you worked out of state (Maine and New York) will also tax the income you earned at those particular medical facilities. While this sounds like double taxation, that’s not the case. 

To keep from doubling up on the tax you are required to pay, your home state (Michigan) will allow for a credit in the tax amounts you paid to your work states (Maine and New York). The credit is based on a formula that your home state uses to determine its own tax on the same amount of income.

There is a caveat to this rule. Some states have reciprocal agreements in place. That means if the state where you travel has an agreement with the state where you live, you won’t have to file such a complicated tax return. 

States with reciprocal agreements include Washington D.C., Illinois, Arizona, Iowa, Maryland, Kentucky, Michigan, Montana, Minnesota, Ohio, North Dakota, Pennsylvania, Virginia, and Wisconsin.

If you work in a state with a reciprocal agreement, you can file a tax exemption with your travel nurse staffing agency. Filing an exemption alleviates you from having taxes withheld in your work state. You will need to ensure your agency is withholding taxes for your home state to remain tax compliant.

Keep in mind that some states do not have an income tax, such as Alaska, Wyoming, Washington, South Dakota, Nevada, Florida, Texas, the District of Columbia, New Hampshire, and USVI (U.S. Virgin Islands).

If you are a resident of any of these states or the USVI, you are not exempt from paying state taxes in the location where you work. Rather, you will have a 0% tax rate.

If you are from a state with an income tax, you will pay your home state tax rate on all income earned in the states without income taxes. This is important for you to understand. This means that your employer needs to withhold home state tax payments for work in states without income taxes. Otherwise, you will likely have a considerable amount due to your home state when it comes time to file your taxes.

If your travel nurse staffing agency doesn’t withhold the required amount, you may need to make estimated tax payments throughout the year. You should also make estimated payments when your home state tax rate is higher than the tax rates for the states where you travel for work.

As you can see, these types of tax cases can get confusing quickly. To keep you from tearing your hair out and owing too much at the end of the year, it might pay to get assistance from a professional tax consultant.

You Can Deduct Travel Expenses by Maintaining a Permanent Residence 

As a travel nurse, it is important that you understand the “Tax Home” law. Having a tax home lets you deduct expenses when you travel away from your permanent residence.

If you don’t maintain a permanent residence in any one state, you won’t qualify for those important deductions (which could save you thousands of dollars each year).

To qualify for a tax home, you must keep a permanent residence you return to in between your travel nurse contracts.

If we’re using our above example, even though you accepted travel nurse assignments in Maine and New York, you would have needed to return to Michigan every so often in order to designate that state as your permanent tax home.

You Can Only Claim a Tax Home When You Travel Home At Least Once a Year

This law is also important for you to know. If you have worked in one state for longer than a year, that state then becomes your home. The IRS will see that location as your home even if you keep a permanent residence in another state. So you might want to think about returning home every few months to be able to maintain your tax home status.

You Need to Understand the Nuances Behind Your Travel Nursing Salary

Working as a travel nurse isn’t like any other nursing position. Take a look at your paycheck stub and you’ll notice the difference. Your salary includes a blended rate, which includes your taxable base rate along with your non-taxed reimbursements and stipends. This is important to understand so you can give the correct figures to the IRS on your income tax returns.

Now that you understand travel nursing taxes a little bit better, let’s get to the deductions you are allowed to claim on your yearly tax returns.

What Travel Nurse Deductions Are You Allowed to Claim?

Travel nursing comes with higher pay than your everyday nurse, but that income can be eaten away by high taxes if you’re not careful. To offset your tax obligation, it helps to be cognizant of the various tax write-offs travel nurses can claim. Memorize the following list so that you can keep more of your hard-earned money at the end of the tax year.

Deduction #1: You Can Claim Your Tax Home Expenses  

As we mentioned, the IRS views your tax home as the residence you return to between travel nurse jobs. Just remember that you’ll have to return home before twelve months are up or else the location where you’re working then becomes your permanent residence.

As long as you do return home between travel nurse assignments, you can maintain a tax home and deduct the expenses that go into paying for that residence.

To claim tax home expenses, you will need to provide to the IRS with copies of your:

  • Rent or mortgage documents
  • Driver’s license from your home state
  • Car registration from your home state
  • Voter registration from your home state
  • State tax filings

Deduction #2: You Can Claim Travel Expenses from Your Tax Home to Your Assignment Location

When you establish a tax home, you can deduct travel expenses anytime you are away from home. To deduct these expenses on your tax return, you will need to provide the IRS with copies of your:

  • Airline, bus, train, and boat tickets
  • Taxi fares to and from the airport/terminal/station
  • Car rental fee slips
  • Shipping and baggage fee receipts
  • Car-related travel expense receipts, including gas, tolls, parking, and car maintenance costs
  • Receipts related to accommodations and meals plus any tips you provide to hospitality staff
  • At first glance, it might seem like record-keeping could become tedious as you’re traveling around. To keep yourself sane, consider using the standard meal allowance, which is limited to 50% of the unreimbursed cost.

Deduction #3: You Can Claim Professional Expenses Related to Your Travel Nursing Job

Travel nurses get to deduct all the expenses they may incur as part of their job. This means you get to deduct costs associated with:

  • Uniforms, including laundry and dry cleaning
  • Malpractice insurance
  • Phone, internet, apps, software, and other computer-related expenses
  • Professional licensing
  • Continued education, including books and trade literature
  • Job search fees
  • Home office expenses

Travel Nurse Tax Tip: Hold onto Your Receipts!

As you can see, you can save a ton of cash each year by being meticulous with your expense accounting. But make sure you hold on to every receipt you are given, or you’ll have a tough time proving your deductions to the IRS. Even if the expense is small, like a cup of coffee, save that receipt. All those small costs will add up when it comes time to file your taxes.

Travel Nurse Tax Tip #2: Assess Your Taxable Income

When filing taxes at the end of the year, pay special attention to the income tax you are being charged by your staffing agency. You’ll want to make sure you’re not overpaying. The finance department of your agency should be able to give you a breakdown of the taxes you are required to pay, which could save you money, or at least give you peace of mind.

Ready to Learn More About Travel Nursing?

Whether you are a travel nurse looking to change staffing agencies or you are wanting to get into the travel nurse profession, Prolink has you covered. When you choose us as your staffing home, you get all the benefits that come with having us in your corner. You'll get paired with a dedicated travel nurse recruiter who can help you find the ideal job to suit your career goals, but that's not all. 

We give you exclusive access to top assignments for travel nurses and put your resume on hiring managers’ desks before anyone else gets a chance to apply. We can also give you personalized advice related to interviews, taxes, licensing, contract negotiations, obtaining additional stipends, managing your hectic schedule, and so much more. Get started now by searching through our travel nursing jobs.

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