You are a nurse. Saving lives while not taking pee breaks. You are amazing. Then one day you start thinking about travel nursing. You’ve heard of it from co-workers, you follow a few travel nurse Facebook pages, but man it’s a little confusing. You know travel nurses make more money than staff nurses. And you’ve even heard they make money that is not taxed. But why? And how? Is it too good to be true, or is this real life?
You’re about to learn the key to making tax-free money as a travel nurse. First things first, you have to know this. You are not entitled to tax-free money just because you are a nurse who is taking a 13-week contract in a new state. There are lots of travel nurses who travel and have their entire paycheck taxed, and it’s also a wonderful way to have freedom (and yes, still make great money.) Travel nurses who earn tax-free money follow certain rules to be able to receive that benefit. The rules are grey. Not black and white. The rules confuse companies, nurses, and other professions that travel too. They are grey because there have not been enough federal court cases to tell us in black and white terms that “this is exactly how you do this”. So we take suggestions. The IRS has some suggestions. And they are worded in such a way that companies and tax experts all might interpret them ever-so-slightly differently. And no one has been proven right or wrong (yet). But there are some pretty standard guidelines out there for travel nurses that we can follow to stay safer in case of an audit.
Travel nurses must have a tax home
This is not always the same as your permanent residence. So as a Travel Nurse, it can get kind of confusing where yours is, right? A typical tax home for a typical person is easy. It’s where your primary workplace is. Where you make the majority of your income. Most humans in this world live and make their income from one place. But alas, we travelers are not typical. We are changing the game a bit by traveling away from our homes and making income in many places throughout the year.
To get the full scoop on tax homes, Nomadicare got a real tax expert in the house! Joseph Smith, the founder of Travel Tax, tells us this: “A tax home is necessary for you to receive any of those reimbursements on a tax-free basis. A lot of people confuse a tax home with a permanent residence. Just because I have a driver’s license, car registration, voter registration, and have all my stuff in place does not necessarily mean that I have a tax home.”
“A tax home is a money home versus a legal home, and in the Tax Code the tax home is defined as somebody’s regular place of income.”
Stay with me, okay? I know so far it’s still clear as mud. I remember being on the phone with my recruiter, getting ready to begin my first contract years ago. “You’ll need to have a tax home to get the housing stipends,” she said. “Okay, great!” I said back, having no clue what a tax home was or why they were so important. Those were all the details she gave me. And I trusted that if I was doing something wrong she would tell me. Turns out, recruiters usually don’t understand tax homes either, and it’s really up to us to learn this so we stay safe!
Tax homes are important because…
Okay so we are learning, as a Travel Nurse, we must travel away from home to receive that tax-free money. Therefore, we must prove that we have a home to go away from. There are certain rules we have to follow for our ‘home’ to become a tax home and qualify. If you don’t follow the rules, then everything an agency gives you becomes taxable.
So what are the rules? Well, put on your scuba gear, Travel Nurses! We are going to dive into the world of taxes.
The 4 Travel Nurse Tax Home Rules
- Duplicate expenses at fair market value (and have proof!) It’s not enough to just travel away from your tax home. Travel Nurses actually have to prove that they are duplicating expenses. Essentially, they are paying for their tax home and paying for housing at their new temporary residence. The most common circumstance is renting both places or owning a home and renting your second residence. (We’ll go into some of the less common ways later!)
- Travel far enough away from your tax home that you actually need a second home (50 miles is a myth). There is no rule on mileage. Go back to why you are getting a housing stipend? You’re getting it because you’re being reimbursed for duplicate expenses that you have on an assignment. The rule is that you have to be far enough away that it requires you to sleep there, and you spend money on lodging. 50 miles? Yes, some facilities or agencies may require you to be a certain distance because they are paying you a traveler rate (aka, the big bucks!), but this has nothing to do with the tax laws. AMN is a good example. To get the housing per diems from them, you must be 50 miles away from your tax home. That is their rule as an agency but it is not a rule of the tax laws.
- Don’t abandon your tax home. Keep strong ties to where your tax home is! Go home at least 30 days a year. Joseph tells us this: “30 days is, by an extension of all sorts of IRS rulings, looked at as a baseline. You want to be home for about a month every year, and that doesn’t have to be at the same time. You can break it up. It’s actually more convincing to me if somebody comes home in between gigs or during gigs than just for Christmas…” Also, a few ways to prove you haven’t abandoned your home is by keeping your driver’s license, registration, insurance, and voter’s card there. Using your credit card while your home is smart too.
- Keep moving, don’t stay in one area for more than a year. Let’s go back to the definition of a tax home. It’s our regular place of income. If we build regular income in a new area, eventually, that new place will become our tax home. (Eventually = at that 12-month mark!) Be a traveler and travel!
Our tip? Act exactly like you would if you were on a 13-week business trip. If you were just on a business trip, you would not be changing your driver’s license, you would not be moving all your things, and you would go back home when you can.
Pro Tip: Act exactly like you would if you were on a 13-week business trip. If you were just on a business trip, you would not be changing your driver’s license, you would not be moving all your things, and you would go back home when you can.
Follow those 4 rules to keep a tax home. Then, you’re ready to enjoy the amazing adventures of travel nurse life (and some tax-free money too -woot, woot!)
Cheers to knowing your stuff about taxes!
Hey friends. This is really important. I am not a tax advisor and the information I provide on this blog about taxes is not legal advice. Please, don’t treat a blog, Facebook, or your recruiter as your tax advisor. But please, learn some theories here and get some great context to go to your tax advisor with questions about your unique situation!