Exactly how does the Internal Revenue Service (IRS) define a traveling nurse? What is a travel “assignment”? What are the benefits and pitfalls of traveling?
One thing all traveling nurses have in common is that they're traveling from somewhere when they take a travel assignment—a permanent home from which they're traveling. That permanent home is their tax home—a residence they return to on a regular basis to live and work and the place where they incur substantial and recurring expenses, such as mortgage or rent. Showing proof of that residence establishes your traveling assignments as temporary leaves from your permanent home, which in turn establishes your tax status. Typically, you'll need to do the following:
- Retain proof of payment you make to someone back home to show that you're maintaining a residence, such as mortgage or rent.
- Stay registered to vote in your home state.
- Keep your driver's license from your home state.
- Keep your car registered in your home state, if possible.
- Make sure you return to your permanent home at least once a year. Working a few shifts in a facility while you're there reinforces your status.
- File a Residence Tax Return with your home state.
Tax benefits of traveling
Having established that you're traveling from your permanent home buys you some great tax breaks. Your travel assignments become temporary leaves from home, defined by the IRS as less than 12 months' duration. While on a temporary leave from home, you're eligible to deduct temporary living expenses. What does that include? Housing becomes a write-off as do your meals; you can deduct a daily meal allowance as an expense. Amazingly, you can actually deduct a certain amount for meals each day and not even worry about keeping receipts if you use per diem tables.
Other deductions can include:
- RN license fees (all states)
- dues and subscriptions (AAA, nursing publications)
- malpractice insurance
- continuing-education expenses
- uniforms, including dry-cleaning expenses
- work shoes
- Internet expenses
- cellular phone
- long-distance calls
- parking fees and tolls
- job search costs
- hotel expenses while driving to and from home to different assignments
- travel mileage from home to an assignment and other assignments during the year. (Mileage to and from work while on assignment is considered commuter mileage, so it's not deductible.)
Obviously, this is a very good tax deal, but there also are some pitfalls. State taxes are one example. Every state has different laws, and you must file a return as a nonresident in every state that you work in as well as the state that's your permanent tax home. For most travelers, that means filing in at least two states, which may or may not have reciprocal agreements with each other. If they do, you get credit in one state (typically your tax home) for taxes you pay in other states you worked in, the idea being that you don't have to pay taxes on the same wages twice. Most nurses end up owing taxes to their home state, even if they didn't work there.
What are some of the most commonly held misconceptions travelers have? That they can deduct moving expenses (you haven't really moved if you're only on a temporary leave from your permanent home) and can continue to take advantage of traveling tax benefits when they've been working on the same assignment for more than the 12 months the IRS limits temporary leaves to.
Obviously, there are some tremendous financial advantages available for traveling nurses. The more you know about your tax situation and how to comply, the better you'll be able to maximize your travel experience.