Do Travel Nurses Pay Taxes in Both States?

Travel nurses often work in multiple states throughout the year, raising questions about where and how they pay taxes. Each state has its own tax laws, making it important to understand how income is taxed to avoid unnecessary payments.

Tax obligations depend on residency status, agreements between states, and credits that prevent double taxation.

Residency and Domicile

A travel nurse’s tax residency is based on residency and domicile. Residency is generally determined by the number of days spent in a state, while domicile refers to an individual’s permanent home. Even if a nurse works in multiple locations, their domicile remains unchanged unless they take steps to establish a new one, such as changing a driver’s license, registering to vote, or updating tax filings.

Most states use a 183-day rule to determine residency, meaning if a nurse spends more than half the year in a state, they may be considered a resident for tax purposes. Some states, like California and New York, apply broader criteria, considering family ties, property ownership, and financial accounts, which can lead to dual residency and increased tax complexity.

Certain states, including Minnesota and New Jersey, aggressively enforce residency rules and may audit individuals claiming nonresident status while maintaining significant ties. Travel nurses frequently returning to their home state between assignments should be aware that maintaining a residence, even with long absences, can still subject them to taxation there.

State Reciprocity

Some states have agreements that allow individuals living in one state but working in another to pay income tax only in their home state. These reciprocity agreements eliminate the need to file multiple returns for wages earned across state lines.

For example, a nurse residing in Illinois but working in Wisconsin would generally owe Illinois state income tax under the reciprocity agreement between the two states. Instead of having taxes withheld for Wisconsin, their employer would withhold Illinois taxes, streamlining the filing process. Similar agreements exist between Pennsylvania and New Jersey, Virginia and Maryland, and several other states.

Not all states participate in these agreements, and those that do often require employees to submit an exemption form, such as Wisconsin’s WT-4NR or Michigan’s MI-W4, to their employer. Without this form, the employer may withhold taxes for the work state, requiring the nurse to later file for a refund.

Multi-State Returns

When a travel nurse works in multiple states within a tax year, they often need to file nonresident tax returns in each state where they earned income. These filings are separate from their home state return and typically report only wages earned in that jurisdiction. Each state has its own tax rates and filing thresholds, and some may not require a return if earnings fall below a certain amount.

Tennessee and Texas do not levy state income tax, eliminating the need for a return there, while states like Oregon and South Carolina require even part-year or temporary workers to file. Some states impose different tax brackets for nonresidents, while others calculate tax on total income and then prorate it based on earnings sourced within their borders. For example, Arizona applies a percentage-based allocation method, meaning a nurse earning $100,000 annually but only working there for three months would report approximately $25,000 as Arizona income.

Filing in multiple states can be complicated due to varying tax deadlines, withholding rules, and deduction limitations. Software programs and tax professionals familiar with multi-state taxation can help ensure compliance. Many online filing services automatically allocate income based on work locations, but errors can occur if payroll records do not match actual time spent in each state. Keeping detailed records of assignment dates and pay stubs helps prevent discrepancies that might trigger an audit or require amended returns.

Income Allocation

Determining taxable income in each state requires a breakdown of earnings based on work location, payroll records, and employer reporting. Some states use a straightforward sourced-income approach, taxing only wages earned within their borders, while others apply apportionment formulas that consider factors like workdays spent in the state.

Employers typically withhold state income tax based on the worksite, but errors can occur when assignments cross multiple jurisdictions within a single pay period. If a nurse works one week in Georgia and the next in North Carolina, payroll systems may not always adjust withholding correctly, leading to underpayment in one state and overpayment in another. This can complicate filing, as corrections may require amended W-2s or withholding adjustments.

Some states, such as Pennsylvania, mandate that employers withhold tax based on an employee’s primary work location unless otherwise specified, which can further distort income allocation. Travel nurses must track their assignments carefully, as discrepancies between actual work locations and reported earnings can lead to tax notices or audits.

Credits for Double Taxation

When a travel nurse is taxed by both their home state and a nonresident state, they may be eligible for a tax credit to avoid double taxation. These credits offset taxes paid to another jurisdiction, preventing overlapping tax obligations.

Most states provide a credit for taxes paid to another state, but the process for claiming it varies. Typically, the home state allows a deduction for nonresident state taxes, reducing the overall amount owed. For example, if a nurse residing in North Carolina earns income in Georgia and pays $2,000 in Georgia state taxes, North Carolina may grant a credit for that amount. However, if the home state has a lower tax rate than the work state, the credit may not fully offset the difference. A nurse living in Indiana, which has a flat tax rate of 3.15%, but working in Minnesota, where the lowest bracket starts at 5.35%, would still owe the difference on their Indiana return.

Some states impose restrictions on these credits, requiring that the tax be directly related to earned income rather than investment or passive income. Additionally, certain states, such as California, only grant credits for taxes paid to states with a similar tax structure. A nurse working in a state with no income tax, like Florida, would not receive a credit for taxes saved. Proper documentation, including copies of nonresident state returns and proof of tax payments, is necessary when claiming these credits to avoid disputes with tax authorities.