How to File Taxes as a Travel Nurse

Travel nurses navigate a unique financial landscape, often working in various locations. Understanding tax implications is paramount for accurate financial reporting and compliance. Managing tax obligations ensures nurses maximize financial well-being while adhering to federal and state regulations. This article explores tax considerations for travel nursing.

Determining Your Tax Home

Establishing a “tax home” is foundational for travel nurses, influencing deductions. Your tax home is generally the city or area of your main business, regardless of family home. If you lack a regular business location, your tax home may be where you live. Without a regular abode and working in temporary locations, you may be an “itinerant” with no tax home.

The IRS outlines a three-factor test for tax home determination, detailed in Publication 463. First, conduct business in your main home’s area and use it for lodging while working. Second, incur duplicated living expenses at your main home due to business travel. Third, do not abandon your main home’s area; family lives there or you frequently return. All three factors mean your tax home is your main home’s area. Satisfying two may allow a tax home claim based on facts and circumstances.

Failing to meet at least two factors means you are an itinerant, and all income is taxable, with no travel expense deductions. For example, a nurse without a permanent residence who continuously moves between temporary assignments likely lacks a tax home. Conversely, a nurse maintaining a permanent residence, regularly returning and incurring living expenses, satisfies tax home criteria. Tax home determination impacts travel expense deductibility, applying only when “away from home” for tax purposes.

Understanding Income and Deductible Expenses

Travel nurses receive taxable wages and non-taxable stipends. Taxable wages, reported on Form W-2, are hourly pay. Non-taxable stipends are employer payments for expenses like housing, meals, M&IE, or travel costs. These stipends are not taxable if paid under an accountable plan: expenses are ordinary and necessary, substantiated to the employer, and excess advances are returned timely.

Non-taxable stipends must not exceed federal per diem rates, varying by location and published by the GSA annually for M&IE and lodging. If stipends exceed these rates, the excess becomes taxable. If a travel nurse works in one location for over a year, that location ceases to be temporary, and stipends become taxable. This “one-year rule” applies to extended assignments.

Many travel nurse expenses are deductible if ordinary, necessary, and incurred away from the tax home. Travel costs include transportation like airfare, train tickets, bus fares, or personal vehicle use (mileage, tolls, parking fees) to and from the temporary work location. Lodging expenses on assignment, like rent or hotel costs, are deductible. Meal expenses, subject to a 50% deduction limit, are claimed for meals away from your tax home on business.

Professional expenses are deductible for travel nurses, including state nursing license fees, certification costs, and continuing education courses to maintain licensure or enhance skills. Uniforms, including scrubs and specific footwear, plus cleaning and maintenance costs, are deductible if not suitable for everyday wear. If a travel nurse maintains a dedicated home space exclusively for administrative tasks, they might deduct home office expenses, provided they meet IRS criteria.

Managing Multi-State Tax Obligations

Travel nurses frequently work in multiple states, creating complex state income tax obligations. Each state has its own residency and filing rules. A travel nurse is often a resident of one state but must file non-resident tax returns in other states where income was earned. Residency is determined by the state where they maintain their permanent home and domicile.

States tax all income earned within their borders by non-residents. Thus, a travel nurse will likely file a non-resident tax return in every state worked, even for a short period. Income subject to tax in each non-resident state is only income earned from working there. For example, a nurse working three months in California and three months in Texas would file a non-resident return in California for income earned there; Texas has no state income tax.

Double taxation can arise when a travel nurse’s resident state taxes all income, including earnings from other states, and those other states also tax income earned within their borders. To mitigate this, most states offer a tax credit for taxes paid to other states. This credit allows taxpayers to reduce resident state tax liability by the amount paid to another state, up to the amount owed in their home state. This prevents the same income from being taxed twice.

Some states have reciprocity agreements, simplifying filing for residents working in another state. Under these agreements, income earned in the reciprocal state is taxed only by the employee’s state of residency, not where work was performed. These agreements are not universal and apply to neighboring states. Understanding these state-specific rules and reciprocity aids accurate tax filing and avoids unnecessary payments for travel nurses.

Gathering Necessary Documents and Filing

Filing taxes as a travel nurse requires meticulous organization of financial documents. The primary income document is Form W-2, received from each staffing agency or employer. If you received miscellaneous income, such as independent contracting work or stipends not on your W-2, you might also receive Form 1099-NEC for nonemployee compensation or Form 1099-MISC for other income.

Detailed records of deductible expenses are necessary, including receipts for transportation, lodging, and professional expenses like licensing fees, certifications, and continuing education. For vehicle use, a mileage log detailing dates, destinations, and business purposes of each trip is invaluable. Records of housing agreements, utility bills, and other expenses related to temporary assignments or potential home office deduction should be kept. Maintaining these records simplifies tax preparation and provides substantiation for deductions.

Once necessary documents are gathered, travel nurses have several options for filing taxes. Tax preparation software, such as TurboTax or H&R Block, provides a guided process for inputting income and expenses, automatically calculating deductions and credits. These programs handle multi-state filings and provide electronic filing options. Users enter W-2 and 1099 information, input deductible expenses, and the software guides them through relevant tax questions.

Alternatively, hiring a qualified tax professional (CPA or EA) is advantageous for navigating travel nurse taxation complexities. These professionals provide personalized advice, ensure federal and state compliance, and help identify eligible deductions and credits. They can also represent you before the IRS if issues arise. When choosing a tax professional, seek someone experienced in multi-state taxation and temporary work arrangements. Most tax returns are filed electronically, offering faster processing of refunds and confirmation of receipt. Traditional mail filing remains an option. Meeting the annual tax filing deadline, April 15th, avoids penalties.