What Are the Tax Deductions for Nurses?
Navigate tax season by understanding how your employment classification as a nurse affects which work-related expenses you can potentially deduct.
Navigating the landscape of tax deductions can provide nurses with opportunities to lower their taxable income. A nurse’s ability to deduct work-related expenses is determined by their employment classification. This guide clarifies the rules and potential deductions available to nurses based on their specific work arrangements.
Eligibility Based on Employment Status
A nurse’s ability to deduct work-related expenses on a federal tax return is determined by their employment status. An employee receives a Form W-2 from their employer, who withholds taxes. In contrast, a self-employed nurse, working as an independent contractor, receives a Form 1099-NEC and is responsible for paying their own income and self-employment taxes.
This distinction became more pronounced following the Tax Cuts and Jobs Act of 2017 (TCJA), which suspended the miscellaneous itemized deduction for unreimbursed employee business expenses for W-2 employees from 2018 through 2025. Consequently, self-employed nurses are the primary group able to deduct business expenses. They report their income and expenses on Schedule C (Form 1040), as the costs associated with their nursing practice are seen as necessary business expenditures.
Common Deductions for Self-Employed Nurses
Self-employed nurses, including many travel, home health, and agency nurses, can deduct a wide array of expenses incurred in their work. These deductions must be considered “ordinary and necessary,” meaning they are common and appropriate for the business.
Uniforms and scrubs are deductible, but only if they are required for work and not suitable for everyday wear. The cost of medical supplies and equipment, such as stethoscopes, thermometers, blood pressure monitors, and protective gear like gloves and masks, can be written off as supplies.
Professional costs are a significant category of deductions. This includes fees for renewing state licenses and certifications, the cost of continuing education courses taken to maintain or improve nursing skills, and premiums for professional liability or malpractice insurance. Dues paid to professional organizations and subscriptions to industry journals also qualify.
For nurses who travel for work, vehicle expenses can be a substantial deduction. This applies to travel between different work locations, such as multiple hospitals or patients’ homes, but not the commute from home to a primary workplace. Nurses can use the standard mileage rate or deduct the actual costs of using their car, including gas, repairs, and insurance, based on the percentage of business use.
A home office deduction is available if a portion of the home is used exclusively and regularly for administrative or management activities of the nursing business. Self-employed individuals can also deduct one-half of what they pay in self-employment tax. Health insurance premiums paid for the nurse and their family can be deducted, provided they are not eligible for coverage through an employer or a spouse’s employer-sponsored plan.
Potential Deductions for W-2 Employee Nurses
While the TCJA eliminated federal deductions for unreimbursed employee expenses for W-2 nurses, a few “above-the-line” deductions remain available. These are reported on Schedule 1 of Form 1040 and reduce a taxpayer’s adjusted gross income (AGI).
A common deduction is for student loan interest. A nurse can deduct the interest paid on qualified student loans, up to a maximum of $2,500 per year, though this is subject to income limitations.
Contributions to certain retirement and health savings accounts also lower taxable income. Money contributed to a traditional Individual Retirement Arrangement (IRA) may be deductible, depending on income and workplace retirement plan coverage. Contributions to a Health Savings Account (HSA) are also deductible for those with a high-deductible health plan.
Some states have not conformed to the TCJA, meaning W-2 employee nurses may still be able to deduct unreimbursed work-related expenses on their state income tax return. Nurses should consult their specific state’s tax regulations.
Documenting and Claiming Your Deductions
Record-keeping is required to substantiate any claimed tax deduction. For every expense, nurses must maintain clear documentation, such as dated receipts for uniform purchases, invoices for malpractice insurance, and bank statements showing payment for license renewals. For vehicle expenses, a mileage log is required, detailing the date, purpose, and miles driven for each business trip.
A common practice is to maintain separate bank accounts and credit cards for business and personal use to avoid commingling funds and simplify tracking. All documentation should be stored securely for at least three years from the date the tax return is filed, as this is the period during which the IRS can initiate an audit.