What Can Nurses Write Off On Taxes?

Understanding tax deductions is crucial for nurses to optimize their tax returns and reduce taxable income. Knowing eligible write-offs and maintaining diligent records can lead to substantial savings.

Understanding Tax Deductions and Employment Status

A tax deduction reduces the amount of income subject to tax, lowering an individual’s overall tax liability. Taxpayers choose between the standard deduction, a fixed IRS amount, or itemizing specific eligible expenses. Most W-2 employees find the standard deduction more beneficial due to its relatively high amount.

A nurse’s employment classification, whether W-2 employee or 1099 independent contractor, shapes their tax deduction opportunities. W-2 nurses are traditional employees, with employers withholding taxes. In contrast, 1099 nurses are independent contractors responsible for paying their own self-employment taxes, covering Social Security and Medicare.

The Tax Cuts and Jobs Act (TCJA) of 2017 eliminated federal deductions for unreimbursed employee business expenses for W-2 employees through 2025. This means W-2 nurses cannot deduct job-related expenses like uniforms or professional dues on their federal tax returns. However, independent contractor nurses are unaffected by this change and can still deduct ordinary and necessary business expenses.

Deductions Available to All Nurses

Despite W-2 employee limitations, some deductions and credits remain available to all nurses, as they are “above-the-line” deductions or specific tax credits. These benefits reduce adjusted gross income (AGI) or directly reduce tax liability. For example, the student loan interest deduction allows eligible taxpayers to deduct up to $2,500 of interest paid on qualified student loans. This deduction begins to phase out for single filers with a modified adjusted gross income (MAGI) above $80,000 and for joint filers above $165,000.

Contributions to a Health Savings Account (HSA) also offer a tax advantage. Individuals with self-only high-deductible health plan (HDHP) coverage can contribute up to $4,150, while those with family coverage can contribute up to $8,300. An additional catch-up contribution of $1,000 is permitted for those aged 55 or older. These contributions are deductible.

Education tax credits, such as the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC), can help offset higher education costs. The AOTC offers a maximum credit of $2,500 per eligible student for the first four years of post-secondary education, with a portion being refundable. The LLC provides up to $2,000 per tax return for qualified education expenses, though it is non-refundable. Both credits have income phase-out ranges.

Specific Business Deductions for Self-Employed Nurses

Nurses working as independent contractors (1099 nurses) have a broader range of deductible business expenses, reported on Schedule C, Profit or Loss from Business. These expenses must be both ordinary and necessary for the nursing profession. Ordinary expenses are common and accepted in the industry, while necessary expenses are helpful and appropriate for the business.

Professional fees and memberships are deductible, including costs for licenses, certifications, and nursing organization dues. Continuing education expenses, such as fees for courses, seminars, and certifications directly related to maintaining or improving nursing skills, are also deductible.

Supplies and equipment purchased for business use are deductible. This includes items such as scrubs, stethoscopes, medical bags, reference books, and specialized footwear. Travel expenses incurred for business purposes are also deductible; for instance, mileage driven for patient visits or travel to temporary work locations can be claimed. The standard mileage rate for business use is 67 cents per mile.

The home office deduction is available if a specific area of the home is used exclusively and regularly for business. Taxpayers can calculate this deduction using either the regular method or a simplified option, which allows a maximum deduction of $1,500. Business insurance premiums, including professional liability insurance, are also deductible. Communication expenses, such as a portion of phone and internet costs primarily used for business, are deductible.

Required Documentation for Deductions

Maintaining thorough and accurate records is crucial for supporting tax deductions and ensuring IRS compliance. Required records include receipts, invoices, canceled checks, and bank or credit card statements for all business purchases. For vehicle use, a detailed mileage log documenting date, destination, purpose, and mileage for each business trip is essential.

Professional licenses and certificates, along with documentation of continuing education course completion, should be retained. The IRS requires taxpayers to keep records for at least three years from the original return filing date, and longer (e.g., six years for significant income underreporting) in certain situations.

Organized record-keeping is important in case of an IRS audit, as the burden of proof rests with the taxpayer. Digital record-keeping systems, such as scanning receipts and maintaining electronic logs, are accepted by the IRS, provided they are accurate, complete, and easily accessible. Separating business and personal finances using dedicated bank accounts and credit cards simplifies tracking deductible expenses.

How to Report Your Deductions

Reporting deductions involves using specific IRS forms and schedules based on expense type and employment status. Self-employed nurses (1099) report business income and expenses on Schedule C, Profit or Loss from Business. This schedule details deductible business expenses, which are then included on Form 1040, U.S. Individual Income Tax Return.

Deductions available to all nurses, such as student loan interest and Health Savings Account contributions, are reported on Schedule 1 of Form 1040. These are “above-the-line” deductions. Education credits, like the American Opportunity Tax Credit and Lifetime Learning Credit, are reported on Form 8863, Education Credits.

While W-2 employees cannot deduct unreimbursed business expenses on their federal return, eligible itemized deductions, such as certain medical expenses or state and local taxes (subject to limitations), are reported on Schedule A, Itemized Deductions. Tax preparation software or a qualified tax professional can help ensure all eligible deductions are identified and correctly reported.