In my mind, there is one and only one con to travel nursing: the tax home baloney.
One of the benefits of travel nursing is that the majority of the money you make is tax-free. This includes your travel costs, per diem, and housing stipend. However, to get that tax free benefit, you must maintain a tax home.
What is a tax home, exactly?
Your tax home is the location in which you either own or rent your living space and you also have legal ties, such as mail delivery, checking account and drivers license. I have met a lot of travelers who use their parents’ address as their “tax home,” but don’t have any ties to that location. You can use your parents’ address, but make sure you are paying market value rent, change your driver’s license, car registration and banking information.
If I rent from someone, how do I know what market value rent is?
The best way to do this is to go on Craigslist and search for rooms/shared in your tax home location. Make sure to look for a property that is similar to the one in which you will be paying rent. For example, if your parents house is a 3 bedroom 2 bathroom house in the downtown area, don’t search for a shared 1 bedroom out in the suburbs. Find 3-4 ad listings, print them off and keep them with your files. Take an average of the monthly price for a room and that is the market value of the rent you should be paying.
What are the limitations in which you can no longer receive tax-free benefits?
There are three main circumstances that you want to be careful about that may disqualify you from receiving tax-free benefits.
The first one is being on an assignment for longer than 12 months. Often times travelers will find an assignment that they love and they extend 3-4 times, thinking that it’s considered a “new assignment” so it’s OK. This isn’t the case. If you stay in an area for longer than 12 months, it is no longer considered a travel assignment. It then becomes permanent. To avoid this, take another 8 to 13 week assignment in another state and then return back and you can do 12 months if you want!
The second situation is if you take an assignment that’s near your tax home. There isn’t an exact mileage restriction on this, so it’s safe to say that if your assignment is within 90 miles of your tax home, it won’t be considered as a travel assignment. I took a 5 month assignment in my tax home and just paid taxes on my total wages for the time that I was there.
Finally, you must return to your tax home 30 days out of the year. This is why a lot of people chose to use their parents’ address– because they go home for visits and Holidays. The 30 days do not have to be consecutive. Make sure to keep records of these trips home via receipts and photos!
Keep in mind that this is NOT a must to become a travel nurse! You only have to do all of this is you want the tax-free benefits.
You don’t have to maintain a tax home. Sure, it saves you about $5,000-10,000 per year in some cases, but for some people, it’s too much of a headache. At that point, you’re known as an itinerant worker by the IRS and become a part year resident in each state that you work in and will file your taxes according to those state regulations.
What if I’m still super confused?
Don’t worry! I was too and even after almost 2 years of traveling, I still have to do some research to make sure I’m doing everything correctly. Luckily, there is a great resource for travel nurses at Travel Tax. You can call them or email them at any time with questions and they will file your taxes for you! I’d suggest directing all of your questions to these guys. It’s a small business, but Joe and Daina used to be traveling healthcare professionals and also have a background in tax preparation and accounting. Most accountants who have never dealt with travel nurses and tax homes aren’t aware of our unique situation.
Leave a comment if you have any questions!