Money and Taxes

2022: Understanding Travel Nursing Tax Rules

Deciphering the travel nursing pay structure can be complicated. Tax homes, tax-free stipends, hourly wages, bonuses, benefits, housing, and per diem reimbursement are all factors to consider when understanding your travel nursing pay and taxes. With the continuation of the COVID-19 pandemic, travel nurses are up against some unique challenges in 2022.

Travel Nursing, Tax-Free Stipends, and Permanent Tax Homes

There are two ways you can be paid as a travel nurse. Travel nurses are paid a ‘blended rate’ of tax-free stipends and taxable hourly wage; or, are paid a fully taxable hourly wage taxed on the total rate of pay.

You can only receive the tax-free stipend option if you can claim a ‘permanent tax home’. You must be able to prove that you contribute a ‘reasonable monetary amount’ (determined by the IRS) to a home that you own or rent in a location at least 50 miles from your travel assignment.

If a travel nurse claims a rented room or apartment as a tax home (for example, at their parents’ house), the monthly amount paid must be comparable to similar market prices in the area. If you own a home and rent it out while you are gone, you must claim that as income on your taxes. If you claim a permanent tax home, you must prove you are duplicating expenses if you are audited.

Taking the tax-free pay means that your yearly income will appear much lower on your W-2 than what you actually received in pay. This means if you want to apply for any sort of credit or loan, you may not be approved because your income appears to be less. This is an individual decision for each travel nurse. Look at your finances and see what is right for you.

What is a Travel Nursing Permanent Tax Home?

You will be required to complete and sign a declaration of your permanent tax home with your travel nursing agency if you choose to take the tax-free stipends in your pay. It is wise to ask in advance what you will need as proof of a tax home so you can prepare any necessary paperwork. 

If you cannot prove you duplicate expenses and maintain the cost of living on a home, you are required to be taxed on the total hourly wage. This may seem like a disappointment but isn’t necessarily a bad thing.

Travel Nursing Taxable Hourly Wage

If you are eligible for a ‘blended rate’ of tax-free allowances and hourly wages, your taxed hourly rate is going to appear much lower on your pay stub than you may be expecting, don’t panic, this is normal. When you get your W-2, you may be shocked at how low your income looks. You do not owe any extra money on the stipends you received, and they will not be included on your W-2.

This is only the amount you are taxed on per hour, not your total pay. Ideally, your ‘blended rate’, the combination of your stipends and hourly wage should be at least $40-$80/hour depending on the location and travel nursing specialty. If it is a crisis rate or short-term strike assignment, your salary is going to be considerably more than the average travel nurse job. 

If a travel nurse is not qualified to receive tax-free stipends the rate will be the similar $40-80/hour but taxes will apply to the whole amount. You will still make more money than the average staff nurse in most states.

Crisis Contracts and Travel Nurse Tax Changes

2021 took many travel nurses to places with crisis contracts that were paying well above the average rates that we usually see. Many of these contracts had very high hourly taxable wages and little to no stipends. In many cases, a hotel was provided to the nurse in addition to very high pay rates.

This means that many of travel nurses who will be reporting a much higher taxable income may have bumped up into a higher tax bracket and could pay up to 10% more in taxes if they consistently worked super high paying contracts. Most won’t see such a large increase, only nurses that spent 4+ months working contracts paying $10,000/week.  

Nurses looking to reduce tax burden can invest their hard earned cash into a tax free option like a Roth IRA. Having a CPA or tax advisor can be helpful in managing finances as a travel nurse. 

Should I Claim Exempt on Taxes as a Travel Nurse?

Some travel nurses that took those high paying contracts opted to claim “exempt” on their W-4 forms. Meaning, they are claiming they are exempt from paying taxes. Nurses opt to do this in order to take home all of their cash on payday, and pay taxes later. Per the IRS

“To qualify for this exempt status, the employee must have had no tax liability for the previous year and must expect to have no tax liability for the current year. A Form W-4 claiming exemption from withholding is valid for only the calendar year in which it’s furnished to the employer.”

These nurses need to be prepared to face a BIG payout to the IRS this tax season. Additionally, they could be hit with an underpayment penalty if they claimed “exempt” throughout the year. 

**Tax Disclaimer

The information contained herein is general in nature and based on authorities that are subject to change. I am not a tax expert and can guarantee neither the accuracy nor completeness of any information and I am not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. I assume no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations.

rachel-nurseflygmail-com
Rachel Norton BSN, RN

Rachel Norton became an RN in 2007 and has been part of the Vivian team since 2019. She has always worked in critical care, and spent the first 12 years of her career working in a surgical neuroscience trauma ICU. She's also worked as a flight nurse, started travel nursing in 2010 and continued working in the ICU until joining Vivian full-time in 2022. As a user researcher, Rachel advocates for healthcare workers to help bridge the gap between employee and employer expectations.

Comments (11)

Here is a question that I haven’t been able to find a definitive answer to:
I am on contract now and am currently working about two hours away from my permanent residence, which is my tax home.
I get a room for the three or four days that I’m working, and come home on my days off.
Is this against the rules, since I’m only getting a room for three or four days of the week?
Thanks for your help

Reply

Thank for reaching out, Lee. To ensure you’re appropriately following all current tax laws in your state, it’s best to speak to your accountant.

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You can get copies of the checks or however you paid them from your bank. If you paid cash, you may be in trouble. You might be able to have your landlord / family member write up a document with how much you paid in rent AND UTILITIES and the dates you paid them. However, I’m sure the IRS will do a lot more digging. Did you pay any of your utilities for that address yourself? Did you pay your family member directly for your share? Or was there a phone or electric bill that you paid the company directly? That would definitely help.

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If i pay rent to a family member. But they do not want to claim my rent as income on their taxes will this effect it being my tax home and effect me in being able to get the housing and incidentals stipends?

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Yes- they will need to claim it as income on their taxes in order for it to qualify as your permanent tax home

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How do I prove I paid a family member for housing come tax time?

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I want to know if I am a travel nurse my home state is WI and I am doing an assignment in CA which state do I pay for taxes on my paycheck each week

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Hi Michelle- sorry for the delayed response. You pay taxes where you work. So any work in WI- you will pay taxes on that income. For your assignment in California, you will pay CA state taxes and file a state tax return for CA during tax season.

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I’ve been working in Texas, they do not have a state tax but I notice that I’m paying Alabama state taxes even though I’m not working there.
Alabama is my home state.

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Actually you pay taxes in your home state AND in the state you work, if that state has a state income tax.

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You will pay taxes in bothe states.
If your eligible at the end of the year and have a valid tax home, you will get the CA taxes refunded when you file.

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