Registered nurses and other healthcare providers who take travel nursing jobs or travel allied health jobs may be paid in one of two ways. They may earn a blended rate that includes taxable hourly wages and tax-free stipends or be paid a fully taxable salary. To qualify for a blended rate, travel workers must be able to claim a permanent tax home. This guide covers the ins and outs of a travel nursing tax home to help you better understand when you can and can’t claim a tax home and the benefits of claiming one.
What Does Claiming a Travel Nurse Tax Home Mean?
Before claiming a travel nurse tax home, you must first determine the location of your tax home. Normally, your tax home is your regular place of business, which isn’t necessarily where you live. For example, if a staff nurse lives and works in Miami, Florida, full-time, their tax home is in Miami. If the same nurse lives in Lillian, Alabama, but works full-time in Pensacola, Florida, their tax home is Pensacola.
However, travel nurses may work in numerous places throughout the year, which could make it difficult to determine a tax home. The IRS has different rules for those who don’t have a main place of work. In this case, your tax home is usually where you regularly live.
To qualify as your tax home, where you regularly live should be a home you own or rent and contribute monetarily to as part of the cost of living in this location. However, if you rent a house, apartment or room, your monthly rent must be comparable to market rates in the area. More on that later.
Generally, a travel nurse’s tax home is where they claim their permanent residence. Your permanent residence is in the city and state where you register to vote, hold a driver’s license, register your car, claim on your federal tax return and maintain your home state nursing license.
To claim and maintain a tax home and qualify for untaxed stipends per IRS regulations, you must meet two of the three following requirements pulled directly from IRS Publication 463:
- You perform part of your business in the area of your main home and use that home for lodging while doing business in the area.
- You have living expenses at your main home that you duplicate because your business requires you to be away from that home.
- You haven’t abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging.
RELATED: Understanding 2022 Travel Nursing Tax Rules
There’s No Such Thing as a “50 Mile Rule”
Travel nurses have heard for years that they can claim tax-free stipends if their tax home is at least 50 miles from their travel assignment. While a hospital or staffing agency may have a 50-mile rule, the IRS doesn’t, and this entity is the most important come tax time.
Unfortunately, the IRS doesn’t give hard rules regarding distance from a travel assignment. Per tax professionals we’ve spoken with, the IRS only states that the travel must keep you out of town longer than a typical workday and make it necessary to sleep or rest before returning home. Thus, if you require lodging away from your tax home to perform your job in another location, you should qualify for tax-free stipends regardless of the distance from your permanent residence. However, when in doubt, always consult a tax expert in your area to confirm that your tax home is far enough from the travel assignment to qualify for tax-free stipends.
Renting a Travel Nursing Tax Home from Family or Friends
Travel nurses wanting to claim a room they rent in a family member’s or friend’s house could count as long as they’re paying “fair market value” for the room. Basically, they must prove they’re paying what the room would typically rent for if their family member or friend were to rent it to someone else. Also, the person you’re paying to live with must claim the rent collected as income on their taxes.
If you’re renting from someone who doesn’t own the home but rents it themselves and you’re not on the lease, create a lease with this person to show you’re paying regular market rates for the room every month. Also, keep proof of paying the rent through canceled checks, money order receipts and/or rental receipts signed by the person collecting your rent.
Why Should Travel Nurses Claim a Tax Home?
Travel nurses can take tax-free stipends to cover the cost of housing, meals and other incidentals while on travel assignments as part of their compensation package if they qualify. These stipends are intended to cover the cost of duplicate expenses incurred as a result of travel nursing and why they’re provided on a tax-free basis.
Travel nurses who don’t have a permanent tax home or don’t meet the qualifications for having a tax home don’t receive a blended rate of untaxed stipends and taxable wages. Instead, their entire salary is subject to federal income taxes, lowering their total compensation. Although travel nurses with fully taxed wages still generally earn more than average staff nursing salaries, they earn less than travel nurses who can claim a tax home.
RELATED: How Travel Nurse Housing Stipends Work
Can a Travel Nurse Rent Their Home While They Travel?
If you own your permanent tax home and want to rent it out while you’re gone, that’s allowed. However, you must claim the rental income you receive on your taxes. If you’re claiming this home as a travel nursing tax home to receive untaxed stipends for housing, you must still prove you’re duplicating expenses. This proof is especially important if you’re audited. Otherwise, you could end up with a large, unexpected tax bill.
When Do Travel Nurses Have to Declare a Tax Home?
Traveling nurses must complete and sign a declaration of their permanent tax home with their travel nursing agency before starting a contract. Signing this declaration enables the agency to structure your compensation package to include tax-free stipends if you want them included in your pay. It’s wise to ask in advance what you need as proof of a tax home so any paperwork can be prepared before signing your tax home declaration.
Can You Travel Nurse Without a Tax Home?
Yes, you can still take travel assignments if you don’t have a tax home, but you won’t qualify for tax-free stipends. If you don’t have a regular place of business and don’t have a place where you regularly live, the IRS considers you an itinerant or transient worker. Your tax home is wherever you work. You can’t claim tax-free stipends because you’re never considered away from home or duplicate expenses in two locations simultaneously while on assignments.
RELATED: Understanding Travel Nurse Residency Rules
Can You Travel Nurse Close to Your Tax Home?
Travel nurses who take contracts close enough to their tax home that allow them to come home every night instead of taking additional lodging near the assignment may qualify for local travel nursing contacts. However, local travelers don’t qualify for tax-free stipends because they don’t duplicate expenses and maintain living costs in two separate areas.
Under a local contract, you’ll be taxed on the total hourly wage, but the pay rate shouldn’t change. Local travelers net a lower salary after taxes than traditional travel nurses because the IRS taxes the entire amount. Most of the time, the net wages of a local travel nurse are still higher than staff nurse salaries but lower than travel nurses who can claim untaxed stipends.
RELATED: How Much Do Travel Nurses Make?
Let your recruiter know ASAP if you won’t be claiming a travel nurse tax home and receiving tax-free stipends. It changes some of the contract stipulations, and the recruiter must quote a new pay package with fully taxed wages.
Recruiters must also confirm that the hospital or health system doesn’t have a minimum distance requirement. This distance is where travel nurses may get confused about the 50-mile rule. Some health systems may require travel nurses to be a certain distance from the hospital or the staffing agency may include a set distance in their contracts. However, this doesn’t have anything to do with IRS regulations. Review “There’s No Such Thing as a ‘50-Mile Rule’” above.
Cons to Claiming a Tax Home for Travel Nurses
While it may be disappointing when you can’t claim a travel nursing tax home and receive tax-free stipends, it’s not necessarily a bad thing. Taking the tax-free pay means your yearly income on your W-2 appears much lower than what you actually receive in compensation as a travel nurse. Thus, if you want to apply for any sort of credit or loan, you may not be approved because your income doesn’t appear to be high enough.
Claiming a tax home is an individual decision for each travel nurse. If you plan to buy a car or home or apply for any significant loan in the next few years, it may be best to work as a local traveler and pay the taxes to have provable income for your future credit needs.
Consult a Tax Expert to Avoid Mistakes
Filing your travel nurse taxes can be complicated, especially if you work in multiple states throughout the year. Vivian always suggests consulting with a tax expert familiar with the unique financial aspects of travel nursing.
A professional tax advisor can guide you through the process of multistate filings, ensure you don’t overpay state or federal income taxes and advocate for you if you’re audited or anything goes awry on your tax return. Although this service comes with a fee, the investment may be small compared to how costly a mistake on your taxes might be.
Learn more about travel nursing, including information on stipends, taxes, housing, bill rates and salary, along with many other helpful topics on Vivian’s Resource Hub under the travel nursing category.
Just starting out. This was a well written and needed article. Thank you!
There is no such thing as a 50-mile rule in the tax code – Yu have to be working far enough away from home that it requires you to get rest/sleep at the assignment location AND incur lodging expenses each at the assignment for each day you receive a per diem.
In addition, you must be maintaining a primary dwelling and incur expected costs to keep your main home unless you have a regular job that you return to annually
Travel nursing is a great way to explore places you may be thinking of moving in the future. It gives you the steady income and time to really explore the community before packing up all of your household goods and family than learning you are not a fit for that community. I enjoy meeting new people, taking care of my patients, and exploring new communities. I am used to traveling with the military, but this allows me to see how hospitals and staff are in the private sector. I am a labor and delivery nurse with 15 years of experience.
So very helpful. Thank you