Travel Nurse Taxes: A Comprehensive Guide

As a travel nurse, you enjoy the flexibility of working in various locations, but this lifestyle comes with unique tax challenges. From managing taxable and non-taxable income to filing taxes in multiple states, understanding the rules can help you maximize your earnings and avoid costly mistakes. Here’s everything you need to know about taxes as a travel nurse.

Taxable vs. Non-Taxable Income

Travel nurses typically receive a combination of taxable wages and non-taxable stipends.

Taxable Income: This includes your hourly wages or base pay, which are subject to federal, state, and sometimes local income taxes.
Non-Taxable Stipends: These are reimbursements for housing, meals, and incidental expenses while working away from your tax home. These stipends are tax-free if you meet IRS requirements for maintaining a valid tax home.

Important Note: If you do not qualify for a tax home, all stipends become taxable income.

What is a Tax Home?

The IRS defines a tax home as the entire city or general area where your regular place of business or work is located, regardless of where you maintain your personal residence. If you do not have a regular place of business, your tax home may be the location where you regularly live, provided certain conditions are met.

Your tax home determines whether travel expenses (e.g., lodging, meals, transportation) incurred while working away from this location can be deducted as business expenses. In other words, it determines whether your stipends for housing and meals are tax-free. To maintain a valid tax home:

You must have a permanent residence where you incur regular living expenses (e.g., rent/mortgage, utilities).
You must return to this residence at least once every 12 months.
You must duplicate expenses by incurring costs at both your permanent residence and temporary work location.

If you do not meet these criteria, the IRS considers you an itinerant worker, and all stipends will be taxed as income. According to the IRS, an itinerant worker is someone who does not have a regular or fixed place of business and, therefore, does not maintain a “tax home.” Instead, their tax home is wherever they are currently working.

A travel nurse who does not maintain a permanent residence or return to it regularly may be classified as itinerant. Any non-taxable stipends (e.g., per diems for housing and meals) would become taxable because the nurse does not meet the IRS requirements for maintaining a tax home.

Claiming a Parent or Relative’s Home as a Tax Residence

This is referred to as a “related party transaction.” If you do this, it needs to look, smell & taste like a real rental arrangement. That means you need to pay rent, and it must be of fair market value. In addition, the recipient of the rent payment should claim the income on their tax forms as rental income.

It’s always a good idea to have a contract. The contract needs to look legitimate, like a business transaction.

Duplicating Expenses

Duplicating expenses means incurring living costs at your tax home and your temporary work location. This is critical for maintaining the tax-free status of your stipends.

Key Aspects of Duplicating Expenses

Maintaining a Tax Home
- A tax home is your primary residence where you incur regular living expenses (e.g., rent/mortgage, utilities).
- To qualify for tax-free stipends, you must demonstrate that you maintain this permanent residence while working temporarily elsewhere.
Temporary Work Location Costs
- In addition to expenses at your tax home, you must pay for housing, meals, or other living costs at your temporary job location. For example, renting an apartment near the work site while still paying for your permanent home qualifies as duplicating expenses.
Documentation Requirements
- Proof of duplicated expenses is essential. This includes lease agreements, utility bills, and receipts for your tax home and temporary housing.
- The IRS may also request proof during an audit.
IRS Scrutiny
- If you cannot prove duplicated expenses or your temporary work location is deemed “commutable” from your permanent home, your stipends could become taxable income.

Multi-State Tax Filing

Working in multiple states during the year means you must file taxes in each state where you earned income. Here’s how it works:

Non-Resident Tax Returns
- File a non-resident return for each state where you worked (except for states without income tax like Texas or Florida)
Resident Tax Return
- File a resident return in your home state, where your tax home is located
- You report ALL income to your home state – it doesn’t matter if you worked there or not
Avoid Double Taxation
- You are NOT double-taxed!
- Use state tax credits to prevent being taxed twice on the same income. For example, if you pay taxes in a work state, you can claim those taxes as a credit on your home state return.
- Exceptions: Some states have reciprocity agreements that allow you to pay taxes only in your home state instead of the work state. Check if this applies to your assignments.

IRS Rules for Per Diems

Per diems are daily allowances provided by employers to cover meals, lodging, and incidental expenses while working away from home. Here’s what you need to know:

Tax-Free Status: Per diems are non-taxable if:
- You maintain a valid tax home.
- Your assignment requires overnight lodging and is far enough from your tax home to justify staying away.
Duration Limits: Assignments lasting more than 12 months in one location may disqualify per diems from being tax-free.
Documentation: Keep records of housing leases, meal receipts, and other expenses to substantiate per diem payments during audits.

Deductible Expenses

While federal tax reforms have eliminated many job-related deductions for employees, some states still allow deductions for certain expenses:

Housing and lodging costs
Mileage and transportation
Uniforms
Continuing education expenses

Keep detailed records of these expenses as they may be deductible on state returns or under specific circumstances.

Common Pitfalls to Avoid

Commutable Assignments

If your assignment is close enough to commute daily without incurring lodging costs, stipends may become taxable.

Abandoning Your Tax Home

To maintain a valid tax home, return to it regularly (at least 30 days per year) and keep ties such as voter registration or driver’s license there.

Misunderstanding the 50-Mile Rule

The IRS does not have a “50-mile rule” for determining whether stipends are tax-free. The IRS states that you can accept tax-free reimbursements if “you need to sleep or rest to meet the demands of your work while away from home.” The IRS does not define a specific distance that would constitute your need to sleep or rest.

The IRS requires that you actually incur expenses to accept tax-free reimbursements for those expenses.

The scenario where a travel nurse drives 100+ miles to work a shift and then drives home without incurring expenses for lodging does not qualify for a tax-free lodging reimbursement.

Tips for Staying Organized

Track Your Assignments: Keep detailed records of where you worked and when.
Save Receipts: Document all housing, meal, transportation, and other deductible expenses.
Understand Your Contracts: Review how stipends are structured and whether they depend on hours worked.
Work with a CPA: Hire a Certified Public Accountant or Enrolled Agent experienced in travel nursing taxes to ensure compliance and optimize deductions.

The IRS 12-Month Rule

The IRS considers any assignment lasting more than 12 months at one location as indefinite rather than temporary. Once an assignment becomes indefinite:

The location becomes your new tax home
All stipends for housing and meals become taxable income

To avoid this situation:

Limit assignments at one location to less than 12 months
- Multiple assignments in the same area = one assignment
Take breaks between assignments or rotate between different locations
- Tax experts recommend taking a 7-12 month break

Why Professional Assistance Matters

Travel nursing taxes can be complicated due to multi-state filings, maintaining a valid tax home, and navigating IRS rules on per diems and stipends. A professional familiar with travel nursing can help:

Ensure compliance with federal and state laws.
Maximize deductions while avoiding audits.
Simplify multi-state filings by claiming appropriate credits.

I recommend traveltax.com – a tax consulting firm started by a traveling respiratory therapist with an accounting degree. They offer several resources for traveling healthcare professionals, including traveler tax returns, phone consults to review your tax home, and a blog with helpful information.

By understanding these rules and maintaining proper documentation throughout the year, you can confidently navigate tax season while maximizing your take-home pay!