Tax Tips for Financially Savvy Travel Nurses
Ah taxes. That time-consuming chore you have to start thinking about every year as the cold recedes and the pollen starts springing from the trees. Allergies and taxes? What a great combination.
This year, tax day is on Tuesday, April 17, 2018. That’s the deadline the IRS has set for you to file your income tax details. Whether this is your first year as a travel nurse or your fifth, it’s important to remember that filing your taxes as a travel nurse is slightly different than you would for a staff nurse position.
Before we dive into the breakdown, we want to note that this year is particularly important because it’s the last year taxes can be filed under the previous tax law. Starting next year, taxes will be affected by the tax plan filed by the Trump Administration on December 22, 2017. Let’s dive into what you need to know when filing your taxes for 2017.
Understand Your Salary: Blended Rates, Taxable Income and Non-Taxable Reimbursements
Before you can understand how to file your taxes on your income, you should first understand how your income is divided. Travel nursing rates are unique in that they’re a combination of a taxable hourly rate and non-taxable items combined together to make something called a “blended rate”. These non-taxable items are used to pay for lodging, meals and incidentals.
Different employers will break it down differently, so take some time to understand how your income is split. On Nomad, we break it down in every job post so you know exactly how much you’re making each week and how much is allotted to reimburse you for food and lodging. Here’s an example below.
Let’s walk through it:
- What does total pay mean? The job post will list a compensation in the description. This example listed a compensation of $62 / hour. The total pay, also known as the blended rate, is then calculated based on the number of guaranteed hours per week. This job guarantees 36 hours per week, which comes out to a total pay $2,232 / week.
- What is non-taxable income? This determines your stipend for lodging and meals and incidentals based on GSA standards by zip code. Each job will identify which county standard is being used, for example here it is the Bronx / Kings / New York / Queens / Richmond county. This comes in the form of a reimbursement.
- What is taxable income? This is what’s left over after the non-taxable income is taken out. The amount shown is the gross amount you will receive, there will be a small amount taken out for tax so the net income you receive may be slightly lower.
- What does per diem mean? Per diem is calculated based on GSA standards for the area to determine cost of living, meals, etc.
Your Travel Nursing Salary As Reflected On Your W-2 Form
Your W-2 form is a form that you should receive from your employer that reports all of your earnings for the year and the amount of taxes that were withheld from your paycheck. You will need this form to help complete your tax filing process. If you worked with multiple employers throughout the year, you will need a W-2 form from each of them.
On your W-2 form, your income will be listed - but it will only reflect the taxable income you were paid over your assignments. The amount of taxes taken out of your salary as listed on your W-2 are also only calculated based on this taxable income.
The rest of your salary, the non-taxable income, will likely be paid to you as a reimbursement and will be reflected as such on your W-2. This money isn’t subject to any tax.
Traveling Means Multiple State Taxes
Travel nursing work is a great opportunity to get paid to travel, whether it’s across the country or a neighboring state. Many nurses become travelers to take advantage of this opportunity to explore, but something to keep in mind when doing so is that will affect how you’re required to file your taxes.
Make sure you figure out where you are legally required to file. In most cases, you will be required to file in both your US state of residence and the state of your assignment and be subject to state income tax in both states. Don’t assume you will only need to file in one. Connect with a financial professional to help determine where you’re required to file and to help you find the best deals for your situation.
What Is a Tax Home State?
So what exactly qualifies as a “US state of residence”? For many travelers who travel throughout the year, there may not be one clear state where you spend the majority of your time.
Your tax home, also called state of residence or permanent residence, needs to meet three requirements:
- You work as a travel nurse in the area of your permanent residence and live there while you’re working.
- You maintain living expenses at your place of permanent residence.
- You have not abandoned the permanent residence, and you or members of your family members live there.
That may sound a little redundant - why should you be paying for a house in your home state when you aren’t even living there? Maintaining a tax home is crucial as it is required to be able to qualify for tax deductions and for your non-taxable stipend to actually remain non-taxable.
Without a tax home you are considered transient. This means you will not qualify for travel nurse tax deductions and your non-taxable stipends for housing, meals and incidentals may be subject to tax.
Tax Deduction Tips
Once you’ve determined your tax home and as long as you aren’t spending over 365 days in one location, there are a number of items that can be considered tax deductible. You can see a full list on the IRS website.
Here are just a few:
- Job-Related Items: This can include things like scrubs, shoes, or specific equipment.
- Travel Expenses: Not only does this include plane or bus fare, but you can also count any car or driving related expenses. This means car maintenance, tolls and parking fees.
- Living Costs: This includes housing and means, but also much more. Things like laundry costs, telephone costs, and internet or computer expenses may be deductible.
- Licensure Fees: If you need to renew your license for your assignment, the fee associated with that may be deductible.
- Continued Education: Depending on your situation, your education expenses may qualify you for for a tax credit or deduction. If you completed your RN-BSN degree in the last year or continued on to your MSN or received certification, you may qualify. Refer to the IRS Publication for details.
To make sure you are accurately claiming the right amount of deductions and that you aren’t missing anything, it’s very important to keep very thorough records of every expense. You will especially want to keep a record of:
- Mileage Log
- Lodging Expenses
- Receipts for Employment Expenses
The IRS has a window of 3 years in which they can audit any tax return that is filed, so you’ll want to make sure you keep up with your records for at least that long. Most experts advise you keep any documentation for at least 7 years to be safe.
How Is This Changing in 2018?
As many of you may already be aware, the new tax laws have changes that affect how travel nurses file their taxes. The biggest change is that many of the deductibles we listed above are no longer deductible. This means things like travel-related expenses, licensing costs, or continued education costs cannot be considered a deductible on your tax return. We recommend reading this in-depth article looking at the major changes introduced if you want to learn more.
But that doesn’t mean you no longer need to keep detailed records going forward. Employers can still give you housing stipends, meal allowances, travel pay and other reimbursements. It’s important to keep all records related to these allowances to cover all your bases.
Here are a few helpful resources to reference to learn more about how to do your taxes as a travel nurse:
- Official IRS Website: The official website of the IRS is probably the best place to get the most accurate and up-to-date information. They have articles with helpful information as well as calculators to help you figure out your withholdings.
- TravelTax: Specializing in traveling professionals, this site has a number of resources you may find useful and also help you to file your tax return by appointment.
- Travel Nursing Central: They have a number of resources not just related to taxes, but also other questions you may have about travel nursing.
There you have it! Tax season may be upon us but that doesn’t mean you need to forage into the world of taxes uninformed.
Important Disclaimer: We aren’t CPAs or by any means experts on this subject. We strongly suggest talking with a CPA who has experience working with travel nurses to help you find the best rates for your specific situation. This article is intended to give you a place to start thinking about this very important part of your career.
Best of luck!
The Nomad Team
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