Travel Nurses: Take Advantage of Available Tax Deductions

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Tips for minimizing your tax bill as you travel

by Paul Muret, CPA, MBA

As a travel nurse, you may not be aware that there are several available deductions you may claim on your federal tax return for out-of-pocket expenses incurred while on assignment. Note that these deductions may be taken only if you meet certain criteria. First, you must have a permanent residence, which establishes your "tax home." Generally, a taxpayer's tax home is considered by the IRS to be his or her main place of business or post of duty, regardless of where the taxpayer maintains his/her family home. If a taxpayer does not have a regular or main place of business because of the nature of his/her work, then either the tax home is the place where he/she regularly lives or the taxpayer is considered homeless for tax purposes.

In order for the taxpayer to be considered "away from home," the overnight rule requires that the trip must be of sufficient duration to require sleep or rest. The "sleep or rest" requirement is generally interpreted to mean that the nature of the taxpayer's employment makes it reasonable for the taxpayer to stop for sleep before continuing his or her duties. If your assignment meets this criteria, you may claim several advantageous deductions.

As long as you maintain a permanent residence like a house, condo or apartment in the state you claim as your tax home and return to that residence on a regular basis, you will be eligible to take advantage of all the tax perks that come with being a traveler. In an IRS audit, the government will look to see if a person has duplicative living expenses, i.e. if you are paying rent/mortgage and utilities in the place you are claiming as your tax home. If you do not have duplicative expenses, then the IRS will disallow the travel expenses.

Another key to maintaining the "temporary assignment" criteria is that you must not stay in one location on the same contract for more than one calendar year. Otherwise the IRS deems this to be a job that is something other than temporary. Therefore, I advise my clients to return home and work there for at least two weeks per year.

Once the issue of tax home is established, the following items are deductible: meals, lodging, cell phone and transportation. Additionally, items that are always deductible for nurses include professional dues and licenses, small tools such as stethoscopes, union dues, tax preparation fees, scrubs and continuing education.

These expenses, if deductible, can make a very big difference in the amount of tax you owe when you file your return. Be sure to keep track of your out-of-pocket expenses and travel itineraries so that you or your tax advisor can minimize your tax bill.

In addition to federal tax returns, you must also file state income tax returns in all the states in which you worked, as well as your home state (even if you didn't work there). Most states take into account your travel expenses claimed on your federal return as a deduction or allow credits for taxes paid to other states. Each state is different, so be sure to look at the forms carefully or have a professional prepare them for you.

Please Note: The preceding discussion is general in nature and should not be considered advice for any individual tax situation. You should consult with your personal tax planning professional for specific guidance relating to your unique circumstances.

Paul Muret, CPA, MBA, is a tax advisor based in Tulsa, Okla., and the owner of www.muretcpa.com. He can be contacted at paul@muretcpa.com.