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Travel Nursing Tax Homes: What Are They and Should You Have One?
Disclaimer: We’re not accountants or lawyers and the information provided here is based on a layperson’s perspective on travel nursing taxes. For tax advice, please consult an accountant, like the experts at TravelTax.com.
Doing your taxes is probably not your favorite activity. We want to make it a bit easier so you can hurry up and get back to the fun stuff. Here’s all you need to know about tax homes, why they’re important, and if they’re worth it.
How to establish your tax home
First things first: A tax home is NOT the same as your place of residence. It is the geographical area where you primarily work. This may or may not be the same geographic area where your permanent place of residence is.
The IRS defines a tax home as “your regular place of business or post of duty, regardless of where you maintain your family home. It includes the entire city or general area in which your business or work is located.”
You’re a travel nurse because you want to travel. You likely accept assignments across many state lines. Establishing a tax home allows you to take deductions for travel expenses to other cities or states, and keep the untaxed income in your contract untaxed.
Travel nurses generally qualify for tax-free stipends if they meet two of the three requirements for tax homes. Here they are:
- You earn a minimum of 25% of your income in this geographical area.
- You have a permanent residence here, paying rent or mortgage, utilities, etc.
- You have not abandoned your tax home.
Now we’ll break down how you qualify. Meeting the first or second requirement generally proves the third, that you have not abandoned your tax home.
Meeting the first requirement
You establish the first requirement by performing the largest percentage of work in one place. It should be a minimum of 25% of your annual income, even if it’s not completed consecutively. If you repeat other assignments throughout the year, your tax home should still be the largest single source of your income.
This location may or may not be where your residential home is located. If it is, you’ll likely meet all three requirements.
Here’s an example. Mike is a travel nurse from Santa Cruz. He has a condo there, where he lives and works at one of the local hospitals from late May through August. The rest of the year he takes assignments that average about 12 weeks, and none of them are repeated in the same tax year. If he has more than a week in between assignments, he’ll go home to his condo.
Mike lives and earns 25% of his income in the same location, which is his tax home. The bulk of his income is made elsewhere by smaller assignments throughout the year. Since none of them repeat, his highest percentage of income from one place qualifies him for the first requirement. Since he returns to his condo throughout the year, he proves he hasn’t abandoned his tax home, qualifying for #3.
Meeting the second requirement
You have financial responsibilities for housing in your tax home, and when you travel, your housing expenses are duplicated.
Example: Nancy is a travel nurse who lives in Newark with her sister. Nancy lives and works there from October through February and makes about $25,000. She takes assignments from Maine to Florida the rest of the year, totaling about $36,000. She usually rents a sublet when she’s on assignment, as they’re never longer than 12 weeks.
Nancy meets all three requirements for a tax home. She earns more than a quarter of her income in Newark, where she also has a residential home. Nancy’s expenses are doubled because she maintains her Newark home and rents in other towns when she’s not there. Because Newark is where her residential home is located and where she does most of her work, she meets the third requirement as well.
Pros and cons of having a tax home
If you’re on the fence about the value of keeping a tax home, here are a few ideas that might help you decide.
- Tax-free stipends can save you up to $10k annually, according to TravelTax.com.
- You have a home base between assignments.
- Some agencies will not sign you unless you have a tax home.
- You have to keep very detailed records of your expenses.
- You’re not completely free to travel all year — you must regularly return to your tax home.
- The money spent on maintaining a tax home may outweigh your tax savings.
Tax home sweet home?
Depending on your goals and your schedule, a tax home may or may not make sense or be feasible. It could be an obvious choice because you easily qualify or because you obviously don’t. Ask your colleagues how they manage their tax home and how that works for them. Or seek advice from a travel nurse tax professional.
Looking for more on how to prepare for tax season? Check out our guide on everything you need to know about travel nurse taxes.
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