One of the benefits of being a travel nurse is the tax free housing, travel reimbursements and in some
cases, meal allowances - ok, so that’s more than one benefit, which is probably why you’re a travel nurse, right? In spite of the information (also called ‘advice’) that other travel nurses give you, these benefits are contingent on your personal “tax home.”
The first thing you, as a travel nurse, should know about your tax home is that it’s not a “permanent” or “fixed” residence. Your permanent place of residence is where a you have financial and legal ties. It’s probably the town you consider your home and the place you come back to between travel nurse assignments. This is the case even if you stay with a family member or rent a different apartment every time you return.
A tax home takes the idea of a permanent residence one step further, and requires you to maintain a livable residence at the permanent residence. Your residence can be a single-family house, condo, or even a room that you rent, but in order to qualify as a tax home, you must have evidence that you are incurring regular expenses in maintaining your place.
The IRS allows your deductions for housing, meals and travel while you’re on the road only when it is clear that you are duplicating living expenses while away from tax home while on business. Keep in mind the duplicate expenses don’t need to match in terms of money value - just their natures need to be duplicated while you’re producing income at a temporary location.
By this definition, the vast majority of travel nurses have a permanent residence, but not all travel nurses have tax homes. And while this may seem like a minor distinction, it quite often leads travel nurses to three common mistakes:
1. Claiming the address of a friend or family member as a tax home without contributing to the care/maintenance of the dwelling. Unless a travel nurse can prove they have a rental arrangement where they pay rent, and that rent is claimed as income on someone’s tax return, your arrangement does not qualify as a tax home. If the IRS audited you for proof that your permanent residence is a tax home, items such as rental contracts, records of payment, cancelled checks and tax returns would need to be submitted to the IRS as proof. “Rent” must also match what others would expect to pay in your area for a similar arrangement. So don’t go thinking you rent a room for $1 a month from a family member.
2. Claiming your storage unit as proof of your residence. Why people try this, I don’t know. Claiming a storage unit does more to prove the your lack of a residence than anything else! When you file an IRS document with 111 Main Street, Unit KK, don’t be surprised when the IRS computers tell them that the address belongs to a storage company.
3. Completely renting your tax home residence. If you rent your home or apartment while you’re on a travel nurse assignment, you need to maintain a portion of the dwelling for you buy storing you personal items and physically living there when you are not on an assignment. Otherwise, you forfeit the residence as YOUR tax home because it’s occupied legally by someone else.
Conclusion
It’s true that these tax rules can be confusing, and even overwhelming. And it can be very tempting to stretch the rules in order to get a better deal on your taxes. Having a tax home can be worth up to $4000 a
year in tax savings to a travel nurse, but the extra time and money it takes to maintain your tax home may not be worth it.
If maintaining your tax home is too much for you, it’s not the end of the world. With your higher pay and
opportunity to explore the country as a travel nurse, you can’t put a price on the experience you’ll get. Don’t live your life based on a single tax deduction.
Many travel nurses have done away with the burden of a tax home and become what the IRS refers to as an “itinerant” worker. This simply means that your tax home follows you to wherever you go - the housing and travel reimbursements are treated as part of your taxable income, and the meal deductions are lost. There are some other factors that you should look into on the topic of tax homes, but it is important to know major rules we’ve given you here.
And, one last thing, always remember that your travel nurse staffing agency is not in the business of making sure you’re in compliance of tax laws. If you need advice, seek professional advice.