What are the Most-Often-Missed Tax Deductions for Travel Nurses?
March 10, 2010 - The tax code is complex. To add to the problem, Congress is constantly tinkering with the rules and adding new deductions, so it’s a wonder anyone can keep up with the system. In the last five years, there have been three home buyers’ credit programs, a new educational deduction and additional deductions for property taxes and sales tax on new cars. And there are more changes to come.
Fortunately for travelers, deductions for transportation, meals and lodging (collectively called travel deductions) have always been around. Surprisingly, many travelers miss these.
Transportation:
To start your assignment, you have to get there first. The expenses you have for driving your own car, airfare or other public transit are deductible less any reimbursements that you receive. The same is true after you finish the assignment and either return home or go to the next engagement. Additionally, transportation at the assignment that is business related is also deductible. Staffing agencies usually offer “travel pay” to offset these expenses, but the amount is often capped and does not cover the full amount of the deductible expenses. Using the 2010 standard mileage allowance of 50 cents a mile, a 1000 mile trip in your own vehicle is worth $500 in deductions. Throw in the lodging en route and you have a substantial amount of deductions compared to travel pay that may be capped at $300.
Meals:
For every day you are away from home on business, you are allowed to deduct a daily meal “per diem”. Per Diems (as distinguished from working on a per diem basis), are standard rates for lodging and meals that are published by the government. Instead of keeping all those meal and grocery receipts, you can use the standard meal rate as your deduction. Staffing agencies vary as to how they pay meal reimbursements. Some use the full published amounts, a fixed rate for all assignments or none at all. Agencies that give “housing only” allowances are really giving meal reimbursements in disguise as by law, the lodging only allowance must be split 60/40 between lodging and meals. If the meal reimbursement you receive from the company is less than the published rate, you can deduct the difference. In addition, the meal allowance is applicable to the travel days at a 75% rate of the destination. Since most meal reimbursements are given for the contract dates, the meal deduction for travel days outside of this period are allowed as well.
Housing:
Normally, the staffing agency or hospital will provide housing or pay an allowance for you to secure your own lodging. There are some occasions where the contract requires the lodging to be treated as a taxable wage by all that work at the facility or the contract simply calls for a straight wage rate without any reimbursements. In these cases, assuming that you have a valid tax home (discussed next), the expenses incurred for the lodging are deductible. This includes utilities and reasonable furnishings.
Caveat:
Having stated all of this, it is important to keep in mind that these deductions require a tax home. A tax home is not a permanent residence and many use the terms synonymously. A permanent residence is a legal item- where the mail, drivers license and car registration is located etc. A tax home for most travelers requires that the individual has significant expenses in maintaining a residence while they are away from home on an assignment which is duplicated by expenses for a second residence. This is important to remember.
Transportation, meal and lodging expenses are important deductions to be aware of during the course of your assignment and can often make a substantial impact on your tax bill. As always, be sure to consult a tax advisor that is familiar with your situation.
Next up on the tax blog--recordkeeping items that are necessary to complete your tax returns.
Reference IRS Revenue Procedure 2009-47
About the author:
Joseph Smith is an IRS Enrolled Agent and former travel respiratory therapist whose firm (TravelTax LLC) provides tax preparation and audit representation for the mobile professional. He is a regular contributor to HealthcareTraveler, Locum Life and a speaker at the annual Travel Medical Professionals Convention. For more travel nursing tax advice, visit TravelTax.com.
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