What are the Most-Often-Missed Tax Deductions for Travel Nurses?
By Joseph Smith, MS Tax, EA, contributor
The tax code is complex. To add to the problem, Congress is constantly tinkering with the rules and adding new laws. The new Trump administration promises bold changes. It’s a wonder anyone can keep up with the system.
Fortunately for nurse travelers, deductions for transportation, meals and lodging (collectively called travel deductions) have always been around. Yet, surprisingly, many travelers miss some of these.
To start your travel assignment, you have to get there. The expenses you have for driving your own car, airfare or other public transit are deductible, less any reimbursements that you receive. Throw in hotel expenses, as well. The same is true after you finish the assignment and return home, or go to the next travel job. 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 2017 standard mileage allowance of 53.5 cents a mile, a 1,000-mile trip in your own vehicle is worth $535 in deductions. Throw in the hotels along the journey and you have a substantial amount of deductions compared to travel pay that may be capped at $300.
For every day you are away from home on business, you are allowed to deduct a daily meal “per diem.” Per diems—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. By law, a lodging only allowance must be split 60/40 between lodging and meals. A $1,000 weekly stipend that does not specify a meal portion is a $600 lodging allowance and $400 meal allowance.
If the meal reimbursement you receive from the travel nursing 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 is allowed.
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 lodging allowance is lower than actual cost, the contract requires the lodging to be treated as a taxable wage by all that work at the facility, or the contract 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.
RELATED: The Ins and Outs of Travel Nurse Housing
Having stated all of this, it is important to keep in mind that these deductions require a qualifying tax home. A tax home is not a permanent residence, although many use the terms synonymously.
A permanent residence is a legal item--where your driver’s license, car registration and voter registration is located, etc. A tax home is where the individual has their primary place of income, or, for those that don’t maintain a principal area of income (like most travelers), the tax home can be where the traveler maintains their dwelling (above), if there are significant expenses in maintaining this residence that are duplicated by expenses at the assignment. This is important to remember.
Transportation, meal and lodging expenses are important tax 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.
About the author
Joseph Smith holds a masters in taxation from Golden Gate University, is an IRS enrolled agent, and a former travel respiratory therapist. His is the president and founder of TravelTax, LLC, which provides tax preparation and audit representation for the mobile professional. He is a regular contributor to several staffing related publications, speaker and co-founder of the annual Travelers Conference, and co-author of Highway Hypodermics. For more travel nursing tax advice, visit his website at www.traveltax.com.
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Updated January 31, 2017.