Tax Basics for Travel Nurses

How do I avoid double taxation if I have worked in multiple states?

In most cases, your employer’s location will dictate where you are paying taxes, at least initially. This is known as paying taxes at the income “source.” For example, if your home is in CO but your job is in IL, most IL-based employers will withhold for IL. However, CO will also expect that you file taxes as a CO resident, if your home is there. So, how do you avoid double taxation? 

The answer is “credits for taxes paid to other states.” Most states will allow you to obtain a credit on your return. In our example, you will pay the taxes to IL, since that is where the hospital is located, however, you get a credit for these taxes on your CO return. This prevents the double taxation.

Some states have reciprocal agreements, but that is out of the scope of this quick summary. Contact us below if that is the case. 

What deductions apply to my situation? Can I take a “per diem” deduction for food & miscellaneous items? 

This conversation really comes down to how the income will be shown by your employer to the IRS. Most travel nurses are paid on a W2/W4 basis, so your ability to take deductions is limited. This is because the Tax Cuts & Jobs Act of 2017 removed most work-related deductions from most types of returns, at least for federal purposes. However, you may be able to take part of the deduction on your state returns, if/where applicable. 

Per diems are a common source of confusion not only for travel nurses but for every profession that requires travel, from those in transport/logistics to salves, moving, ship captains, those working on oil rigs, etc. Contact us directly to see if this can apply to your case. 

The short answer here is that unless you are on 1099 or considered a contractor, most of these types of expenses are not deductible on your returns. The proper procedure is that the employer is to pay these expenses either directly or through a reimbursement program, where you upload your receipts & the employer reimburses you. 

Can I itemize my expenses or take deductions for travel or lodging? 

For federal purposes, this is no longer allowed if you are paid on W2. If you are filing a state return, many states will allow you to itemize if you pass certain thresholds or requirements. If you are on 1099s, these expenses are deductible. 

Are professional licenses related to nursing, etc. deductible? This includes continuing education, board certifications, etc. 

Same rule applies as above – these are deductible if you are on 1099 and more difficult to deduct if you are on W2. 

What is better – being paid on a 1099 or a W2? 

This really depends on the individual and is a complex topic. Taxpayers that have extensive self discipline when it comes to withholding their own tax & may have many deductions are often better off on 1099. There are more deduction opportunities and higher retirement plan deduction options on 1099. Also, if you form an s-corp, there is further opportunity for tax savings. However, many employers will not give a choice and will put you on W2. W2 is great for those that do not want to worry about withholdings & hope that the employer is withholding sufficiently. 

Do quarterly taxes apply to me? 

If you are underwithholding, then yes. For those that are on 1099 or those that are not withholding enough tax – or not withholding for the correct state – it is required to file quarterly. 

What are tax savings strategies if I have multiple employers in one year? 

First off, if you have many employers in one year, they will not know about each other, so they may not know what your total tax bracket will be. This can lead to a situation where each one does not withhold sufficiently. To prevent a tax surprise at year-end, make sure to run your pay stubs through your CPA throughout the year to ensure you are withholding enough.

It is not always bad news, though – if you are earning high enough, you may be entitled to a refund for excess social security taxes paid.