Multi-State Taxes for Travel Nurses: A Comprehensive Guide

Tax Returns in Multiple States

Travel healthcare professionals often work in multiple states within a year, making it necessary to file for tax returns in more than one state. Here is how it usually works:

Resident State: This is the state where the healthcare professional maintains a permanent residence. Even if they haven't worked in this state during the year, they'll still need to file a resident tax return here.

Non-Resident/Part-Year Resident States: For every state a travel healthcare professional has worked in, they'll typically need to file a non-resident or part-year resident return.

It's important to keep track of the exact dates worked in each state, as this will determine the income to report on each state's return.

Tax Home and Travel Expenses

The concept of a "tax home" is very important for travel healthcare professionals. The IRS defines a tax home as the general area of an individual's primary place of work, irrespective of the family home. If a travel healthcare professional doesn't have a tax home, their travel expenses won't be deductible.

To maintain a tax home, you should:

• Have a permanent residence to return to between assignments.
• Not abandon the residence while traveling for work.
• Incur expenses at the permanent residence while working away from it.

Generally, if these conditions are met, you can deduct "ordinary and necessary" travel expenses, including:

• Lodging and meals.
• Transportation costs.
• Licensing and continuing education related to the job.

Important: Under current law (tax years 2018 through 2025), W-2 employees generally cannot deduct unreimbursed job expenses like these. This deduction mainly applies to travel nurses who work as self-employed (1099) contractors. For most W-2 travel nurses, the real tax benefit comes from the tax-free stipends covered below.

Stipends and Taxable Income

Many travel healthcare professionals receive stipends for housing, meals, and other expenses. While these stipends can be significant, it's very important to understand their tax implications:

• If a tax home exists and incurs duplicate expenses while traveling for work, the stipends are generally tax-free.
• Without a tax home, these stipends become taxable income.
• If an assignment in one place is expected to last, or does last, more than one year, that place generally becomes your tax home and the stipends become taxable.

Make sure to consult with a tax professional!

Multi-State Taxation and Credits

When paying taxes to multiple states, there's the possibility of double taxation on the same income. It's important to remember that most states offer a credit for taxes paid to another state, ensuring that income isn't doubly taxed. Always be aware of this and claim the credit where applicable.

Always keep detailed records, especially records of:

• Dates worked in each state.
• All income received, including stipends.
• All work-related expenses.

These records will be priceless when preparing tax returns and in case of any future inquiries from the IRS or state tax agencies.

Disclaimer: This article is for informational purposes only and is not meant to be financial or legal advice.