If you are considering getting into travel nursing, one of the first terms you might read about is a “tax home”. This term can be a bit confusing, but it is an important thing to understand in order to make sure you are being correctly taxed on your earnings and honestly reporting your “home” to your travel nursing company.
What is a “Tax Home” in travel nursing?
In the most simple terms, a tax home is a location where you pay to reside, pay taxes, and keep all of your belongings and licenses registered.
Can I pay any amount of rent to friends or family and claim it as my tax home?
No! One key piece of maintaining a tax home is paying fair market value for whatever space is yours. This can be a mortgage or rent, but you cannot underpay, and you need to have a receipt for all payments in case you are audited.
So, what is the point of having a tax home?
Having a tax home allows travel nurses to collect tax-free stipends while on contract. These stipends are meant to pay for the cost of “duplicating expenses”. This means that if you are not duplicating housing costs, you do not qualify for tax-free stipends.
Is it really worth it to pay for housing I won’t be living in most of the time?
The answer here is–it depends! For some people, it may be worth it to maintain a tax home. For others, you may want to consider working as an itinerant worker instead. Let’s break down some of the differences between both options and why one may work better for you.
Itinerant workers do not claim a tax home. Instead, they take all pay packages at a fully taxed rate. At first, this may seem like a deal breaker for travel nurses, but for some, it might actually make sense.
If your established home is a place where the cost of living is extremely high, it might be worth it to simply forgo paying rent or a mortgage on a tax home. This is especially true if you don’t have a way to rent from a friend or family member in an area that has a high cost of living.
However, if you do plan to return home regularly and will need a place to stay, it might be worth it from a personal standpoint to have a place to land from time to time. Keep in mind, most travel nurses also keep some amount of stuff in storage, so regardless of your friends and family situation, you will likely have somewhere that your stuff will land.
Claiming itinerant status may also be worth it if you own a home and plan to rent the entire home out while on assignments. You cannot claim your home as your tax home if you are renting it! If you want to use your home address and claim tax-free money, you will need to keep a space in the house that is designated as “yours”.
Basically, you would need to be more like occasional roommates with whoever is renting the home you own. Once again, this may work if you have friends or family members who want to rent a portion of your home while you are gone, but it might be trickier to find someone you don’t know who can be trusted with your home while you are away for long stretches of time.
If you think working as an itinerant worker might be right for you, it would be worthwhile to speak to a recruiter about what a pay package and taxes would look like for tax-free vs itinerant for a couple of jobs. Then, you can decide if the money you are saving by not paying for a tax home is worth it compared to the higher amount of taxes you will be saving.
As always, we highly recommend you talk to a tax professional as well when making these decisions. TravelTax.com is a great resource for specific tax-related questions.
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