Tax Free Travel Nursing Benefits - In conjunction with my post on keeping a Permanent Tax Home, this post deals with what is required to have your reimbursement for travel costs (like meals, transportation and housing) be non-taxable. You have to start by looking at the way the IRS views travel related payments from your travel nursing company. The IRS views travel related payments from your travel nursing company as either (a) income (and, therefore, taxable) or, (b) non-income reimbursement (and, therefore, non-taxable). By way of example, if I am a non-travel nurse and I drive 20 miles to work each day and my hospital agrees to pay for my costs to make the trip, the IRS will deem that payment to be taxable income and not a non-taxable travel reimbursement. Why? Because 20 miles is a commuting distance which the IRS does not view as a travel expense. How do I Qualify my Travel Expenses for Tax Free Treatment?
The IRS uses three primary factors in determining whether a travel nursing company can reimburse you for nontaxable travel expenses.
- Do you have a permanent tax home? You can read more about a Permanent Tax Home here. The travel nurse must have a permanent tax home.
- The travel nursing assignment cannot be within commuting distance of your Permanent Tax Home.
- The travel nursing assignment (including extensions) cannot extend beyond a one year period.
Permanent Tax Home - If your situation is such that you do not have a Permanent Tax Home then all of the travel related payments you recieve from your travel nursing company are taxable. This includes all meal per diems, mileage reimbursements, housing allowances or company paid housing costs. These items would be subject to payroll tax withholding.
Commuting Distance - The same conclusion as that in the above paragraph is reached if you live within commuting distance between your Permanent Tax Home and your healthcare facility. Most travel nursing companies will not even offer reimbursement if you live within commuting distance.
One Year Time Limit - At the time you become aware that your assignment will extend beyond one year, all of the travel related expense reimbursements you recieve become taxable income.
Most travel nursing companies have a recruiter who can assist you in determining whether you qualify for non-taxable travel reimbursement. You may also want to contact your accountant if you are still not sure.