Travel Nursing Tax Advantage Plan
Tax Advantage programs allow you to receive a tax free reimbursements to cover meals & incidentals and lodging expenses or to receive tax free Travel Nursing Company supplied housing.
To participate in the Tax Advantage Program you need to maintain a residence as a renter or owner in your permanent resident location and state with associated expenses and be working away from this residence on a temporary assignment living in a separate temporary residence. This permanent residence is called a Permanent Tax Home as defined by the IRS.
You should have connections to this address such as: Drivers License, Insurances, Professional License, Voters Registration, Property Taxes and other various bills connected to the Permanent Tax Home. It is advisable to return there between assignments if possible, apply for jobs there, do business there, even work there if possible.
Generally if you reside in another state or same state, different location, for more than a year you can lose your Permanent Tax Home status. Keep documentation of these activities to keep the information organized and easily at hand if you needed it. The Travel companies usually just have you fill out a form verifying you Permanent Tax Home.
The Travel Nursing Company will give you a tax free reimbursement per day that you are on an assignment staying in temporary housing away from your Permanent Tax Home (Meals & Incidentals and Lodging or Company supplied Tax Free Housing). This per day reimbursement is different where ever you go.
The Federal Government has a web site:Domestic Per Diem Rates - US General Services Administration that supplies this information.
The rates on this website are in reality reimbursements figured for government employees traveling to, staying in hotels and/or eating in other cities for work purposes. The costs a Traveler will incur on a daily basis may not be as much depending on various factors generally because the Traveler is usually staying at least 3 months and buying groceries mostly instead of eating out for every meal. That could be different if you are on a short term contract such as a Strike.
Some Travel Nurse Agencies may not use the max rate all the time unless it reflects more in reality the true costs. This Tax Free Reimbursement is separate from your Pay Rate which IS taxed.
Some Travel Nurse Companies that are new to this get confused and think the reimbursement is per day that you work but that is wrong. It is per day that you are on assignment residing in that area in temporary housing away from your Permanent Tax Home.
There is no 50 or 80 mile radius rule with the IRS. Those rules are more so rules with Travel Nursing Companies and/or Hospitals to set some standard for being away from home or to prevent perm or potential perm staff in the area from converting to Travelers (Hospital Rule).
Travel Nursing Agencies if they are supplying temporary housing will only use the the meals and incidentals max rate to figure the tax free reimbursement although you will not be taxed for your housing supplied.
If you are receiving a housing stipend instead of the Travel Nurse Agency supplying the housing, the Travel Nurse Company will use both the per day Lodging Rate and the per day Meal & Incidentals rate to calculate your total tax free reimbursements depending on how those rates reflect true costs for you in that area.
Below are some examples of how some companies figure Tax Advantage reimbursements.
Government site reports a per day rate for Meals & Incidentals of $25/day for a certain locale.
They are saying the maximum you would spend per day for Meals & Incidentals is $25
$25/day X 7 days = $175/week $25 X 30 = $750/ month (Tax Free Reimbursements)
Alot of Travel Nursing Companies will also figure it into a virtual pay rate to see the actual value that you get in terms of $'s/hour.
Let's say you work 36 hours/week with a pay rate of $28/hour and you get $475/week in tax free reimbursements (Meals & Incidentals + Housing Stipend for this example)
$475/week divided by 36 hours/week worked
= $13.19/hr Virtual pay rate
$28/hr Actual Pay Rate + $13.19/hr Virtual pay rate
= $38.19/hr (Actual pay rate + Virtual pay rate)
This is only a way to for you to see total value. Your pay check stub or contract should avoid the above language because tax free reimbursements are not pay rates.
If you are supplied housing by the Travel Nurse Company you could still convert it to a virtual pay rate if you know the housing costs + meals and incidentals reimbursement.
If you were Not a Tax Advantage Traveler you would have to pay taxes on your supplied housing or housing stipend and you could not receive Meals & Incidental Tax Free Reimbursements either.
If you are NOT offered the Tax Advantage Program but you DO maintain a Permanent Tax Home you can deduct expenses that are above what is covered by the Travel Nursing Agency at the end of the year so keep a record of these expenses and keep receipts.
Even as a Tax Advantage Traveler you need to keep track of reasonable expenses above what is covered by the Travel Nursing Company such as Medical Expenses, Travel Costs, Mileage to location, Mileage to and from Facility from Temporary Housing times number of trips.
When you deduct these things the dollar amount that ends up in your tax return is not as much as you would get receiving the Tax Advantage tax free reimbursements. That is why people are are attracted to Tax Advantage Programs.
Some disadvantages of being a Tax Advantage employee are:
Lower reportable income which may affect getting loans based upon your income. With the competition for loans these days I would think this has little effect especially if you have good credit. Some banks are friendly towards nurses or healthcare professionals. They consider them reliable borrowers because there is a great demand for healthcare jobs and other factors . The right bank or credit union, good credit and the right loan officer can be more important than the higher reportable income.
Your Social Security you get when you retire is based upon your reportable income. So if you make less reportable income you will get less money when you retire from Social Security.
Solution: You take some or all of the extra amount you get and invest it wisely and have even more when you retire.
Some people just don't want the hassle of returning home and maintaining a permanent residence or being limited in how long they can stay in another state. You may still be able to maintain residency in another state without the requirement of having an Official IRS Defined Permanent Tax Home.
Avoid Contracts where the Travel Nursing Company pays an Extremely Low Pay Rate which is below the norm for your profession for that location such as $10/hr along with the Tax Free Reimbursements. You don't want to get mixed up with Travel Nurse Companies that may get you in trouble with the IRS.
This only a general article and you should seek the advice and guidance of a Tax Professional experienced in working with Traveling Professionals. I've listed some below along with some other helpful websites.
Travel Tax - Joe Smith is the go to expert for Healthcare Traveler Taxes. Definitely read and understand all of his articles on the subject. He also is readily available for questions on Delphi Forums - Travel Nurses and Therapists.
Kobaly Traveler Tax Service - A number of articles available here as well.
Hicks Tax Service
Muret Tax Services
GSA USA Per Diem Rates
Dinkytown Financial Calculators
Pay Check City Calculators
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