Tax season is here once again along with the stress, confusion, and headaches that come with it. For some, all of this will be followed by a check written out to a tax preparer and Uncle Sam. The goal of this article is to provide the information you need to avoid this (at least the Uncle Sam part). For your sake, I hope we succeed in our goal.
The difference between a Tax Home and Permanent Address
This is the most confusing and tricky part of travel nursing. The difference between the two could mean as much as a $10,000 swing in your return. Let’s start with what a tax home is.
Tax Home (travel nurse version)
A tax home for a travel nurse is the location occupied by the nurse prior to beginning his or her travels. That’s the simplified version. There are many factors that will determine if this location can be used as a tax home. Here are a few:
- You must continue to pay rent or mortgage at this address and the amount must be believable. You cannot give your parents $50/month and claim that you pay rent.
- The address should be the same as the address on your current drivers license.
- If you are registered to vote, this address should be your voting address.
- You cannot abandon this home. In other words, you must return to this address and occupy it for a certain amount of time each year. There is not set amount but the longer you stay, the better it looks. Ideally you would just take a travel assignment here once a year.
This is by no means an exhaustive list. We highly recommend you speak with a tax professional about your situation. We use TravelTax and they were very helpful in answering our questions and helping us understand if we qualified for a tax home.
A permanent address is just the legal address you use when filling out personal information for legal documents like your drivers license, credit card, etc.
The important thing to remember is that a permanent address can help establish and prove your tax home, but does not automatically become your tax home when you start traveling. If you lived with your parents before you started traveling but do not pay rent, you do not have a tax home.
Impacts of not having a tax home
Unfortunately if you do not have a tax home, any reimbursements you receive from your travel agency will need to be taxed. This includes housing stipend and meals and incidentals. DO NOT take your recruiter’s word for it that you qualify for a tax home! They know how big of a difference having a tax home can make on your paycheck. Even if the recruiter is not intentionally deceitful, they may unknowingly provide incorrect information. It is always best to speak with a tax professional. It’s free and they know what they’re talking about.
So just how big of a difference does a tax home make?
When we first started traveling in California, I was told that I qualified for a tax home by my recruiter and my first paycheck was based on this assumption. After further research I found that the address I was using did not qualify so I had my recruiter change my information and tax my reimbursements in the future. My next bi-weekly paycheck was $400 less!! So had I continued to not claim a tax home, I would have lost $800 each month to Uncle Sam. After speaking with a Daina at TravelTax, we were relieved to find that the house we were renting qualified as a tax home.
I claimed a tax home but now realize I don’t qualify
If you were persuaded to claim a tax home and realize after reading this article you do not qualify, please contact a tax professional. This article is just to give you an idea of what qualifies and explain how much of a difference it can make. Speaking with a tax professional is the best way to determine if you qualify and what your options are.
We have been told that travel nurses are audited every year and the number of audits has increased recently. You might get lucky and get away with claiming a tax home that doesn’t actually qualify, but eventually it will probably catch up with you. $10,000 is a lot of money to pay back to the IRS if you were ever caught.
We hope this sheds some light on the confusion of a travel tax home and anyone still confused should seek professional advice. This is not one of those things that should be left to deal with after the fact. If you have any other advice or experience with a tax home or being audited by the IRS, please share in the comments below.