I’m not an accountant, and this is NOT tax advice, and you should double-check all this with an accountant! With the Travel nursing boom going on and my wife having many travel nurse friends, I get some travel nurse taxation questions.
TL;DR – To get tax-free stipends legitimately (it’s the IRS, not your employer, that matters here!), you need to maintain a ‘tax home’ while you travel, like an apartment you still pay the rent on (without renting it out!) or a home you own and pay the expenses on while you’re gone. You must also ‘duplicate expenses’ such as rent another place at your travel work location, like an apartment or hotel. The IRS assumes you’ll eat and drink, so no need to keep proof of that. All your per diems for the tax-free stipends must come as reimbursements for expense reports you submit to your employer with this key information:
- The business purpose of the trip
- The date and place of the trip
- Receipts for any actuals for lodging (if not getting it per diem as a stipend)
- The employee must file the expense report with the employer within a reasonable period of time (60 days). If any of these requirements are not met, the payment is taxable to the employee.
You can read more about this in IRS Publication 463, or consult your accountant.
Resources on tax rules for travelers and some key points
I’m only going to address the issue of tax-free stipends (aka ‘per diems’, the IRS kind, not the nurse shift kind!) for nurses who maintain and pay for another residence while temporarily on travel assignment. Other’s can read this site’s handy advice:
For true “travelers” as defined above, the tax rules allow an exception to the tax home definition. Instead of looking at the primary place of income/business, it allows the tax home to default (fall back on) the permanent residence. For this to apply however, the travel nurse must meet 2 out of 3 of the following criteria.
1. Does the individual have significant income at home?
2. Does the individual has substantial expenses maintaining their primary residence that are duplicated when on assignment
3. Has the individual abandoned their historical place of lodging and work?
Since most traveler’s do NOT meet criteria one, they need to qualify for tax-free stipends by meeting BOTH criteria 2 and 3. So, if you own your home-away-from-work and pay all the expenses, or pay market rents there, you should be good. Don’t try to cheat by claiming your parent’s home where you don’t pay market rent, or your friend’s house where you crash a fews times and pay some grocery bills. This will NOT count as meeting criteria #2! There’s a lot of bad advice that goes around with people trying to fudge this one.
The other key thing is that to get the housing tax-free stipend, ‘“you need to sleep or rest to meet the demands of your work while away from home.” It does not set a specific distance.’ Thus, there’s no ’50 mile rule’ in the IRS’s eyes even if that’s a common threshold used by many staffing agencies. You must also actually incur expenses for housing!
It is against the rules to take the housing stipend if you do not actually pay for housing. For example, if you have family or friends who live in the assignment’s area and you stay at their home for free, then you do not qualify for the housing stipend.Bluepipes.com
If you meet these criteria, you should be eligible for housing and meals and incidentals (M&IE) reimbursements on a per diem basis. You must submit and keep your expense reports to your employer for these per diem reimbursements, and keep your expense report copies, your traveler’s contract that spells out your compensation, and any travel lodging (lease/hotel receipts) in case you ever get audited!
For meals (M&IE), the IRS doesn’t appear to require proof that you actually ate or drank while traveling (they just assume you must, as a biological being.) That said, it never ever hurts to keep additional info for tax purposes, so consider keeping receipts anyway, even if it’s just electronic credit card statements.
For lodging, you apparently just need proof that you spent SOMETHING, but it’s totally ok if you spent less than the per diem amounts for M&IE as well as lodging while traveling. For most people, you’ll probably need to rent an apartment for the entire assignment. But if you do only pay for, say, hotels while you’re working, you likely cannot get reimbursed tax-free for the days you’re back at home in the IRS’s eyes, since you don’t have any travel housing expenses then.
Again, if it’s reasonable for you to just rent a monthly apartment, then even if you return home you still have duplicate expenses and it’s fine to accept the full housing stipend for the entire time.