The new year is upon us and that can only mean one thing, it is officially tax season! What could be more fun than digging through all those receipts, bank statements and canceled checks? Rhetorical question. In the next few installments, I will be going over some finer points of taxes while being a traveling healthcare professional. So let’s start with a review of what tax-free can mean to a Traveling Nurse or Traveling Allied Health Professional. As a traveler I’m sure you’ve heard the phrases, “tax free money” or “tax advantage programs” that many of the staffing agencies are offering, but do you know what they mean? If not, you should, because in order for you to get the most out of your traveling career, you should know exactly what you are earning without penalty later in the future.
What is a tax advantage program? A tax advantage program is basically another opportunity for traveling healthcare professionals to maximize their take-home income, while minimizing the income taxes they are legally required to pay. Tax advantages are also known as: Blended Rates, Stipends, Housing & Meal Allowance, Non-Taxed Allowance and Per Diems.
So how do you know if you qualify for these Tax Advantage Programs? In order for you to receive any benefits regarding tax breaks, you must first meet some very important criteria, the most being you must have a Tax Home. What’s a tax home you ask? Your Tax Home is your place of residence you return to regularly where you incur living expenses on top of your assignment expenses and/or normally pay income taxes. According to the IRS, there are three determining factors to a tax home.
1. Taxpayer performs a portion of business in the vicinity of the claimed home and uses home for lodging while performing such business.
2. Taxpayer’s living expenses at claimed home are duplicated because business requires taxpayer to be away from home.
3. a. Taxpayer has not abandoned vicinity in which historic place of lodging & claimed home are located – maintains bank accounts, driver’s license, mail address, voting registration, has economic & social ties to the locale. b. Has members of family (marital or lineal only) currently residing in the claimed home, or c. Uses claimed home frequently for lodging purposes.
If you meet all three requirements above, you qualify for a “Tax Home.” If you only meet two of the three, “Facts and circumstances determine your tax home.” Consult your tax preparer. If you do not meet two of the stipulations, the IRS sees you as a nomad, meaning you carry your home with you and therefore you’re considered to never be away from home and you cannot qualify for a tax home.
So do you qualify for the Tax Home Advantage program? There is one more important factor that determines your qualifications. You must keep your assignment under one year. However, multiple assignments and extensions of those assignments away from home that add up to a year or more are permitted.
Okay, so that’s the gist of the Tax Advantage Program that is available to you as a traveling healthcare professional. At the end, you send less money to be taxed and take home more pay. By being a thrifty traveler, you can take even greater advantage to these programs and pocket even more money by living below your means, the choice is yours. To learn more about Tax Advantage Programs and other benefits consult with your tax preparer or visit any of these related sites.
The tax information contained on TravelNursingBlogs.com and from any communication related to this blog is for information purposes only. Please consult with your personal accountant or tax preparers for any matters concerning your own income taxes.