By April 9, 2012 5 Comments

Ask a Travel Nurse: How do you calculate the benefit of free housing?

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Ask a Travel Nurse Question:pay vs housing travel nursing

I have over 20 years of nursing experience and am considering a travel nursing career. My question is about the pay rate, I was quoted a very low range by a major agncey. The recruiter said this was a ‘tax free’ salary and would be comprable, in the end, to a much higher per hour rate. I’m confused, does this mean they don’t withold income tax? I want to negotiate a competitive rate for myself.

Where I live(Indianapolis) has a low cost of living, compared to the places I want to work (Southern CA) but the rate of pay she’s suggesting is les than I make per hour. How do you calculate the benefit of free housing, in relation to hourly pay? I will still have a mortgage to carry in my home state.

Thanks for your advice.

Ask a Travel Nurse Answer:

You’ve stumbled on one of the greatest areas for confusion in the travel industry.

The best starting place to gather some information is on Joseph Smith’s website at traveltax.com. Joseph was once a traveler himself and now specializes in doing returns for traveling professionals. A must read is his FAQ page located directly at http://www.traveltax.com/html/TaxEdTravelling.html

Basically, these companies are using a deduction that you would be entitled to if you are duplicating your expenses while working a travel assignment. Since you have a mortgage upon which you are paying, you probably meet the criteria of having a “tax home” (an area in which you normally do business usually characterized by a place where you receive mail, are registered to vote, have a car registered, etc). But, it is important to make sure you meet that criteria before accepting tax advantage money. Just having a home does not always insure that you have a valid “tax home”.

Since I am registered to vote, have my car registration, and do my banking in Phoenix, in addition to having a home (upon which I pay a mortgage), when I take a travel assignment in CA, I am duplicating my living expenses to be able to work in another location. The IRS allows me to take a deduction because of this.

It is not that your company is not withholding income tax, it is just that they are using the deduction (to which you would be entitled having a valid tax home and working in another state) and not taxing that portion since it is considered a “reimbursement” and is tax free as long as you do have a valid tax home.

Honestly, I could go on for quite a bit on this (in my book, there is an entire chapter on tax implications for travelers). But the best resource is Joseph’s site (traveltax.com) where you can start to gain a better understanding of this practice. You can certainly ask your recruiter, but when I’ve asked mine, most do not have a great explanation and they are certainly not tax professionals.

Watch for rates that seem too low as they may get flagged by the IRS (the IRS knows that when a registered nurse is only making $8 an hour, something isn’t right). Get all the details you can from your company on what things are factored into your hourly rate and see if they have someone that can explain the calculations to you. If they cannot adequately explain how their program works, get all the specifics and email Joseph and either he or one of his employees will try to clarify (they always welcome questions and are the real experts on all this).

When I have used the tax advantage savings in my travels, my earned rate does work out to what my recruiter quotes me; however, I travel with a company and recruiter that I trust to get this information right.

I hope this gives you some good resources for understanding this very complex facet of travel nursing. Please don’t hesitate to email with any other questions or contact Joseph for anything that cannot be answered on his site.

David
TravelNursesBible.com
david@travelnursesbible.com

 

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About the Author:

Hello everyone. I’m a travel nurse originally from Ohio who graduated in 1993 from Mount Carmel School of Nursing in Columbus. I completed a critical care fellowship at Riverside Methodist Hospital in 1994 and started traveling in that specialty a year later. My first travel assignment was in Maui and since that time I have completed close to 40 different contracts in various states with multiple travel companies. I am the author of Travel Nurse’s Bible (A Guide to Everything on Travel Nursing), in addition to my writings here and in the pages of Travel Nursing publications such as Healthcare Traveler Magazine and American Nurse Today. I am presently on assignment in Phoenix, AZ and travel anywhere from six to eleven months of the year.

5 Comments on "Ask a Travel Nurse: How do you calculate the benefit of free housing?"

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  1. This is the true breakdown on a Travel Nurse Salary:
    Housing, Travel expense and Meals are based on the gsa per diem rate that is posted by the Federal Government. The rate quote is what Federal employees are entitle to if they traveled.
    In the gsa per diem calculator, put in the City and State and this will give the maximum tax free allowance. However, based upon the nurse specialty, you will not receive the maximum due to the rate that the hospital is willing to pay the nurse for the hospital position. If the recruiter quotes a higher amount then gsa per diem maximum, then you will be taxed on the amount over the maximum.
    The “salary” rate is lowered usually in the range of $15 to $20 dollars per hour to minimize the federal tax rate that the nurse would have to pay.

    The bottom line is what is the “net quote” the true weekly salary that you put into the bank after taxes.
    Thus, the quote that is the most important factor is the net weekly pay, not the gross, that you will be paid.
    In order to estimate what your true salary is:
    Net salary x 35% Federal taxes, plus net salary x state tax percent. Add this calculate amount to the net salary and this is the true gross salary.
    Legitimate travel nursing companies will provide a written net quote that you will receive when you take a position. Always get the net quote in writing.
    Please feel free to contact me to evaluate any quote, I would be more than happy to evaluate the offer.

  2. eugenekoval says:

    familiar with taxes since i have become an independent contractor, but how much should recieve as a housing stipend if no housing is provided, and travel expenses
    thanks, gene

    P>S> do you know anything about medical solutions inc. other than what i found out on the web

  3. David says:

    Housing stipends will vary with location as will travel money. Most companies pay a standard $200-$300 travel money, but again, it can vary if travel will be more (Hawaii for example).

    Housing stipend usually is dependent on the rent charged in the area. You might find a very nice one bedroom for $650 in one area, but not be able to find even a studio for twice that amount in another location.

    The best way to find out housing stipend averages is if you are with any travel companies. You could always ask your recruiter what the company will pay as a stipend for any given area.

    As far as Medical Solutions, I have never traveled with them, but do use them as a recommended company when referring travelers. I have contacts at the company and regularly refer my new, and seasoned travelers, to them as I believe they are a solid company with which to travel.

  4. Judy says:

    David,
    You mentioned in your article to be wary of the agencies that quote low rates such as $8/hr as they may be flagged by the IRS. I travel with Medical Solutions and they do quote low for the taxable rates. I have questioned the low taxable rates since I do not want to be considered for an audit, but usually get the answer that it has never been a problem with past travelers. I’ve been happy working with them but don’t want to have a possible audit hanging over my head. Have you heard of any instances from your contacts at MS of such instances?

    Thanks,
    Judy

  5. myza says:

    Hello,

    Thank You for opening up this topic. I am a traveler myself and have a difficulty figuring out if my GSA per diem rate quote for my location is fair. I will be in East Bay Area of San Francisco and I am only quoted a $40 a day on meals & inc expenses. Although I am receiving a tax free housing stipend of $2600, i feel that $40 a day for meals is relatively low. Living in the area is very expensive that is why my housing stipend is high. Any help would be greatly appreciated!

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