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.