Travel nursing pay packages are a complicated process. You have different forms of payment and benefits. Although part of your pay is taxable, you also receive non-taxable income via housing stipends, travel reimbursement and funds for specific needs. By evaluating the package carefully, you can avoid complications with your taxes and prevent IRS red flags when filing your paperwork.
What is Taxable Income?
Taxable income as a travel nurse is the hourly wage you earn from your time in a facility or hospital. The hourly wage may vary significantly between positions and locations, so you should pay attention to the details when you look at your pay package.
Non-taxable income refers to the benefits you receive that do not require taxes. In travel nursing, the non-taxable benefits and income is usually travel reimbursement, a housing stipend and any other funds you receive that are not part of your normal wages. For example, if you receive funds to help with health insurance or health-related costs, then you do not always pay taxes on the funds.
When you file your taxes, you use your taxable income to calculate your tax bracket and your tax responsibilities. The non-taxable income, or benefits, do not require you to pay taxes to the IRS.
How to Recognize a Red Flag in Travel Nursing Pay
Although a travel nurse position gives you a chance to enjoy non-taxable income and benefits, you want to use caution when you look at available positions. You want to avoid any position that has a clear red flag in your payment structure.
A red flag is a pay package that will catch the attention of the IRS when you file your taxes. Essentially, it is a pay package that puts too much into the non-taxable income and keeps the taxable income at a rate that seems too low. The IRS has a large amount of data to draw on for comparisons. When a pay package seems to focus too much on non-taxable income, it may appear that you are not paying the appropriate amount of taxes. That results in the IRS auditing your taxes.
Your Personal Situation
Your personal situation also contributes to your tax responsibilities. If you do not have a mortgage or a property you rent in your hometown, then you may not qualify for certain non-taxable funds. You should also be aware that the IRS may audit you if you do not return to your hometown on a regular basis. A travel nurse has a complicated work situation. You travel to and from different locations, which means you do not spend most of your year in your hometown.
If you do not return home regularly, the IRS may assume that you moved. That may result in the IRS auditing you and requiring you to pay taxes on all of your income. Pay attention to the potential factors that limit your non-taxable income to avoid complications on your taxes.
Taxes are complicated, even when you do not work as a travel nurse. By working as a travel nurse, you want to evaluate your taxable and non-taxable income to find the right strategy for your financial goals. The key is ensuring that you do not lose your tax home by renting out your property, staying away from your hometown too long or giving up your rental property when you travel as a nurse.