Travel Nursing and Taxes. How long can I stay in the same place? Can I come back if I take a 3-month break?

*The information contained in this post is purely for informational purposes. We recommend you talk to your accountant for any questions about your taxes.

Facts and Myths of Traveling Nursing Taxes

First of all, the "3-month break and I can come back to this hospital" is a MYTH!

But, if I love this city, I love how they work in this hospital, and I love how they are treating me! HOW CAN I COME BACK AS A TRAVEL NURSE? Where is the limit on how long I can keep collecting TAX-FREE stipends? So many questions and details that we will try to explain as clear as possible. I am going to give you a hint: YOU CAN KEEP GOING BACK, AS A TRAVEL NURSE, TO THE SAME HOSPITAL. FOREVER, if you maintain certain requirements... Keeping a PRN position in your hospital back home while you travel can be the best strategy.

It is important to remember that in order to legally qualify for tax-free stipends, travel nurses must have a permanent residence in their home state. There are basically no truly defined rules, about how long a travel nurse can keep going back to the same hospital. But the IRS has developed a few guidelines to make sure travelers stay as "travelers," instead of "residents taking advantage of tax-free stipends." We will dive into the main guidelines you should follow to stay compliant with the IRS. But first...

What happens if I don't follow the rules?:

If, for any reason, you find yourself not compliant with the IRS guidelines, the IRS may audit you to make sure you are still a travel nurse, and not someone who "permanently moved" to that area and is collecting stipends when they shouldn't. Best case scenario, they make you pay taxes (plus interest) on those stipends you have been enjoying during the year. The most important details the IRS will look for during an audit are: a) the income generated in the state where you were not allegedly compliant, and b) the income generated in your home state (the PRN position can help you with that). If both incomes are comparable, chances are you can easily prove yourself innocent.

Travel tax: The "12-month" rule:

TRUE. You should not do more than 12 months in a row in the same "Metropolitan Area." A Metropolitan Area is a 100-mile radius zone with the hospital, where you are travel nursing, located at the center. This "rule" is easy to follow, mainly because the hospital will not let you work more than 12 months continuously.

Travel Tax: The "12 months within a 24-month period" rule:

TRUE. However, it can get a little gray. If the IRS flags your return because you worked more than 12 months within a 24-month period, they will look, first, at your income generated during those 2 years, separately; and then, compare it with the income generated back in your home state. Let's do an example to understand this rule better.

Scenario 1: You did travel nursing in Washington, D. C. in 2022 & 2023.

• In 2022, you were there for 6 months and generated $30,000. The other 6 months, you went back home to Charlotte, N. C. and worked hard to make $30,000.

• In 2023, you decided to go back to Washington, D. C. This time you made $60,000 because you stayed 9 months. Your recruiter told you that the clock starts over because you took a break for more than 3 months (THIS IS A BIG MYTH). The last 3 months you went back to N.C., but your income back home was only $20,000.

Answer 1: You have created a "Work Pattern." You broke the rule of 12 months within a 24-month period. The IRS could flag your return and decide to investigate deeper. When they look at your taxes from 2023, they see that your income in Washington, D. C. ($60,000) is much higher than your income in Charlotte, N. C. ($20,000). But when they look at your taxes from 2022, everything seems fine because both incomes are comparable. They might audit your case, and you must prove that you are, in fact, still a travel nurse in Washington, D. C. and a permanent resident in Charlotte, N. C.

This time you got lucky and the IRS did not flag your case, you are safe!

Travel Tax: The "3 years" rule:

If you managed to work around the "12 months within a 24-months period" rule, and you decide you really want to go back to that hospital, you need to be aware that you are entering dangerous territory. The IRS also developed a guideline which tracks if a traveler goes back to the same Metropolitan Area for 3 calendar years consecutively. So, this time, you better have all the documents to prove you are still a resident in your home state. Let's play with the same scenario to understand this one better.

Scenario 2: You did travel nursing in Washington, D. C. in 2022 & 2023. However, you last contract ended February 2024. You have, technically, worked in the same Metropolitan Area for 3 consecutive calendar years (regardless of how little your travel income was in 2024).

Note: a calendar year starts January 1st, and ends December 31st. Not based on the fiscal year.

• (Same as Scenario 1) In 2022, you were there for 6 months and generated $30,000. The other 6 months, you went back home to Charlotte, N. C. and worked hard to make $30,000.

• (Same as Scenario 1) In 2023, you decided to go back to Washington, D. C. This time you made $60,000 because you stayed 9 months. The last 3 months you went back to N.C., but your income back home was only $20,000.

• In 2024, you only worked 2 months, and your income was $10,000. So, you had no problem making your home state income comparable (let's say you made $30,000).

Answer 2: You have created a "Work Pattern." You broke the rule of "3 consecutive calendar years in the same Metropolitan Area." The IRS might flag your case because you have filed 3 different Tax Return, as "a traveler," in Washington, D. C. So, they could decide to look a little deeper (as deep as the last 7 years of your tax returns).

Important note: The IRS looks at cases year by year, individually. You can be "innocent" one year, and "guilty" a different year.

• In 2024, your travel income was only $10,000, and you stayed there for only 2 months. In addition, your income in N. C. was $30,000. For 2024, you are, without a doubt, a resident of N. C.

• In 2023, your travel income was $60,000 and your stay in D. C. was 9 months. Unfortunately, your income in N. C. was not comparable to the one in D. C. In Scenario 1, we stated that you did not get flagged by the IRS. However, when they started looking deeper, they asked you for documentation proving that you were still a traveler in D. C. during this year (housing, flights, receipts...).

• In 2022, your income and length of stay in N. C. and D. C. were comparable. So, you were, without a doubt, a resident of N. C.

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Travel Tax: The "one calendar year break" rule:

Taking a break for an entire calendar year (remember, from January 1st to December 31st) is the only way to break the "Work Pattern" algorithm.

"Play the game" rule:

With these guidelines in mind, you can play the game and keep doing travel nursing in the same hospital, FOREVER! Just make sure you can keep proving that your are a resident in your home state. The IRS only has one concern: Someone who claims tax-free stipends, as a traveler in a state, while they are, in fact, permanent residents in such state.

PS: yes, this is in fact first-hand experience! Dates and numbers were changed for confidentiality purposes.