The Best Tax Tips & Deductions For Nurses, Nursing Students and Travelers
Disclaimer: This article is for informational purposes only and should not be taken as professional tax advice. Always consult your own CPA or tax preparer for tax advice.
Tax season is in full swing, and although it’s a time of year that many people dread, the truth is, you don’t have to be afraid of filing your tax return. If you take time to prepare your paperwork ahead of time, work with a Certified Public Accountant (CPA) that you can trust and have a good line of communication with, and stay updated with tax tips for nurses, you may just find yourself pleasantly surprised come tax-time.
So while you deliberate how you’re going to spend that tax refund, you can brush up on some of the tax tips for nurses and nursing students that you need to know.
Tax Tips for Travel Nurses and 1099 Contractors
One of the most important things you can do is find a professional CPA or tax preparation professional who is familiar with working with Registered Nurses. It can be helpful to ask your coworkers for recommendations or do a quick online search for CPAs who specialize in working with nurses.
Save all documentation
If you are a travel nurse, who is taxed as an independent contractor (1099), the tax rules will be different than nurses who are W-2 employees. Not all travel nurses are independent contractors. But, if you are, you should keep receipts of everything you pay for as a travel nurse, including:
- Internet and phone fees
- Rent (or your housing stipend costs)
- Travel, including mileage and vehicle upkeep expenses
“Documentation is KEY to start at the beginning of the year for travel nurses or nurse contractors,” says Tracie Jackson RN, BSN, a tax professional with Tax Savvy Nurse. “This will help make sure you can get all deductions owed to you. Keep records in a binder or expense tracking app such as all travel contracts, distance to travel to and from assignments, meal receipts, etc.”
Report all income
If you happen to do any side work as a nurse (such as writing or consulting,) always remember, even if a company or client that you have worked with fails to send you a 1099 or W2, it is still your duty to report that income and pay any applicable taxes on it, so keep careful records of all income you receive, no matter how small it is.
Tax Tips for Nursing Students
As a nursing student, how your taxes will be done depends on your filing status and if you are still listed as a dependent or if you’re filing independently of your parents. “Communicate with your parent(s) before you file if you are in college to see if they will be claiming you,” says Jackson.
Can your parents claim you as a dependent?
Your parents can claim you as a dependent if you meet the following criteria,
- You are under the age of 24
- You are a full-time student
- Your parents support you
Tax credits for students
If your parents do not claim you as a dependent, however, you can deduct the typical student credits,
- American Opportunity Credit
- Lifetime Learning Credit
- Tuition and fees and student loan Interest
Most of the time, you can only choose one type of tax credit for your education, so you should work with a tax professional who can make sure that you are getting the maximum amount for your own filing status. Jackson adds that if your parents are going to claim you, they will need your 1098-T form when you receive it at the end of year.
It’s important to note that there is also a new tax and education deduction that was brought back for 2020. If you qualify for the American Opportunity Tax Credit or the Lifetime Learning Credit, you’ll probably get more out of claiming those, but if not, you might benefit from claiming the tax and education deduction.
With this deduction, you may be eligible to deduct up to $2,000 of tuition and fees if your income is under $80,000. There is a higher income limit on this particular deduction, which is why the other education credits are usually prefered, but it does have the benefit of not requiring itemization.
Deductions Nurses Don’t Want to Miss
You’ll want to speak with your tax professional to determine if it’s better for you to take a standard deduction or to itemize your expenses. If you do itemize, you can usually write-off any expenses related to your job as a nurse, such as:
- Uniforms, including scrubs, medical shoes, and scrub coats
- Equipment, such as your stethoscope, pen lights, scissors, etc.
- Licensing fees, i.e. anything you pay to keep your nursing license, or any state registrations
- Continuing education costs, including the fees, meals, and travel to conferences or CE courses
- Expenses related to staying educated in your profession, such as journal access fees, subscriptions to publications in your field, and professional organization membership dues
4 Tips For Saving Money On Your Taxes
Jackson also offers the following tips for saving on your taxes:
#1: Max out retirement contributions. “If you are a nurse with little to no deductions, consider maxing out contribution to pre-taxed retirement accounts such as an IRA,” she suggests.
#2: Start a small business. “If you're able to, start a small business so you can not only generate additional income, but in many cases can allow them to start taking advantage of tax deductions as a business owner rather than just an employee,” she says. “ I help nurses do this every day.”
#3: Consider if a 1099 can give you more deductions. “Sometimes nurses who are working in home health, contractors, or who work from home can ask if they can be paid via a 1099 so they can be allowed more tax deductions,” Jackson explains.
However, she warns that you have to be cautious with this strategy, because choosing to be paid via a 1099 means that you are also responsible for sending your tax payments in to prevent from having a big tax bill at the end of year. “You will want a tax professional to help you execute this plan,” she says.
#4: Beef up agency expenses. “Travelers may be able to ask for higher reimbursement for travel and other associated expenses from their agency,” she says.
What’s New for Taxes in 2020
There were some major changes made for the 2019 filing year, thanks to the Appropriations Act of 2020 that was signed into law on December 20, 2019. Here are some of the changes that could affect how you do your taxes as a nurse or nursing student include:
- You can no longer write off employee-related expenses. This is a big one and according to Jackson, because the 2018 tax law changed, you can’t write off employee-related expenses, unless you are paid a 1099 or have a business related to nursing.
“This especially affected nurses who are travelers and used to write off what was not reimbursed by their agency,” she explains. “My tip is to understand that most nurses will no longer itemize and will most likely take the standard deduction, so it's not necessary to track all those receipts and expenses anymore unless you are in a state that allows some of those expenses to be written off.
- Lower income levels for medical expenses that weren’t reimbursed. If you had medical expenses that you paid for yourself or your dependents, the income level for claiming itemized deductions was lowered.
- Payments for home healthcare nurses. According to The CPA Journal, home healthcare workers are no longer required to include “difficulty of care” payments they receive in their gross income. If they choose, however, they can treat those payments as compensation in order to make contributions to their 401(k) plan or IRA plans (those contributions must have been made on or after December 20, 2019).
- 529 Balances for student loan payments. Under the new act, you are allowed to use up to 10K of your 529 Plan balances to pay off the loan principal on student loans.
- IRA funds for the birth or adoption of a child. As the Tax Savvy Nurse explains, one of the changes for 2020 is that there is an exception that allows you to draw up to 5K from your IRA without penalty for expenses related to the birth or adoption of a child. So, if you have to take time off for the birth or adoption of a child and didn’t have enough PTO to cover your time off and used IRA funds to help fund your life, you may be in luck this year.
- Rules on home sale income. “If a nurse sold a home, the allowing the discharge of qualified principal residence indebtedness to be excluded from income could benefit them,” Jackson explains. “They would want to consult with a Tax Savvy Nurse to see if it is worth going back to amend any of these changes.”
The future of tax filing may get more complicated under Trump’s proposed 2021 fiscal budget, such as the elimination of student loan forgiveness, but we will have to wait until the fall to see how that shakes out.
So, for now, be sure to get all your tax paperwork in order and work with a tax professional this year so you are able to claim the maximum amount and get any refunds you are due.
Nurse.org's Popular Guides and Resources
Student Loan Forgiveness for Nurses?
Read about the top student loan forgiveness programs for nurses and find out if you qualify.
Top Online RN-BSN Programs
Thinking about going back to school to get your BSN? We’ve vetted online RN-to-BSN programs to help you find the best option for you!
Scrubs Reviews by Real Nurses
Wondering which scrubs live up to the hype? We asked 2 million nurses to vote on their favorite scrubs brands. Find out what they thought!
15 Highest Paying Nursing Jobs in 2020
You know all nursing jobs aren’t created (or paid!) equally, but do you know which nurses are making the most money in 2020?