Tax Deductions for Nurses: What Can You Claim?

Nurses have gotten a lot of press lately with labor shortages and wage concerns. If you are a full-time employee in a hospital, you may be questioning whether now is the time to make the leap into travel nursing or other contract work.

One of the considerations for employees vs. self-employed nurses (also called contract employees) is the difference in how income tax is treated. There’s also a whole list of tax breaks that are available when you are a contract worker.

If you have any questions about what expenses can be deducted when you are a nurse, it’s always a good idea to talk to a tax professional. S.H. Block Tax Services can help you navigate the specifics of tax law to make sure you are taking the right deductions available to you.

Employees vs Self-Employed Nurses

The tax code treats employees differently than self-employed workers. If you’re not sure which one you are, a good indicator is what tax form you receive. Employees receive a W-2 form, while contract employees receive a 1099 form. Not all travel nurses are considered independent contractors, so it’s important to understand how you are employed.

Nurses who receive a W-2 form cannot take advantage of the federal tax deductions listed below. The tax deductions available to nurses are for those who are considered self-employed, and therefore have business expenses related to their profession. For regular employees, there might be an advantage to itemized deductions, or other tax credits like the lifetime learning credit or other education credits to help offset your taxes.

RELATED: Simple Tax Deductions for Small Businesses and the Self-Employed  

The Top Tax Deductions for Contract Nurses

Nurses have many expenses related to their profession, and if you are paying for things required by your job, then you can probably deduct those costs. Anything that reduces your federal taxable income means more money in your pocket!

Specific examples of tax deductions and benefits you may be eligible for include:

• Scrubs and shoes: If you are required to wear a uniform and your healthcare workplace does not reimburse you for the cost, then you can write off that expense. Be careful, though—if your workplace does not require a specific kind of shoe, you probably can’t deduct that expense.
• Licensing fees, union fees, professional memberships: Costs for your RN registration, background checks, and other expenses required by your job are eligible expenses unless they are reimbursed by your employer. This also includes any malpractice insurance premiums and even professional journal subscription costs.
• Continuing education expenses: Any education that is required for your job can be deducted, including the mileage, meals, and lodging for training or conferences that require you to travel.
• Mileage and other travel expenses: In fact, any travel that you must do for your job (not including your regular commute) can be deducted, such as making house calls.
• Home office: If you work from home and have a dedicated office, you may be eligible for a tax deduction based on the square footage of your office and a percentage of your utilities, like internet. You can also deduct equipment expenses, such as a new laptop that you purchased specifically for your job.
• Travel stipends: Travel nurses often receive a stipend for lodging, transportation, and meals. The money you receive from stipends is typically tax free and does not have to be reported as income, so long as it covers “duplicated” living expenses, and you spend at least 30 days per year in your “tax home” (usually your place of permanent residence). Duplicated living expenses include things like rent or hotel bills away from your tax home, as well as travel and meals for work assignments. If you have any questions about whether any portion of your stipend is taxable or not, speak with an experienced tax attorney.

Remember: If you receive reimbursement for any deductible expenses from your employer (including stipends), then they are not eligible for tax write offs. You can’t get a tax break for an expense that you didn’t pay out-of-pocket. Travel nurses can be at higher risk for IRS audits, especially if it looks like you are taking too many deductions on your Schedule C.

RELATED: What Triggers an IRS Audit? And Am I (or My Business) at Risk?

Tax Tips for Taking Advantage of Deductions

In order to make the most of your deductions, here are a few tips that will help you reduce your adjusted gross income and make the most of your tax refund.

Track Your Expenses

It’s easy to lose receipts, even if they are digital copies. However, by making sure you stay organized throughout the year, you will have the proof you need to show the expenses that you want to deduct. Use an app, or have a specific folder for all your receipts, business mileage, and stipend information. Documentation is key to getting the biggest deduction you are eligible for, and if you are diligent throughout the year, it will make your life easier during tax season.

Learn About Other Tax Credits and Deductions

There are some expenses that qualify for special tax treatment for both W-2 and contract employees. For instance, education and training may qualify for the American Opportunity Tax Credit or the Lifetime Learning Credit. Student loan interest is also deductible.

RELATED: Are Student Loans Tax Deductible?

Ask an Expert

While most of your nursing expenses are likely to be tax deductible, if you deduct expenses that aren’t eligible you could be in hot water during an audit. You should consider talking to a professional tax preparer to understand how to apply business expense tax deductions to your specific situation. S.H. Block Tax Services has helped many nurses make sure their deductions are eligible for reducing their income taxes.

S.H. Block Tax Services Can Help Nurses Maximize Their Tax Deductions

As a nurse, we know you work hard and need a break. Instead of spending your free time searching for tax benefits for nurses, let our experienced team talk to you about your expenses and see if we can find more tax deductions for you.

Our staff is knowledgeable about work related expenses for nurses and nursing students, and our tax advice has helped many nurses reduce their tax bill. If you want to see what we can do for you, just contact our office by calling (410) 872-8376 or filling out this form. While you take care of your patients’ health, we’ll take care of your financial health.

The content provided here is for informational purposes only and should not be construed as legal advice on any subject.