Guide to Per Diem Traveling Nurse Deductions and Taxes

April, 16 2025 by Lisa Brugman, EA

Embarking on the journey of a traveling nurse is like diving into a whirlwind of adventure and opportunity. Each assignment takes you to a new city, a different hospital, and a fresh set of experiences. But amid the thrill of the nomadic lifestyle, one thing looms large — TAXES. The financial side of being a traveling nurse, especially when it comes to per diem payments and deductions, can feel like a maze with hidden traps at every turn. Let’s untangle this web and turn tax season into a breeze.
 

Understanding Per Diem for Traveling Nurses

Per diem, Latin for "per day," is essentially a daily stipend given to cover the expenses you incur while working away from home. This usually includes food, lodging, and incidental costs. Think of it as a financial cushion ensuring you don’t have to dip into your paycheck just to stay afloat on the road.

Travel nursing agencies often provide per diem payments to help cover your cost of living while you’re on assignment. Unlike a standard salary, these funds are meant to keep you comfortable as you move from city to city, ensuring that your focus remains on providing top-notch patient care rather than worrying about rent or dinner expenses.
 

Tax Implications of Per Diem Payments

Tax-Free Per Diem: A Silver Lining

Here’s some good news—per diem payments can be tax-free! But before you start celebrating, there are a few conditions you must meet.
 

1. You Must Have and Maintain a Tax Home
    
   • Your tax home is your primary place of business or residence. You establish a residence by paying rent or mortgage, utilities, receiving regular mail, and registering to vote. This is also the address listed on your driver’s license or ID, and where you can accumulate most of your other day-to-day expenses.
   • When on assignment, you may duplicate expenses like rent, utilities, and day-to-day expenses, especially if your assignment is several months long and even if they are paid for or reimbursed by your per diem employer.
   • Always return home for at least 30 days each year, although they don’t need to be consecutive.
   • Without a legitimate tax home, the IRS classifies you as itinerant, and your per diem payments become taxable income. That’s not ideal!
   
    
2. Assignments Must Be Temporary
    
   • If an assignment lasts more than a year (365 days) in a single location, the IRS no longer considers it temporary, and boom—your per diem payments become taxable. Keep a close eye on your contract duration.
      

Taxable Per Diem: When You Owe Uncle Sam

If you don’t maintain a tax home or you remain in one location too long, your per diem will be treated as taxable income. That means a bigger tax bill and less money in your pocket. Careful planning can help you avoid this financial pitfall.
 

Deductible Expenses for Traveling Nurses

1. Travel Expenses
   Whether you’re driving, flying, or taking a train to your next assignment, travel expenses are deductible. This includes:
   • Airfare
   • Mileage (at the IRS standard rate)
   • Tolls
   • Parking fees
      
2. Meals and Incidentals
   While per diem covers your daily expenses, if you spend more than your allowance, the excess may be deductible. Keep track of those dinner tabs!
    
3. Housing Expenses
   If your agency doesn’t provide housing or a stipend, you can deduct lodging costs, including:
   • Rent
   • Utilities
   • Renter’s insurance
      
4. Licensing and Continuing Education Costs
   Nurses must maintain licenses and often pursue further education. Luckily, fees for license renewals, certification exams, and job-related courses are deductible. Investing in your career is a smart financial move in more ways than one!

Record-Keeping: Your Secret Weapon for Tax Savings

1. Why Keeping Detailed Records is Non-Negotiable
   When tax season rolls around, meticulous record-keeping can be the difference between smooth sailing and a tax nightmare. Detailed logs of expenses, receipts, and contracts help substantiate deductions and provide a safety net in case of an audit.
    
2. Best Tools for Expense Tracking
   Ditch the shoebox full of receipts! Use apps like:
   • Expensify – Snap photos of receipts and categorize expenses in seconds.
   • QuickBooks Self-Employed – Keep track of deductions and even estimate quarterly taxes.
   • MileIQ – Automatically logs mileage for work-related travel.

Filing Taxes as a Traveling Nurse

1. Choosing the Right Tax Forms
   Most traveling nurses will file a Form 1040, but if you’re working as an independent contractor, you may also need a Schedule C to claim deductions properly. If you’re not sure how to prepare your 1040, consult a tax professional for assistance.

Common Tax Mistakes to Avoid

1. Misunderstanding Your Tax Home
   Assuming your tax home is simply where you “live” can be costly. Make sure you have a clearly established tax home to avoid per diem payments becoming taxable.
    
2. Failing to Track Expenses
   Failing to document expenses means you could be leaving money on the table. Get into the habit of tracking daily expenses to ensure you don’t miss out on deductions.
    
3. Overstaying an Assignment
   If an assignment exceeds 12 months in a single location, your tax-free per diem perks could vanish. Be mindful of the duration of your contracts.

Final Thoughts

Navigating per diem deductions and tax rules as a traveling nurse doesn’t have to feel like deciphering an ancient code. With the right knowledge, strategic planning, and solid record-keeping, you can keep more of your hard-earned money while staying in compliance with tax laws. Whether you tackle your taxes solo or enlist a professional, understanding the rules of the game puts you in control. Safe travels and happy nursing!

If you are still unsure if and how to claim deductions as a traveling nurse and want help, you can look for a tax professional in your area or go to the IRS website here. If you want to protect yourself from the IRS, consider purchasing a membership to Audit Defense here.