A nurse records travel costs and professional expenses.

Article

Nurse Tax Deductions You Should Know About

Nursing

by Norwich University Online

April 19th, 2023

When tax season rolls around, everyone looks for the best ways to decrease tax liability to get a refund from the federal government. Health care professionals are no different in that regard. For nurses, tax deductions can be an important part of the financial picture, offering myriad potential tax-saving opportunities.When tax season rolls around, everyone looks for the best ways to decrease tax liability to get a refund from the federal government. Health care professionals are no different in that regard. For nurses, tax deductions can be an important part of the financial picture, offering myriad potential tax-saving opportunities.

Nurses need to stay informed about how tax laws apply to their profession and what work-related items and purchases are tax deductible. At the same time, tax laws are subject to change, which means that deductions taken one year might not qualify the next time around.

To get the most out of their tax strategy and decrease their liability, nurses and health care workers should always remain up to date on the latest rules. This means getting familiar with what they can deduct and implementing a reliable system that keeps tax-related documentation safe and organized.

Major changes to the tax law went into effect in 2018; however, many of the tax cut provisions and other key elements of the bill are set to expire in 2025. For clarity, we’ll review the main parts of the bill that apply to nurses as well as what items qualify as tax write-offs. Tax deductions for registered nurses are due to change again in a few years, so it behooves current and future nurses, including those who are pursuing nursing degrees, to be prepared for that.

What Are Tax Deductions? And Other Tax Terminology

Taxes are the money collected from U.S. residents at the state and federal levels for the upkeep of the country as well as government-run programs and facilities. For example, two big programs that federal tax dollars fund are Social Security and Medicare.

Every employee pays taxes; however, the amount varies by state and across income levels. The more money a person makes, the higher the person’s tax rate.

For example, a person who makes $10,000 a year has a tax rate of 10%. A person with an income that exceeds $209,425 but doesn’t exceed $523,600 is taxed 35% for that portion of the income; income below $209,425 is taxed at a lower percentage, depending on the bracket that it falls within. The amount of money owed at the end of the tax year is what’s referred to as the tax liability, and the best way to lower the tax liability is by finding tax deductions.

Tax deductions are what reduce the total taxable income, effectively decreasing the amount that a person must pay at the end of the tax year. The person may also drop down into a lower tax bracket, reducing the rate at which the income is taxed. Common examples of tax deductions are contributions to an IRA or 401(k) account and contributions to a health savings account (HSA).

Standard and Itemized Deductions

Tax deductions are claimed in one of two ways: standard deduction and itemized deduction. A standard deduction is a fixed amount that the government gives filers to reduce their taxable income. For example, the standard deduction for single filers currently sits at $12,550.

An itemized deduction, on the other hand, means that the filer lists every single tax-deductible item on the return to minimize the overall tax liability. Filers who itemize deductions are required to retain all relevant receipts and documentation. In some situations, this strategy can result in a much greater reduction in the tax liability than the standard deduction offered by the government.

Savvy tax filers retain all their paperwork until the end of the tax year and figure out which approach is most advantageous for them. Nurses and those in the health care industry are encouraged to do the same.

The Tax Cuts and Jobs Act and How it Affects Nurses

The Tax Cuts and Jobs Act (TCJA) is one of the most sweeping overhauls of the tax code in several years. Former President Donald Trump signed off on it, and it officially went into effect on December 22, 2017; however, it didn’t truly start affecting people until the 2018 tax year (filings occurring in 2019).

Notable changes include the lowered corporate tax rate of 21%, a raised estate tax exemption of $11.2 million, and a 20% deduction for pass-through income for sole proprietors, partnerships, or S corporations.

The TCJA also affected personal tax brackets and itemized deductions. The TCJA retained the structure of seven tax brackets, but most of the tax rates were lowered. For example, the top rate decreased from 39.6% to 37%. All tax brackets saw anywhere from a 1% to 4% reduction under the TCJA; however, these changes will expire in 2025.

The TCJA also had a huge impact on what tax deductions are available through 2025, as well as the new standard deduction.

Married couples who file joint returns can now take a standard deduction of $24,000, up from $12,700.
Single filers saw an increase from $6,350 to $12,000.
The heads of household deduction increased from $9,350 to $18,000.

This means that the TCJA approximately doubled the standard deduction across the board. However, a trade-off was involved; many of the items that previously qualified as tax deductions are no longer allowed.

One of the big tax write-offs for nurses until that point fell into the category of “miscellaneous itemized deductions”; that category was suspended at the federal level until 2025 under the TCJA. Some states still allow for these deductions, but that only benefits filers at the state level.

Tax Write-Offs for Nurses and Other Filing Tips

Even though the TCJA suspended the majority of tax write-offs for nurses, it’s worth getting familiar with them because they may still be deductible at the state level. More important, miscellaneous itemized deductions will be coming back in 2025, barring any changes by the Biden administration.

The following are some of the most common items that nurses use as tax deductions (bearing in mind that they can only be claimed on state returns until 2025):

Medical supplies beyond what their employers supplied
Uniforms/scrubs (if not reimbursed by employer)
Continuing medical education credits to maintain licensure
Nursing union dues or dues from a similar professional organization
Professional licensing fees
Professional or malpractice insurance premiums
Subscriptions to professional journals
Job relocation costs (if more than 50 miles away)
Travel to a patient’s home

Although itemized tax deductions are what traditionally decreased the tax liability for nurses, the fact that the TCJA has essentially doubled the standard deduction should make up at least part of the difference. Additionally, nurses should employ other tips to lower their taxes. The most common tips include the following:

Making the maximum allowed retirement plan contributions
Adding more pretax dollars to HSA and flex savings accounts (FSAs)
Asking about employer commuter benefits
Funding a child’s 529 college savings plan

Ultimately, nurses will need to decide whether taking standard or itemized deductions is more advantageous. Considering the changes that the TCJA has brought in, chances are that most will find that the standard deduction is the better choice. In any case, it’s always best practice to retain all receipts and documentation of work-related purchases.

Taxes for Travel Nurses

The considerations around taxes for travel nurses are unique. Whereas most nurses work in one place and are paid an annual salary, travel nurses work in multiple locations and are paid on a contractual basis with untaxed stipends. Due to the unique nature of their role, travel nurses have far more opportunities for tax deductions than on-staff nurses.

Travel nurses can also claim all tax deductions available to staff nurses. However, travel nurses are able to deduct the following additional items (on state returns only until 2025):

Internet bill
Phone bill
Utilities
Meals
Rent or housing costs
Travel (includes mileage and vehicle upkeep)

Due to the complexity of tax filings for travel nurses, they’re encouraged to implement some best practices to make their experience a little easier at the end of the tax year. These measures include the following:

Saving all documentation pertaining to expenses
Saving all employment contracts
Reporting all income
Filing a state tax return for every state they worked in (as out-of-state income)
Setting up a tax home to save on tax-deductible travel expenses

When filing, it’s important to note that the filing must be done in the state where the travel nurse lives, not works (unless an assignment takes more than 12 months). Keeping that in mind, it’s a good idea for travel nurses to hire a certified public accountant (CPA) or an accountant who’s familiar with travel nurse tax deductions and tax codes in different states.

The IRS scrutinizes the travel nursing industry fairly closely, so travel nurses would be wise to hire a professional to prepare their tax returns to avoid problems later. Dealing with an audit while trying to work a travel nursing job can be a big challenge.

Taxes for Nursing Students

Nurses aren’t the only ones who should be aware of ways to decrease their tax liability. Nursing students need to consider this too. One important factor to note is that nursing students who are under the age of 24 can be claimed as dependents by their parents if their parents are the source of most of their financial support. Parents who claim their full-time college student as a dependent are eligible for a one-time $500 tax credit.

Nursing students who aren’t supported by their parents should consider the following student tax credits to lowering their tax liability:

Credits for any tuition, student loan interest, or school-related fees for supplies and books
American Opportunity Tax Credit (AOTC; for qualified education expenses, to a maximum of $2,500 per year per student)
Lifetime Learning Credit (for qualified education expenses, to a maximum of $2,000 per year per student)

Nursing students can read more about the AOTC and the Lifetime Learning Credit by visiting the IRS website, which explains the terms and exact eligibility requirements for both.

For students who are attending nursing school on full or partial scholarship, please note that most scholarships are generally awarded tax free. Be sure to double-check the scholarship documentation to confirm that.

The Advantage of Getting a CPA Who Specializes in Working With Nurses

The TCJA signaled a major shift in tax law and nurse tax deductions. However, it does appear that the TCJA has made things simpler for filers. According to Forbes, 90% of filers are claiming the standard deduction rather than itemizing. That means close to 300 million people are no longer having to go through a year’s worth of receipts and documentation to prove their tax write-offs, and that includes nurses and nursing students.

The only group that may benefit from itemizing deductions is travel nurses, since they have far more work-related expenses than salaried nurses. Due to the complexity of the tax law and the possibility that they’ll need to file returns for multiple states, travel nurses are encouraged to find a CPA who has experience preparing taxes for travel nurses. They’ll be able to determine whether itemizing or taking the standard deduction is more appropriate in each individual’s circumstances.

Additionally, a CPA will become a valuable resource in 2025, when the suspended tax write-offs for nurses go back into effect. The standard deduction for single filers, married couples filing jointly, and heads of household are due to revert to their original amounts. This means that nurses should seriously consider saving all their receipts and documentation for work-related expenses starting in 2024. Otherwise, they’ll miss a big opportunity to claim these expenses when filing.

Begin Your Journey to Becoming a Nurse

Although the current tax law has simplified things for many nurses, it will change again in 2025. Nurses should know what to expect when the standard deduction reverts to 2017 levels and common nurse tax deductions are available again. Travel nurses especially are in for a tumultuous year in 2025 if they forget to start saving their receipts and documentation, since they easily have some of the highest work-related expenses in all of health care.

For those who are considering a career in nursing, never has there been a better time to get involved. The U.S. Bureau of Labor Statistics (BLS) predicts that demand for registered nurses will increase by 9% (or 276,8000 new jobs) by 2030. Registered nurses also do well from a salary perspective, having earned an approximate annual salary of $77,600 in 2021, according to the BLS; nurses in the top 10% of earned as much as $120,000.

In addition to steady job security and great compensation, nurses get the benefit of knowing that they’re providing a valuable service by delivering high-quality patient care. Nurses are generally the first point of contact a patient has when entering a hospital or health care facility; for this reason,skilled and knowledgeable medical workers who are on the front line are in high demand.

During a typical day, nurses assess patient conditions, record medical histories and symptoms, administer medications and treatments, collaborate with other health care professionals about patient care, and teach patients and their families about the best ways to manage injuries and illnesses.

The best way to get started in the health care industry is by investing in education. For someone who wants to be involved in advanced practice, a nurse practitioner program would be an ideal fit. Conversely, degree programs in health care systems leadership and nurse education prepare nurses to advance their careers along administrative and academic paths.

Recommended Reading

Emergency Nurse Practitioner: 5 Essential Responsibilities

Nurse Practitioner Scholarships: A Guide for MSN Students

Nursing Apps and Technology to Optimize Patient Care

Sources

Tax Deduction, Investopedia

2021-2022 Tax Brackets and Federal Income Tax Rates, Forbes

Tax Deductions For Nurses | RN, LPN, NP, MA & more, Everlance

How Much Is the Standard Deduction for 2021 and 2022, Forbes

What’s the Difference Between the Standard Deduction and Itemized Deduction?, H&R Block

Explaining the Trump Tax Reform Plan, Investopedia

Top Tax Tips and Deductions for Nurses, Jackson Hewitt Tax Service