The 2025 tax season may be over, but it’s not too early to think about 2026. If you’re a travel nurse or just starting out, it’s a good idea to stay informed about the residency rules for travel nurses. Knowing these rules is vital because they determine how you receive stipends, such as housing and meals, and whether that income is tax-free or taxable. This directly affects the net income travel nurses receive from each assignment. With every new assignment, travel nurses must navigate a new set of residency and tax rules that differ by location. Understanding these rules can help you maximize your income, ensure IRS compliance, and avoid costly mistakes when moving between assignments.

Why residency rules matter for travel nurses

While transitioning from one job to another may seem straightforward, travel nurses must navigate the logistics of their new assignments along with the accompanying financial responsibilities. Some of the financial items on that list include stipends, which property to claim as your living space, and more. For example, the IRS has strict criteria for tax-free stipends. To qualify, you need to provide evidence of maintaining a permanent residence and being away from it for work. This means you incur living expenses at both your tax home and your assignment location. If these guidelines are not followed, you risk losing tax-free stipends and facing additional tax-related expenses.

What is a tax home and why is it important?

A tax home is not simply where you grew up or where your family lives; it’s a location where you maintain your primary residence and to which you regularly return. The IRS defines a tax home as a person’s place of business or employment, regardless of where the family residence is located. For travel nurses who tend to work temporary jobs in different states, your primary residence can still qualify as your tax home, provided you meet certain IRS requirements.

Many travel nursing expenses can be considered tax-free if they meet specific IRS guidelines. Housing, meals, and travel allowances, known as stipends, must qualify under these IRS criteria to be reported as tax-free. If they don’t qualify, they must be reported as taxable income. This is where having a valid tax home becomes important because, to claim non-taxable meals, travel expenses, and housing, you must have an established tax home. 

Do travel nurses need a permanent residence?

Yes, you must have a permanent residence to establish and maintain a tax home. This means more than just having an address on your driver’s license. You’ll need to prove that you have a physical home where you:

• Pay rent or a mortgage (with your name on the lease or deed)
• Maintain utility bills (in your name)
• Return between assignments (even if only occasionally)
• Have your driver’s license and voter registration

Merely providing a P.O. box or a relative’s address will not suffice. The IRS requires proof of your active financial and personal ties to a specific location, including living expenses or a plane ticket.

How do you declare and maintain a tax home?

Declaring a tax home isn’t a one-time process; it requires continuous documentation and diligence. Maintaining it will require continuous efforts. Here’s how it’s done:

1. Establish your permanent residence

Choose a location as your tax home such as your own apartment, house, or a rented room, at fair market value. Fair market value is used to establish a tax home, which the IRS then uses to determine whether your claimed expenses are legitimate and reasonable. Ensure your name is on the lease or mortgage, and keep records of rent or mortgage payments, utility bills and property taxes.

2. Maintain your records

Keep your driver’s license, car registration and voter registration in your home state and current. File state taxes as a resident of your tax home state, even if you’re working elsewhere.

3. Duplicate living expenses

To qualify for tax-free stipends, you must show that you incur duplicate living expenses. Financial statements should show you’re paying for your tax home and temporary lodging simultaneously while on an assignment. This is a key IRS requirement. If you give up your tax home and only pay for housing where you work, you’re no longer considered a traveler.

4. Follow the 12-month rule

The IRS has a “12-month rule” for temporary assignments, meaning if you perform services at the same location for more than 12 months out of any rolling 24-month period, that location will become your new tax home. This means that you would no longer be eligible for tax-free stipends in that area. You can avoid this by not working in the same city for more than a year within a two-year window. Periodically return to your tax home to maintain eligibility for tax-free stipends.

The advantages of declaring a tax home

Establishing and claiming a tax home offers benefits beyond just meeting compliance requirements:

• Tax-free stipends: You may also claim tax-free housing, meals and other incidental allowances, increasing your net income.
• Travel expense deduction: When moving between assignments, you can deduct travel-related expenses such as mileage, airfare, and lodging.
• Benefits on state taxes: Remaining a resident in your home state allows you to receive credits for taxes paid to other states, thus preventing double taxation.

Impact of not having a tax home

Without a tax home or a primary place of business, the IRS may classify you as “itinerant,” meaning all your income is taxable regardless of where you work. Staying in one location for too long (over 12 months within a 24-month period) can mean you’re automatically designating wherever you’re working as your new tax home, which may affect stipend eligibility and state tax responsibilities.

Do travel nurses need to file taxes in every state they work?

Travel nurses who work in several states typically must file a non-resident tax return in each state where they’ve taken an assignment and a resident return for their home state. Some states have no income tax or reciprocal agreements, but multi-state filings can be complex. Keep careful records of your assignments and earnings in each state.

Should travel nurses consult a tax professional?

It might be a good idea. The tax rules for travel nurses are complicated and mistakes can be costly. An experienced tax professional stays up-to-date on any tax code changes you might not know. They can help you:

• Structure your documentation for your tax home
• Maximize your tax-free stipends
• Navigate multi-state tax returns
• Shield yourself from IRS audits and penalties

Even if you’re confident in your record-keeping, the peace of mind that comes from professional advice is well worth the investment.

Keep travelling, but stay tax compliant

The travel nursing career may be distinct and interesting, but it also has unique obstacles that staff nurses wouldn’t have to encounter. Complying with IRS and residency rules allows you to safeguard your income and focus on what you do best: delivering exceptional patient care nationwide. If you’re looking for assistance, reach out to us here at StaffDNA. Our experienced recruiters can assist with any questions you might have and help book your dream assignment without the worries.