Travel nursing offers exciting opportunities to explore new places while advancing your healthcare career. However, working in multiple states throughout the year can complicate your tax situation, especially when it comes to determining your state residency status and understanding your tax obligations.

Navigating state residency rules is critical for travel nurses to ensure compliance with tax laws, avoid double taxation, and optimize their tax outcomes. This article explains how state residency is determined, the tax implications of working across states, and practical tips for managing your tax responsibilities as a travel nurse.

What Is State Residency for Tax Purposes?

State residency determines which state(s) can tax your income and to what extent. Each state defines residency differently, but generally, your residency status affects:

• Whether you owe state income tax and at what rates
• Which state you file your tax return in
• Eligibility for state tax credits or deductions

Most states classify taxpayers as either resident, nonresident, or part-year resident for tax purposes.

• Resident: You live in the state for most of the year and have your permanent home there. You generally pay taxes on all income, regardless of where it was earned.
• Nonresident: You do not live in the state but earned income there (e.g., from a temporary work assignment). You pay tax only on income earned in that state.
• Part-year resident: You moved into or out of the state during the year, so you pay tax on all income earned during the period you were a resident, and only on income earned in the state during your nonresident period.

Why Residency Rules Matter for Travel Nurses

As a travel nurse, you often work short-term assignments in various states while maintaining a home base elsewhere. This creates potential tax complexity:

• You may earn income in multiple states, each with its own tax laws.
• States may claim you as a resident for tax purposes based on physical presence or domicile, even if you consider yourself a resident elsewhere.
• You risk double taxation if two states tax the same income without proper credits or agreements.
• Filing multiple state tax returns may be required, increasing administrative burden.

Understanding residency rules helps you:

• Correctly file your state tax returns
• Claim appropriate credits to avoid double taxation
• Plan your living and working arrangements to minimize tax liabilities

How Do States Determine Residency?

1. Domicile

Your domicile is your true, fixed, and permanent home — the place you intend to return to after temporary absences. Most states consider domicile the primary factor in determining residency.

Key points about domicile:

• You can only have one domicile at a time.
• Changing domicile requires physical presence plus intent to remain indefinitely.
• Factors include where you own or rent a home, where your family lives, where you register to vote, driver’s license state, and where you maintain bank accounts.

2. Statutory Residency

Even if you are domiciled elsewhere, some states consider you a resident if you spend a certain number of days in that state during the tax year (often 183 days or more).

• This is called statutory residency.
• For example, if you spend over half the year in a state, it may tax you as a resident regardless of domicile.

3. Part-Year Residency

If you move into or out of a state during the year, you may be a part-year resident and must file accordingly.

Common Residency Rules by State

• States with no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming (and Tennessee and New Hampshire tax only interest/dividends). Living in these states can reduce tax burden.
• Community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin have special rules about income earned by spouses.
• States with reciprocal agreements: Some neighboring states have agreements allowing residents to work across state lines without filing multiple state tax returns (e.g., Maryland and Virginia).

Tax Implications for Travel Nurses Working in Multiple States

Filing Multiple State Tax Returns

• Resident state return: Report all income earned anywhere.
• Nonresident state returns: Report only income earned in those states (your travel assignments).
• You may be eligible for a credit on your resident state return for taxes paid to other states to avoid double taxation.

Example:

• You live (domicile) in Ohio but take assignments in California and New York.
• You file an Ohio resident return reporting all income.
• You file nonresident returns in California and New York reporting income earned there.
• Ohio gives you a credit for taxes paid to California and New York.

Per Diem and Travel Expenses

• Some states allow travel nurses to deduct per diem allowances or travel expenses if properly documented.
• Rules vary by state and require careful record-keeping.

Tips for Travel Nurses to Manage State Residency and Taxes

1. Establish and maintain a clear domicile
   Keep consistent documentation of your home state: driver’s license, voter registration, mailing address, bank accounts, and primary residence.
2. Track your days in each state
   Maintain a detailed log of where you work and live. This is critical for determining statutory residency and filing accurate returns.
3. Understand tax laws of states where you work
   Research or consult a tax professional about filing requirements and deductions in each state.
4. Keep good records of income and expenses
   Save pay stubs, contracts, and records of travel expenses or per diem allowances.
5. File all required state tax returns on time
   Late or missing returns can lead to penalties and interest.
6. Consider working with a tax professional experienced in travel nurse taxation
   They can help optimize your tax strategy, file correctly, and maximize deductions.

Conclusion

Travel nursing is rewarding but comes with unique tax challenges due to working in multiple states. Understanding how state residency is determined and the tax implications of your assignments is essential to stay compliant and minimize your tax liability. By establishing a clear domicile, tracking your time carefully, and seeking expert guidance, you can confidently navigate state residency rules and focus on your career and adventures.

Frequently Asked Questions (FAQs)

Q1: What determines my state residency for tax purposes as a travel nurse?
A: Residency is primarily determined by your domicile (your permanent home) and statutory residency rules (time spent in a state). You can only have one domicile at a time, but you may be considered a resident in other states if you spend enough days there.

Q2: Can I be a resident of more than one state?
A: No, you can only have one domicile state. However, you may be considered a resident or part-year resident in other states based on their rules, which means you might need to file multiple state tax returns.

Q3: Do I have to file tax returns in every state where I work?
A: Generally, yes. You file a resident return in your domicile state reporting all income and nonresident returns in states where you earned income. Some states have reciprocal agreements that may simplify this.

Q4: What is double taxation, and how can I avoid it?
A: Double taxation occurs when two states tax the same income. You can usually avoid it by claiming a credit on your resident state return for taxes paid to other states.

Q5: How do I keep track of my days in each state?
A: Maintain a detailed log or calendar noting the dates you enter and leave each state, including work assignments and personal travel.

Q6: Are per diem allowances taxable?
A: Per diem may be non-taxable if it meets IRS guidelines and is properly documented, but state rules vary. Consult a tax professional to ensure compliance.

Q7: What if I change my domicile state?
A: Changing domicile requires physical presence in the new state and intent to remain indefinitely. Update your driver’s license, voter registration, and other records to reflect the change.

Q8: Can I deduct travel expenses on my state tax returns?
A: Some states allow deductions for work-related travel expenses if you are not reimbursed. Keep detailed records and consult state-specific rules.

Q9: Should I hire a tax professional to handle my multi-state taxes?
A: Yes, especially if you work in multiple states. A tax professional experienced with travel nurses can help you file correctly, maximize deductions, and avoid costly mistakes.

Q10: What states do not have income tax?
A: Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming do not have state income tax. Tennessee and New Hampshire tax only interest and dividends.