Perhaps the most common fallacy regarding tax-free stipends for travel nurses is “The 50 Mile Rule.” This myth is prominent among both travel nurses and recruiters. This “rule” is often said to allow nurses to accept tax-free stipends as part of their travel nursing pay as long as the assignment they’re taking is 50 miles or more from their tax home. This is not correct. The IRS makes no such determination. There is no such rule.
The genesis of the travel nursing 50 mile myth
Remember, IRS Publication 463 states that you can accept tax-free stipends if “you need to sleep or rest to meet the demands of your work while away from home. “ It does not set a specific distance that would constitute your need to sleep or rest. More importantly, you must stay overnight and incur lodging expenses (among other things) in the work area in order to meet IRS requirements.
So where does this myth come from? Joseph Smith, a tax consultant specializing in travel nursing tax issues, offers 3 possible origins on his website traveltax.com. First, there is a 50 mile rule for state legislators to determine if they are away from home and able to accept their per diem payments. Second, in order to write off moving deductions, the IRS requires that a taxpayer’s new commute to work be more than 50 miles farther than their old commute. Third, many travel nursing companies have utilized the 50 mile rule as an internal policy for so long that it has come to be viewed as an IRS regulation. Elaborating on this third possible origin will provide some interesting insights on the industry.
Some hospitals have a 50 mile rule
The 50 mile rule is not just imposed by travel nursing agencies; it’s also imposed by some hospitals that utilize travelers. There are several reasons for the policy. First, it serves as a potential safeguard for agencies in case they are audited. While the 50 mile rule may not be a rule established and recognized by the IRS, consistently enforcing such a rule does, nonetheless, give the impression that an agency is attempting to ensure compliance with the spirit of IRS regulations.Whether or not the IRS views it favorably in an audit is another story.
Second, agencies may want to demarcate between PRN, local contracts, and travel nursing contracts. There are often times different bill rates for PRN, local contracts, and contracts at the same facility and the rules vary from facility to facility. Therefore, if an agency has one rule for all facilities it can make their internal processes and procedures more efficient than if they were to require their recruiters to check each contract to determine the rules.
I’ve seen the distance requirements set at 50, 75, and 100 miles. Hospitals have their own reasons for maintaining these rules. I personally have heard two reasons given for these hospital requirements, and I’m sure there may be others.
First, this is a cost issue for hospitals. PRN bill rates are typically 2%-3% less than travel nursing job bill rates, and I’ve seen them be up to 7% less. In addition, PRN shifts aren’t guaranteed while travel nursing jobs offer guaranteed shifts. Therefore, PRN shifts give the hospital flexibility to cancel shifts which can also save them money. A hospital will typically try to fill its staffing needs at the lowest possible cost and would prefer anyone within a 50, 75, or 100 mile radius to sign up for PRN shifts.
Second, the hospital’s staff also has a stake in ensuring that travelers come from outside a specified distance and, despite popular opinions to the contrary, the hospital has a vested interest in keeping its staff happy. The issue is that travel nurses often have guaranteed hours. As a result, staff members may get called off in lieu of calling off a travel nurse if census drops. This doesn’t happen very often, but it can and does happen. If the travel nurse is called off and the staff member is allowed to come in, then the hospital runs the risk of paying for both. As a result, it’s in the best interest of the staff to have local health care professionals signed up for more flexible PRN shifts. That way, the PRN worker would get called off before the permanent staff worker.
No matter the reason that the 50 mile myth exists, or the explanation given to justify it, it’s important that you not put any faith in to it. Again, at its worst the myth is claimed to allow travel nurses to accept tax-free stipends as long as their tax address is more than 50 miles from the facility. This claim can get people in to a lot of trouble. To learn how to legitimately qualify for tax free money as a travel nurse see our series on the subject.