Nurse Insights: What Tax Benefits Are Available for Registered Nurses?

As a registered nurse, you may be eligible for various tax benefits that can help ease the financial burden associated with your profession. In this informative guide, we’ll explore some of the key tax deductions available to nurses, including work uniforms, continuing education, professional fees, and travel expenses. We’ll also discuss the Lifetime Learning Credit and the Student Loan Interest Deduction, two essential tax benefits that can help make nursing education more affordable.

Nurse Insights

What Tax Benefits Are Available for Registered Nurses?

In our Nurse Insights series, experienced nurses offer an insider’s perspective on the nursing profession by addressing common questions, challenges, and triumphs of their careers.

Tax Deductions for Registered Nurses

As a registered nurse (RN), you might be eligible for a variety of tax deductions. These deductions are meant to alleviate some of the financial burdens that come with your profession. While tax rules may vary, several common tax deductions for nurses include work uniforms, continuing education, professional fees, and travel expenses.

Work Uniforms

If you’re required to wear a specific uniform for your role and you pay for it out-of-pocket, that expense may be deducted from your taxes. While regular clothes that you might wear outside of work do not qualify, scrubs, specialty shoes, and unique uniforms required by your employer can potentially be claimed.

Continuing Education

Keeping your nursing skills updated is almost always a professional necessity. Luckily, costs associated with continuing education, including tuition, fees, books, and supplies, can often be deductible.

Professional Fees

Membership dues for nursing associations and license renewal fees are also often tax-deductible. This includes both national and local professional organizations.

Travel Expenses

Travel expenses associated with your profession can also be deducted in certain situations. If you’re required to travel as part of your job and your employer doesn’t reimburse the cost, you can usually claim these expenses. This might include mileage, tolls, parking fees, and even lodging in some cases.

Please remember, tax laws vary greatly and change frequently. Keep thorough receipts and consult with a tax specialist to ensure you’re taking full and appropriate advantage of the deductions available to registered nurses.

While these deductions can help reduce your taxable income, it’s essential to ensure accurate filing to avoid any potential issues with the IRS. Be sure to enlist the aid of a professional tax preparer, particularly one familiar with the healthcare profession, to assist in correctly filing your tax returns.

Lifetime Learning Credit

The Lifetime Learning Credit (LLC) is a tax credit that can provide up to $2,000 of annual tax relief for qualifying higher education expenses, including tuition and course-related fees that are mandatory for enrollment.

As a nurse, you may be eligible to claim LLC if you are taking undergraduate, graduate, or even professional degree courses. This includes nursing programs that lead to an advanced practice registered nurse (APRN) designation or other graduate-level nursing degrees. The aim of the LLC is to provide assistance by reducing the out-of-pocket costs of continuing your education. It is important to note that, in order to claim this credit, you must be enrolled in an eligible educational institution, and your modified adjusted gross income must be under $68,000 (or $136,000 if filing jointly).

How to Use the Lifetime Learning Credit?

You can use the Lifetime Learning Credit by claiming the tax credit on your annual tax return. The IRS provides a form, IRS Form 8863, for this purpose. It will assist you in calculating the exact credit amount. Remember, this tax credit is non-refundable, meaning it can bring your tax liability to zero, but it will not provide a tax refund beyond that.

Please consult with a tax advisor or use the IRS’s Interactive Tax Assistant tool to determine if your course is eligible for the credit.

Eligibility Criteria for the LLC

The criteria to qualify for the LLC include:

• You need to be paying post-secondary tuition and fees for yourself, your spouse, or a dependent.
• You should be taking the course or courses to acquire or improve job skills.
• You are not claiming tax credits under the American Opportunity Credit for more than four years.
• Your reported income should meet the IRS guidelines.

Unfortunate news for foreign students: Non-resident aliens aren’t eligible for the LLC unless they elect to be treated as resident aliens for tax purposes.

Remember that tax laws can and do change. Always stay up-to-date, do your research, and consult with tax professionals to ensure you’re getting the most out of your nursing education tax benefits.

Student Loan Interest Deduction

When considering how to finance a nursing program, one financial benefit to be aware of is the student loan interest deduction.

Understanding the Deduction

This deduction allows you to deduct the interest you pay on your student loans from your taxable income. The maximum deduction is set at $2,500 per year. Utilizing this deduction can help lower your tax bill, making your education more affordable.

Eligibility Criteria

You’re eligible to deduct this interest if you’re legally obligated to pay interest on a student loan and you paid interest on the student loan while in a program leading to a degree, certificate, or other recognized educational credential. If you are an aspiring nurse or a working nurse who wants to further your education, a nursing program qualifies you under this criteria.

However, your income also plays a part in whether or not you’re eligible for the student loan interest deduction. At certain income levels, the amount you can deduct starts to decrease and then phase out completely. As of 2021, this phase-out begins once your modified adjusted gross income (MAGI) hits $70,000 (or $140,000 if you’re married filing jointly) and completely phases out at a MAGI of $85,000 (or $170,000 for married filing jointly).

Unfortunately, the deduction does not apply if you are married but file separately or if someone else can claim you as a dependent on their tax return.

As an RN seeking to further your education, you may find that this deduction greatly impacts your ability to afford your second-degree program. However, everyone’s financial situation differs, so it’s crucial to seek professional tax guidance.

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) can be a significant aid for you if you are a student pursuing a nursing profession. It offers a tax credit for specific education expenses for the first four years of higher education.

Eligibility

To be eligible for the AOTC, you must:

• Not have completed the first four years of postsecondary education at the beginning of the tax year
• Be pursuing a degree or other recognized education credential
• Be enrolled at least half-time for at least one academic period beginning in the tax year
• Not have claimed the AOTC or the former Hope credit for more than four tax years
• Be you, your spouse, or your dependent that you listed on your tax return
• Have qualified education expenses at an eligible educational institution
• Not have a felony drug conviction at the end of the tax year

Credit Amount

The AOTC offers credit of up to $2,500 per eligible student. It further breaks down as 100% of the first $2,000 of qualified education expenses and 25% of the next $2,000 of those expenses. Furthermore, if the credit brings the amount of your tax that you owe to zero, up to 40% of any remaining credit amount can be refunded to you, up to a maximum of $1,000.

Limitations

While the AOTC provides substantial financial relief, it has limitations. Particularly, the credit is phased out if your MAGI is between $80,000 and $90,000 for single filers and $160,000 and $180,000 for joint filers. The tax credit is not available if your MAGI is over the upper limit of these ranges.

Remember that tax laws continually evolve, and it’s essential to keep updated on any changes that might affect your eligibility for the AOTC. Consulting with a tax advisor or financial aid counselor can be beneficial to optimize your usage of this tax credit.

Rules Regarding Travel and Relocation Expenses

Many might think that the expenses incurred on travel and relocation as nurses aren’t tax-deductible, but that’s not always the case. Depending on the nature of your work and the circumstances under which you travel, you may be able to claim tax deductions on your travel and relocation expenses.

Deductions for Travel Expenses

As a registered nurse, you may be able to claim deductions for travel expenses if it’s strictly for business purposes. This means attending seminars, conferences, workshops, or meetings outside of your normal working area can qualify for deductions. However, if the travel combines both work and personal activities, only the expenses related directly to the work activity can be deducted.

The travel expenses may include airfare or train tickets, car rentals, the cost for taxis or similar transportation services, lodging, and meals. However, the tax deduction standard for meal expenses is only 50%.

Deductions for Relocation Expenses

In terms of relocation expenses, the tax law allowed deductions for individuals who moved due to a change in job or business location. Unfortunately, the Tax Cuts and Jobs Act, effective in 2018, abolished most of these deductions except for certain military personnel.

To qualify for this deduction before the change in law, the IRS required the new job location to be at least 50 miles farther from your old home than your old job location and for you to work full-time hours for at least 39 weeks during the first 12 months immediately following your move.

Remember, these tax deductions can be a little tricky to navigate, and the regulations can change, so it’s always a good idea to consult with a qualified tax advisor or professional who understands the specific tax laws for nurses and other medical professionals.

Filing Taxes as a Registered Nurse

While filing your taxes as a registered nurse, you need to keep a few things in mind to optimize your potential deductions and credits.

Deductible Expenses

There are several work-related expenses that you can claim as deductions. These include the cost of uniforms and specialty shoes, any expenses for laundry and cleaning of those uniforms, any dues for professional organizations, and the cost of continuing education or certifications for your nursing profession.

Also, expenses associated with your job search in the nursing field, including costs of resume creation and distribution, employment agency fees, and travel expenses for interviews can also be deducted.

Travel and Meal Costs

If you are a travel nurse, bear in mind that costs associated with travel, meals, and lodging can be eligible for deduction as well. Be sure to keep a detailed log of these expenses and discuss this with a professional to estimate your tax savings.

Home Office Deduction

If a portion of your home is used primarily for your nursing work, such as for scheduling, continuing education, or other administrative tasks, that portion could be eligible for a home office deduction.

Education Credits

Remember that you may also qualify for various education-related credits or deductions. This is particularly applicable if you’re enrolled in a continuing education program or are pursuing higher studies in nursing, such as a Master of Science in Nursing (MSN) degree.

Seek the Help of a Professional

Tax law is notoriously complex and ever-changing, which can be particularly challenging given the unique working conditions and requirements of nursing. As such, you may want to consider hiring a tax professional specializing in healthcare professionals to ensure you’re maximizing your deductions and not missing out on any potential savings.