Considering Travel

Wolf at the Door, BSN · Mar 23, 2016

Why not rent the house out to travel nurses? You will need to maintain or pay someone rent during your cool off period which just means you are back in your home state.

NedRN · Mar 23, 2016

The basic finances are not that hard to work out. For most travelers, having a tax home is worth about $10,000 extra in the bank every year (I can post the math if anyone is interested). If maintaining a tax home costs more than that, it makes sense to give it up and become itinerant (without a tax home).

The decision to keep your tax home is a bit more complicated. For one thing, it is nice to have a place to retreat to between assignments. Your mortgage serves as a locked up savings account, which is not to be sneered at as for most Americans, it is the only asset they have at retirement. Your home may also appreciate, perhaps making up for the interest portion of your mortgage.

I would not rent your house out though. That is not compatible with a tax home. There is a workaround that you may find beneficial if your house is appropriate. Get a housemate. You will both benefit greatly. The housemate will enjoy the privacy of sole tenancy for most of the year at an unbeatable price for such luxury, and you will offset the cost of your mortgage and have someone to look after your property and deal with mail. You need to keep a bedroom for your exclusive use, such that you can return at any time and live there.

As far as being itinerant, you can still keep residency in a state for purposes of voting, driver's license and the like. It may subject you to paying state income taxes, especially if you work in a state with lower income tax than yours. You can also switch states of residency. You might also consider selling your home and buying one in a state you like better, perhaps in the middle of the country somewhere if you plan on a long career as a traveler, both for convenience no matter where you do assignments, but also for lower property costs. Purchasing a house in a state like Texas, Kentucky, or South Dakota will also get you eligibility for a compact state license.

CGB1 · Mar 23, 2016

Thank you so much for your thorough reply. I very much appreciate it, and it is very useful to me. There is a great deal to consider, and I am grateful for those willing to share their experience.

Wolf at the Door, BSN · Mar 24, 2016

I would not rent your house out though. That is not compatible with a tax home. There is a workaround that you may find beneficial if your house is appropriate. Get a housemate. You will both benefit greatly. The housemate will enjoy the privacy of sole tenancy for most of the year at an unbeatable price for such luxury, and you will offset the cost of your mortgage and have someone to look after your property and deal with mail. You need to keep a bedroom for your exclusive use, such that you can return at any time and live there.

I think you misunderstood. Renting the place out to travel nurses would be a benefit for him. Airbnb listing. Could easily be advertised as entire home during or private room. With the understanding he will not be there much of any. Travel nurse could cover his entire mortgage+. Rent the place for 1800. That of course is if he lives near a major hospital with travel needs.

guest769224 · Mar 24, 2016

For most travelers, having a tax home is worth about $10,000 extra in the bank every year (I can post the math if anyone is interested)

I would like to see the math when you have a moment, please.

NedRN · Mar 24, 2016

I think you misunderstood.

Nope, no misunderstanding. If you rent your entire home out, you have abandoned it and have no tax home. It is no longer your residence.

NedRN · Mar 24, 2016

For most travelers, having a tax home is worth about $10,000 extra in the bank every year (I can post the math if anyone is interested).
I would like to see the math when you have a moment, please.

Sure.

For travelers with a valid tax home that they are traveling away as contract workers, you know that they receive legitimate tax free reimbursements or stipends for lodging, meals and incidentals, travel, and licensure reimbursement right? These range from perhaps a low of $1,500 a month (really chintzy agency in the midwest) to almost $10,000 a month (legally but unlikely) in an area like San Francisco.

Now just because there is a legal maximum that the IRS will accept without challenge doesn't mean an agency will or can pay you that much. I'm going to use a figure of $2,500 to be conservative or $30,000 a year.

If $30,000 a year was fully taxed on top of the $70,000 plus taxable wages you earn annually as a traveler, federal taxes alone would eat up around 25%. Add some other figure for state income taxes, let's be very generous and call it 5%. Now add in payroll taxes, both employee and employer, also called FICA at 15%. We are now at 45%. Yup, no kidding.

So in the above conservative example, that $30,000 would have taxes of $19,500 taken out. Wow. So it has been a while since I went through this exercise (like over 10 years). Maybe I should start calling it $20,000 for the average traveler.

Don't get it, or have some issues with payroll taxes? I'm going to leave this post relatively simple, but feel free to ask questions.

I should point out that this math applies whether the agency supplies housing or gives you a stipend in lieu of housing - it is compensation and must be taxed if you don't qualify with a legitimate tax home.

guest769224 · Mar 24, 2016

Don't get it, or have some issues with payroll taxes? I'm going to leave this post relatively simple, but feel free to ask questions.

I reckon I may have to be a traveler to gain a deeper understanding of these concepts. Half of that made my head spin, but I did find your link interesting and informative, and I had no idea stipends could range so high on the spectrum. I am young and have much to learn when it comes to the financial realm. Thanks for taking the time to explain that to me. I will keep learning as I go, and through information provided here.

I saw in a post you began travel sometime around age 40, and it has helped enable your financial independence and more in a relatively short time compared to other professions. I do hope to be in your position at some point in my career. So thank you for sharing with us what you do.

NedRN · Mar 24, 2016

Many travelers don't get the math either. There is a vocal contingent of travelers who believe getting paid fully taxable and itemizing at the end of the year is better. If you simply look at the 15% FICA that is withheld to begin to understand how wrong that is (FICA cannot be recovered on your tax return). That's without even discussing filing thresholds for itemizing.

I think most professionals can be in retirement mode after 20 years. I haven't done anything special, in fact I've underperformed due to some failed business ventures. Try reading a book called "The Millionaire Next Door" for how completely ordinary American families leading good lives end up wealthy.

guest769224 · Mar 24, 2016

Try reading a book called "The Millionaire Next Door" for how completely ordinary American families leading good lives end up wealthy.

I have read that and it was quite interesting. Honestly Ned you are my favorite book of sorts when it comes to travel nursing.

NedRN · Mar 24, 2016

Well thanks.

I've never read the millionaire book honestly. But I know what is in it. Should be mandatory reading in high school.