A travel nurse can work in the same metropolitan area for up to one year before the IRS treats the assignment as indefinite and every tax-free stipend becomes taxable income. That limit comes from federal tax law, and the clock runs on the whole metro area, not a single hospital. Cross the line and the reclassification can reach back to the start of the assignment.
The One-Year Limit in the Tax Code
Under 26 U.S.C. § 162(a), you can deduct travel expenses, or receive them tax-free from an employer, only while “temporarily away from home.” The statute draws a bright line: you are not considered temporarily away from home during any period of employment that exceeds one year.1Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
IRS Publication 463 puts the same rule in working terms. An assignment in a single location is temporary if it is “realistically expected to last (and does in fact last) 1 year or less,” and indefinite if it is “realistically expected to last for more than 1 year, whether or not it actually lasts for more than 1 year.”2Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses
Two things follow. First, expectation at the start of the assignment matters as much as actual duration. Second, the moment an assignment becomes indefinite, housing stipends, meal reimbursements, and travel allowances turn into taxable gross income. For a nurse collecting $2,000 to $3,000 per month in stipends, that shift can cut take-home pay by hundreds of dollars a month, and the IRS can apply it retroactively if it concludes you should have known from the outset that the assignment would run past a year.
What the IRS Counts as One Place
The IRS does not measure your work location by a specific hospital address. Your tax home covers the entire metropolitan area where you work, so moving from one facility to another across town does not create a new temporary assignment.3Internal Revenue Service. Taxable Fringe Benefit Guide – Section: Tax Home Revenue Rulings 73-529 and 93-86 both treat the “general vicinity” of your principal place of business, including the full metropolitan area, as a single work location.
That spatial rule blocks the obvious workaround of hopping between hospitals in the same city. Two facilities close enough to commute between count as the same location even if the employers are different companies. Moving from a downtown trauma center to a suburban urgent care 20 miles away still counts as the same area when both fall inside the same metro region. To start a genuinely new temporary assignment, you need to move to a different metro area.
Extensions and Back-to-Back Contracts
The one-year clock starts on what you reasonably expect at the beginning of the assignment, not what ultimately happens. A 13-week contract with no plan to extend is temporary from day one. But expectations shift, and Publication 463 is explicit: “An assignment or job that is initially temporary may become indefinite due to changed circumstances.”2Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses
Take a 13-week assignment you extend three times. After the third extension, your expected total is 52 weeks, and the assignment arguably remains temporary because the expected duration is still one year or less. Sign a fourth extension that pushes the expected total past 12 months and the assignment becomes indefinite on the date your expectation changes, not the date you actually reach month 13. From that date forward, your stipends are taxable. The decision to accept an extension can carry immediate tax consequences even in month six.
Publication 463 also warns that “a series of assignments to the same location, all for short periods but that together cover a long period, may be considered an indefinite assignment.”2Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses Rotating through short contracts at the same hospital or in the same metro area does not restart the clock if the cumulative period runs past a year.
Going Back to a Prior Assignment Area
No IRS statute or publication specifies exactly how long you must be gone before a return trip counts as a fresh temporary assignment. This is one of the murkier corners of travel nurse tax law. The statute simply says an assignment exceeding one year is indefinite, and Publication 463 warns that aggregated short stints in the same location can be treated as indefinite.
Because of that ambiguity, most tax professionals who specialize in travel healthcare recommend staying away from a metro area for at least 12 months before returning. If working in one place for more than a year makes the assignment indefinite, then being absent for a full year creates a clean break the IRS has a hard time challenging. A shorter gap of a few weeks or several months is riskier, because the IRS can combine the previous and later assignments into a single continuous period that exceeds the one-year limit. If you want to go back somewhere you loved, plan on a full year working elsewhere first.
The Tax Home Requirement
The one-year rule only protects your stipends when you have a legitimate tax home to be “away from.” Without one, the IRS classifies you as an itinerant worker whose tax home follows them to each assignment, making every reimbursement taxable regardless of how short the contract is.4Internal Revenue Service. Foreign Earned Income Exclusion – Tax Home in Foreign Country This is the biggest mistake travel nurses make: treating the one-year rule as the whole story while ignoring what makes the rule apply in the first place.
Revenue Ruling 73-529, referenced in the IRS Taxable Fringe Benefit Guide, sets out a three-factor test for establishing a tax home when you don’t have a regular place of business:3Internal Revenue Service. Taxable Fringe Benefit Guide – Section: Tax Home
- You perform some work or business in the vicinity of your claimed home address. Picking up PRN shifts at a local hospital between travel assignments satisfies this factor.
- You pay for housing at your permanent home (rent, mortgage, property taxes, utilities) while also paying for lodging at the travel assignment. This duplication is the core economic test.
- You haven’t abandoned your home base. A driver’s license, voter registration, vehicle registration, and bank accounts at your permanent address all show continuing ties.
Meeting all three factors clearly establishes a tax home. Meeting two builds a strong case depending on the circumstances. Meet only one and the IRS is likely to treat you as itinerant. Duplicate expenses carry the most weight in practice. A nurse who lets a lease lapse to save money on the road, then claims a parent’s spare bedroom as a tax home, walks into an audit with a weak hand. If you aren’t paying fair-market rent or a mortgage at your permanent address, the IRS has good reason to conclude you don’t actually maintain a home there.
What Losing the One-Year Rule Costs
When the IRS decides that stipends should have been reported as taxable income, the consequences stack. You owe unpaid federal income tax on the full stipend amount for every affected year. Interest runs from the original due date of the return and adjusts quarterly.
If you fail to pay after the IRS sends a notice, a failure-to-pay penalty of 0.5% per month accrues on the unpaid balance, capped at 25% total.5Internal Revenue Service. Failure to Pay Penalty If the IRS concludes you were negligent or substantially understated your income, the accuracy-related penalty under 26 U.S.C. § 6662 adds 20% of the underpayment on top.6Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments A nurse who collected $30,000 in tax-free stipends over a year can easily face a combined bill of $10,000 or more once tax, interest, and penalties are added up.
The negligence standard matters here. The IRS defines negligence as “any failure to make a reasonable attempt to comply” with the tax code.6Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments Claiming tax-free stipends while living full-time in an RV with no permanent address is the kind of fact pattern that clears that bar easily.
Records That Prove You Stayed Inside the Rule
If the IRS questions your travel nurse tax status, the burden falls on you to prove three things: that the assignment was temporary, that you maintained a tax home, and that your stipends were reasonable. Publication 463 requires records of the amount, date, place, and business purpose of each travel expense, and receipts for lodging showing the hotel or rental name and location, the dates of your stay, and separate charges for lodging, meals, and other costs.2Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses The IRS suggests keeping documentation in “an account book, diary, log, statement of expense, trip sheets, or similar record.”
Alongside expense records, keep a paper trail that supports the tax home and the temporary nature of each assignment:
- Monthly mortgage or rent payments, utility bills, and property tax receipts for your permanent residence, which prove duplicate living expenses.
- Every original contract and every extension, with expected start and end dates, which show what you reasonably expected when you accepted the work.
- Dates you departed for and returned from each assignment, receipts for travel between your tax home and assignment locations, and evidence that you returned home between contracts.
- Copies of your driver’s license, voter registration, and vehicle registration at your permanent address.
Keep everything for at least three years after filing the return, the standard IRS audit window. If you underreported income by more than 25%, the IRS gets six years, so holding records that long is safer.