Ask a Nurse: What Tax Benefits Can I Claim as a Registered Nurse?

In our Ask a Nurse series, experienced nurses provide an insider look at the nursing profession by answering your questions about nursing careers, degrees, and resources.

Disclaimer: NurseJournal is only sharing information that you can use to further your research into the tax law or speak with your tax preparer. This is not an endorsement or recommendation for a particular tax plan.

As a healthcare professional, you have several tax-saving opportunities based on the nature of your work. If you take some time to prepare your receipts and understand the deductions available, you may be surprised when your tax forms are completed.

Many people dread filing their taxes. It can color your thoughts and even affect your mood. Let’s try to lighten those feelings by discovering some of the tax deductions and benefits you may have this year that will also lighten your tax bill.

Taxes are mandatory charges on your income that help fund the government and pay for various public services, like first responders. The charges are based on a percentage of your income and depend on your income bracket. You can reduce those charges by lowering your taxable income using deductions.

For example, if you gave $3,000 to charity last year, you may be able to subtract $3,000 from your taxable income. This can lower the amount of money you are taxed and may lower your tax bracket.

Several tax deductions can benefit nurses but only when you know about them. The government allows you to take a standardized deduction or itemize your deductions. Which strategy you use depends on how many deductions you have.

If you take the standardized deduction, you will not claim specific nursing-related deductions. However, using the standardized deduction may be better if you don’t have enough deductions to give you a significant tax break.

You won’t know which is better until you’ve done the math. To ensure you’re getting the best benefits, use the following tips to gather your receipts. The amount of money you spent this year on nursing and non-nursing expenses may offer you greater benefits than you’d imagined.

These common non-nursing expenses qualify as deductions on your taxes. There may be others that are less common. It is best to work with an experienced tax preparer to make sure you have covered all your bases.

Even without itemized deductions, several expenses may help reduce your taxes. They are entered on Schedule 1 of the tax form and are sometimes called “above-the-line” deductions. These include:

The money you spend on your job or maintaining your nursing license may also be deductible from your adjusted gross income. These must be considered as you determine if standardized or itemized deductions are most beneficial for your taxes.

However, many past nursing deductions now fall under “miscellaneous deductions.” The IRS rules for these changed with the Tax Cuts and Jobs Act.

Many of the deductions that were once allowed as 2% of your adjusted gross income were eliminated. These included deductions for:

These deductions are allowed on your 2021 taxes only if you are an Armed Forces reservist, qualified performing artist, fee-based state or local government official, or have impairment-related work expenses.

However, some states continue to allow for some of these deductions, which can help you reduce the amount of tax you owe to your state but not your federal taxable income.

These include:

It can be intimidating if you are a student and have never filed taxes before. But you can take steps to lighten your load and maximize your possible refund.

There are two ways to lower your taxes — credits and deductions. The IRS treats these as two different strategies. You can sometimes use both strategies, but they reduce your tax burden in two different ways.

A deduction lowers your taxable income, but it does not directly lower your tax. In other words, it lowers how much of your income the government will tax. The impact it has on your tax bill depends on the tax bracket in which you fall. However, a tax credit will directly reduce the amount of tax that you owe.

For example, you can either itemize your deductions or take the standard deduction offered by the IRS. The standard deduction is a no-questions-asked deduction you can take that reduces the amount of money the IRS will tax.

Let’s say you made $50,000 and take the standard single deduction of $12,550 on your 2021 taxes. Your taxes are calculated on an income of $37,450 if you have no other deductions or credits.

If you itemize your deductions, it’s important to save every receipt you might use. Which deductions you may consider depend on your filing status. For example, you may still be listed as a dependent on your parent’s taxes. They can claim you if you are under age 24, a full-time student, and provide the majority of your financial support.

It’s important to note though that most students take the standard deduction, so saving receipts might not be helpful for you unless your parents itemize.

The other option to lower your taxes is tax credits. If you qualify for one of the education tax credits, such as the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit, it cuts the amount of taxes that you pay.

For example, if you owe $3,000 in taxes but qualify for the $2,500 AOTC, it reduces your taxes by the credit amount, so you would owe $500 in taxes. Students can only claim one of the education credits.

It may be beneficial to speak with a tax professional to determine which strategy, deductions or tax credits, can get you the maximum amount for your filing status.

Also, since college students usually have simple taxes and earn less than $75,000 a year, they qualify to use the IRS Free File.

Apply for nursing scholarships to help pay for your nursing program. Not only is this money you don’t pay back, but it is typically tax free.

There are two types of student loans for nurses you may have while in school. In the first, the government subsidizes the interest payments until you begin paying off the loan after graduation.

In the second type, the interest starts accruing the minute you sign the loan papers. However, you don’t pay on the loan principal until after you graduate.

You have a choice of deferring these interest payments, which go on to accumulate and add to your loan repayment. You may also make payments on the interest immediately.

By making interest-only payments while in school, you prevent the interest from accumulating on the loan and can deduct the interest payments.