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Being a traveling nurse has many advantages: new places, new people, and good money. When Willie Nelson croons his anthem of being on the road, he strikes a chord with many travelers:

On the road again, goin' places that I've never been,
Seein' things that I may never see again,
And I can't wait to get on the road again.
Written by Willie Nelson © EMI Full Nelson Music

Yet even with all its wonders, traveling can be a taxing experience. Adjusting to a fresh environment and learning the ins and outs of a new working situation can be stressful. Managing the unique financial ramifications of working on the road can be even more of a challenge—especially when it comes to taxes. Fortunately, with a clear understanding of the issues at hand and appropriate preparation, traveling doesn't have to be a taxing situation.

There's no place like a "tax home"

Traveling offers the opportunity to live in a variety of different locales. Since a traveler can go from assignment to assignment, it may seem an unnecessary expense to keep a permanent residence. After all, think how much money you'd save without additional payments of rent and utilities! But by not keeping a primary residence, you may be setting yourself up for some unpleasant tax consequences.

When you're a traveler, each assignment can be seen as "temporary." As a result, you may be entitled to tax deductions. Generally speaking, a temporary assignment is one performed at a single location away from your primary residence, and is realistically expected to last for less than 12 months. But in order to be a temporary worker, you need to have a primary residence. If you don't, the government may consider you a "transient" or "itinerant" and you may be subject to tax rules that are less advantageous.

Therefore, in order to use the benefits offered by Uncle Sam, it's important to establish a "tax home." Once you do, you may be entitled to deduct many expenses related to travel. Bear in mind, however, that the rules and regulations regarding the "tax home" issue are complicated, and you should consult a tax professional to discuss your individual circumstances.

Your primary residence

How do you establish a primary residence to use as your tax home? First, you must contribute to the rent or mortgage for an apartment or house that serves as your home address. By doing so, you are showing an intention to return to your permanent residence when you have completed your temporary job. Your driver's license and car registration also should reflect your main address.

In addition, your home base should be the address you use on your primary bank account. In the past, many travelers opened accounts in different cities to make it easier to cash checks; it's no longer necessary to do this. Your agency can do a direct deposit of your paycheck into your bank account. Cash is readily available through the national network of ATMs. And with the advent of debit cards that function like personal checks, you can pay for personal needs with the ease of a credit card.

TIP: Have your mail forwarded to your temporary residence from your permanent address. This can be done by a housemate or directly by the post office.

What's deductible?

In order to prepare for your deductions, you need to know what expenditures may be deductible. Living expenses while on temporary assignment are a good place to begin. These may include rent, utilities, telephone expenses, cable TV, and storage. It's important to speak with your recruiter about how housing expenses are handled. Some travelers assume their housing is tax-free, but in certain circumstances, the IRS mandates that housing costs be added to gross earnings, which means your housing costs would be taxed.

The cost of traveling to and from an assignment also may be deductible. This could include mileage between your work assignment and your home, airfare, meals, and hotel expenses. Other professional expenses that may be deductible include licensing fees, continuing education, uniforms (not suitable for outside wear), and liability insurance.

Speak to your tax professional about claiming other sundries and/or personal expenses. They may be non-deductible expenses when you are at home, but you may be able to claim these expenses as a traveler.

Write it down!

Now that you're aware of the possible tax advantages offered to travelers, you're ready to get organized to reap the benefits. First, keep accurate records of all deductible expenses. When you buy something, keep the receipt and write on the back what the expense was for. (It's funny how the memory of those purchases slips away months down the road.) Then, be sure to keep your receipts together in one centralized place.

It's also helpful to keep an expense journal. Write down all relevant information including the date, the type of expense, the amount, the place, and the purpose. Your accountant—and yes, you most likely will need an accountant—may choose to use the standard deduction allowed by the IRS for travel expenses, but it will be helpful to have written documentation.

TIP: Office supply stores sell folders with dividers. Label each divider based on the category of expense, and you'll have a convenient way to keep track of your costs.

The state of things

There's another reason to keep tip-top records: In addition to filing a tax return for your home state of residence, you will need to file a return for each state in which you work. Don't worry about taxes being duplicated; generally speaking, the amount you pay in taxes as a non-resident is applied as a credit toward income taxes in your home state. You even may be entitled to a refund if your home state has a lower tax rate than the state in which you were employed.

By the same token, if you live in a state with no income tax—like Alaska, Florida, Nevada, South Dakota, Texas, Washington, or Wyoming—you still need to pay tax in states where you worked. The good news is that you may deduct expenses incurred in each individual state against the income you received in that state—another good reason to keep accurate records.

TIP: Have your employer deduct the state taxes directly from your paycheck when you work out-of-state.

The pros know

Choosing a career as a traveler means choosing a career with somewhat complicated tax issues. Therefore, it's a smart idea to consult a tax professional about your individual situation. He or she can provide you with the guidance necessary to ensure compliance with all IRS rules for your individual situation. Choose an accountant who has worked with travelers. If you don't know any, ask your recruiter.

Dealing with taxes isn't much fun, but it's easier when you know the steps to take to comply with the rules. Once you know the rules, taxes don't have to be taxing.