Nurses and Taxes: What Michiana Nurses Need to Know Before Filing in 2026

Posted by Uncle Joe | Uncle Joe Tax Services | South Bend, IN

If you work as a nurse at a South Bend hospital, a clinic, or a long-term care facility, your tax situation doesn’t look like most people’s. Overtime, license renewals, continuing education, scrubs—some of these have new federal deduction rules, and others are no longer deductible at all if you’re a W-2 employee. It gets messier if you work two jobs or pick up travel assignments, because by the time tax season arrives you may have multiple W-2s stacked up and Social Security tax withheld twice on the same wages.

Here’s what matters most for nurses filing in 2026, and where nurses most often get it wrong.

The Overtime Deduction: Why Many RNs Still Miss Out

The One Big Beautiful Bill Act created a new federal deduction for qualifying overtime pay, available for tax years 2025 through 2028. Single filers can deduct up to **$12,500** in qualifying overtime, and married couples filing jointly up to $25,000. The deduction phases out above $150,000 (single) or $300,000 (joint).

But there’s a critical limitation: only the premium portion of overtime required under the Fair Labor Standards Act counts—that is, the extra half in time-and-a-half.

Here’s where it gets tricky for nurses, and where a lot of blog posts get it wrong. The common assumption is that all registered nurses are exempt from overtime. That’s not accurate.

Under the FLSA, registered nurses who are paid on an hourly basis should receive overtime pay. The Department of Labor’s Fact Sheet #17N is explicit on this point: RNs who are paid hourly are entitled to time-and-a-half for hours over 40 in a workweek. The professional exemption only kicks in when an RN is paid on a salary basis of at least $684 per week (the 2019 threshold). An RN who meets the duties test and is salaried at that level may be classified as exempt.

So the real question isn’t “are you an RN?” It’s “how are you paid?”

  • Hourly RNs who receive FLSA-required time-and-a-half on hours over 40 generally have qualifying overtime pay and may be eligible for the deduction, subject to the income phase-outs.
  • Salaried RNs classified as exempt generally receive no FLSA overtime, so there’s no premium portion to deduct.
  • LPNs and similar health care staff generally do not qualify as exempt learned professionals and are entitled to overtime pay—so their overtime premium is more likely to qualify.

This distinction matters because the IRS will look at whether the overtime was actually required by the FLSA. If your employer paid you hourly and paid time-and-a-half, you have a paper trail. If you’re salaried and exempt, you don’t.

One more caveat: this deduction only reduces federal income tax. FICA (Social Security and Medicare) is still withheld, and the 2025 withholding tables weren’t adjusted. You only get the benefit when you file.

Employee Nurses: Most Work-Related Expenses Are Gone

If you receive a W-2, the TCJA eliminated the unreimbursed employee business expense deduction. That means:

  • Uniforms and scrubs: Even though the IRS has historically accepted that nurses’ scrubs qualify as deductible work clothing, you still can’t deduct them on your federal return as an employee.
  • Stethoscopes, blood pressure cuffs, scissors: Same story—no deduction as an unreimbursed employee expense.
  • License fees and certification exam costs: Not deductible for employees either.
  • Commuting mileage: Never deductible from home to a regular workplace.

So what can employee nurses still use? Mostly the above-the-line adjustments that don’t require itemizing: student loan interest (up to $2,500), IRA contributions, and HSA contributions. These aren’t profession-specific, but they do lower taxable income.

Travel Nurses and 1099 Contract Nurses: Completely Different Rules

If you take travel assignments or work 1099 contracts, you have far more deduction room—and far more risk.

Tax home is the whole ballgame. Whether your tax-free stipends (housing and meals) are genuinely tax-free depends on whether you maintain a real tax home. You need a permanent or primary residence where you incur ongoing living costs, and the assignment must be temporary (no more than one year in the same location). If you gave up your apartment and consider yourself “home on the road,” the IRS will treat you as having no tax home, and every stipend dollar becomes taxable income.

1099 income allows business expense deductions: license and certification fees, continuing education that maintains or improves your skills, professional association dues (like ANCC), mileage between assignments, and unreimbursed lodging and meals (within IRS per diem limits). But be careful—if you work more than a year in one location, or your “travel” is really just a commute, those deductions will be challenged.

Multi-state filing is the norm. Whichever state you actually worked in has the right to tax that income. You’ll file nonresident returns for each work state, then report all income on your resident state return (Indiana, for example) and claim a credit for taxes paid to other states to avoid double taxation. If you earned income in multiple states, Indiana’s county tax still follows your county of residence on January 1—not where you worked.

Multiple W-2s can mean over-withheld Social Security. Social Security tax in 2025 applies only to the first $176,100 of wages. If you receive W-2s from two or more employers, each one withholds as if it were your only employer, and you’ve likely overpaid the 6.2% on the excess. You can claim that back as a refundable credit on Schedule 3. Don’t chase each employer for a refund separately—claim it on your return.

Indiana State Tax Notes for Nurses

Indiana’s 2025 state income tax rate is a flat 3.0%, dropping to 2.95% in 2026. On top of that, your county of residence adds a local income tax, and St. Joseph County’s rate shows up directly on your IT-40.

If you work in South Bend but live in Elkhart County, the county tax follows Elkhart’s rate. If you work in Indiana but live in Michigan, there’s a reciprocity agreement between the two states, so you may only need to file in your resident state—but confirm your specific situation.

What You Should Do Now

If you’re a W-2 employee nurse: Check whether your W-4 withholding is adequate, especially if you have a second job or a spouse with income. And if you’re an hourly RN who regularly works overtime, gather your pay stubs—you may have a qualifying overtime deduction that you’d otherwise miss. Don’t count on general work expense deductions to lower your tax bill; that door is closed at the federal level.

If you’re a travel or 1099 nurse: Start organizing your tax home evidence now (lease, driver’s license, voter registration, bank address), keep contracts and dates for every assignment, and track mileage between assignments. If your stipends are substantial, this is a high-audit-risk area, and it’s worth the time to document it properly.

If you worked in multiple states: List your working dates and income by state, and confirm which states require nonresident returns. Your Indiana resident return should include all income, with a credit claimed for tax paid to other states.

Nurses’ tax complexity is often underestimated. Hourly versus salaried status, overtime classification, multiple employers, travel assignments, continuing education—none of these is difficult on its own, but stacked together they’re easy to get wrong. If there’s anything in last year’s return you weren’t confident about, or if this year’s situation has gotten more complicated, it’s worth sorting out before you file.

Uncle Joe Tax Services
2113 Miami Street, South Bend, IN 46613
📞 574-222-1351
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Licensed Tax Advisor and Enrolled Agent serving South Bend, Mishawaka, Granger, and the surrounding Michiana area.