The direct answer: once you realistically expect to work in a single location for more than one year, the IRS no longer considers that work "temporary." The location becomes your new tax home, and the housing and meals stipends that were tax-free become taxable wages from that point forward. For travel nurses who keep extending in the same city, this one rule quietly converts thousands of dollars of tax-free pay into a surprise tax bill.
What the one-year rule actually says
The rule comes straight from IRS Publication 463: "If you expect employment at a work location to last for 1 year or less, it is temporary unless there are facts and circumstances that indicate otherwise. If you expect it to last for more than 1 year, it is indefinite." Travel expenses — including the housing and meals your stipends are meant to cover — are deductible or reimbursable tax-free only while you are away from your tax home for temporary work. The moment the work turns indefinite, the tax-free treatment ends.
It is about expectation, not the calendar
The most misunderstood part of the rule is timing. The test is your realistic expectation at the moment the work begins or changes — not how long you actually end up staying. If you sign a 13-week contract genuinely expecting it to be your only contract there, that work is temporary even if you happen to leave early. But if you accept an extension that you reasonably expect will push your total time in that area past one year, the assignment becomes indefinite on the date your expectation changes, not on the day you cross the 12-month mark. From that date forward, stipends are taxable.
The serial-assignment trap
Travel nurses rarely sign one 14-month contract. They sign a string of 13-week contracts and keep extending — and many assume each new contract resets the clock. It does not. Under Revenue Ruling 93-86, a series of assignments to the same general location, each short on its own but together covering more than a year, is treated as a single indefinite assignment. The IRS looks at the metropolitan area, not the individual contract or the individual hospital.
What the 12-month clock counts
- The metro area, not the building. Switching to a different hospital across town does not reset the clock if you are still in the same general work area.
- The metro area, not the agency. Changing staffing companies changes who signs your checks, not where you are working. The location is what matters.
- Cumulative time, not per-contract time. Four back-to-back 13-week contracts in one city is 52 weeks in one place — right at the line, even though no single contract was a year.
How nurses keep their assignments temporary
There is no statutory safe harbor that guarantees temporary status, but tax professionals who specialize in travel healthcare generally apply a practical guideline: do not work in the same metropolitan area for more than 12 months in any rolling 24-month period, and spend meaningful time back at your tax home between stretches. The reasoning is that if you genuinely rotate among different areas and return home, no single location looks like it has become your indefinite base. This is practitioner guidance, not a line in the tax code, so treat it as a conservative rule of thumb rather than a guarantee.
The cleaner protection is to plan ahead. If you love a city and want to stay, recognize that the stipends should become taxable once the work is indefinite, and negotiate a higher taxable hourly rate to make up for it rather than quietly continuing to take stipends you can no longer defend.
A worked example
Imagine you take four straight 13-week contracts at hospitals around the same city, drawing about $1,300 a week in tax-free stipends. Partway through, you accept the extension that you know will carry you past a year there. From that date, those stipends are taxable. If $20,000 of stipends fall on the taxable side of the line and you are in the 22% bracket, that is roughly $4,400 in federal income tax you did not plan for — plus FICA does not apply to reclassified stipends, but state income tax often will. Knowing the rule in advance lets you renegotiate the package instead of absorbing the hit at filing time.
Want to see what your take-home looks like if the stipends become taxable? Drop both versions of the package into our Contract Analyzer and compare the after-tax numbers side by side before you sign the extension.
Frequently asked questions
Does switching agencies reset the one-year clock?
No. The clock follows the work location, not the employer. If you keep working in the same metropolitan area, changing staffing companies does not give you a fresh 12 months.
What if I switch to a hospital in a different city nearby?
It depends on whether it is genuinely a different general work area. A facility on the far side of the same metro region is usually still the same location for this rule. A move to a clearly separate area, requiring different housing and a different commute, has a stronger argument for starting a new temporary period.
Do my stipends become taxable retroactively?
Generally the change is prospective: stipends become taxable from the date your expectation shifts to more than one year, not back to your first day. But if the IRS concludes you never realistically expected the work to be temporary, it can challenge the earlier stipends too, which is why your contract history and intent matter.
How long should I stay away before returning to the same city?
There is no official number, but many travel-tax professionals suggest a substantial break — commonly cited as around a year away from that area — before treating a return as a new temporary assignment. Because this is judgment, not statute, confirm your specific timeline with a travel-tax professional.
The bottom line
The one-year rule rewards nurses who actually travel and punishes those who quietly settle in while still collecting stipends. Track your cumulative time in each metro area, watch the extension that pushes you past twelve months, and renegotiate before you cross the line. To make sure the rest of your setup holds up, review the IRS three-part tax home test and check your standing with the Tax Home Quiz.
This article is general information, not tax advice. The one-year and serial-assignment rules are fact-specific and hinge on your realistic expectations. Consult a CPA or enrolled agent experienced in travel-healthcare taxation before relying on any timeline.
Wondering whether switching staffing agencies resets this clock? It doesn't — see Switching Travel Nursing Agencies Mid-Year for what actually does and doesn't reset.