The 12-Month Rule: When Temporary Assignments Become Indefinite

What is the 12-Month Rule?

The IRS 12-month rule determines whether your work assignment is "temporary" or "indefinite." This distinction is critical because only temporary assignments allow tax-free travel expense reimbursements.

Why the 12-Month Rule Matters

Temporary Assignment (12 months or less)

• Your original tax home (Florida) remains your tax home
• Housing, meal, and travel stipends can be paid tax-free
• You file taxes as a Florida resident
• Travel expenses may be deductible

Indefinite Assignment (more than 12 months)

• The work location becomes your new tax home
• All stipends become taxable income
• You may owe state income tax where you're working
• Travel expenses are no longer deductible

How the 12 Months Are Counted

The IRS looks at the realistic expectation at the start of your assignment:

Scenario	Status	Tax Treatment
13-week contract, may extend	Temporary	Stipends tax-free
6-month contract with possible 6-month extension	Temporary (unless extension is certain)	Stipends tax-free initially
Permanent position or "as long as needed"	Indefinite	All pay taxable
Extended beyond 12 months total	Becomes indefinite retroactively	Stipends become taxable from start

The Break in Service Exception

You can "reset" the 12-month clock by taking a significant break from a location:

• 7+ months away: Returning to the same location starts a new 12-month period
• Same employer, different location: Each location has its own 12-month clock
• Brief breaks don't count: A week or two off doesn't reset anything

Special Considerations for Travel Nurses

Travel nurses typically work 13-week contracts, well under the 12-month threshold. However, watch for:

Extension Chains

Four consecutive 13-week extensions at the same facility = 52 weeks = still under 12 months. But:

• A fifth extension would push you over 12 months
• If the fifth extension was always expected, you may have been indefinite from the start
• Document that each extension was genuinely uncertain until decided

Same Hospital System

Working at different facilities within the same hospital system in the same metropolitan area may be counted as a single location. Get clarity from a tax professional if this applies to you.

Documentation Best Practices

1. Keep all contracts: Save every assignment contract showing dates and expected duration
2. Document uncertainty: Save emails showing extensions were not guaranteed
3. Track dates carefully: Maintain a calendar of exactly when you worked where
4. Note reasons for leaving: Document when you declined extensions or assignments ended
5. Keep return tickets/receipts: Show you returned to Florida between assignments

Real-World Examples

Example 1: Safe

Sarah takes a 13-week assignment in California, extends twice for a total of 39 weeks, then moves to a Texas assignment. Her California work was temporary—stipends remain tax-free.

Example 2: Risky

Mike takes a 13-week assignment, then extends four more times (65 weeks total). Because his total time exceeded 12 months at one location, the IRS could argue his assignment was indefinite from the start.

Example 3: Saved by Documentation

Lisa worked 50 weeks at one facility. She kept emails showing each extension was uncertain until approved, and her last extension was cut short due to census changes. With documentation, she successfully argued her assignment was always temporary.

Next Steps

1. Review tax home requirements
2. Understand duplicate expenses
3. Travel nurse-specific guidance