Building a Taxable Brokerage as a Travel Nurse

Once you’ve maxed your Roth IRA and contributed enough to your 401k to capture any employer match, you might still have money left to invest. That’s a good problem to have — and the taxable brokerage account is where your next dollar belongs. Here’s how to use it well.

What a Taxable Brokerage Account Is

A taxable brokerage account is just an investment account with no special tax treatment. You open it at any brokerage, fund it with after-tax dollars, invest in whatever you want, and pay taxes on gains and dividends as you go.

Compare this to a Roth IRA: no taxes ever on qualified withdrawals, but you’re limited to $7,000/year. Or a traditional 401k: contributions reduce taxable income now, but you pay taxes on withdrawals in retirement. The taxable account has no contribution limit, no income limit, and no restrictions on when you can access the money — but you don’t get the upfront tax break.

When It Makes Sense for Travel Nurses

For most travel nurses, the order of operations is:

1. Emergency fund (3-6 months expenses, liquid)
2. Max Roth IRA ($7,000 in 2024)
3. 401k at least to the employer match
4. HSA if eligible ($4,150 individual)
5. Then: taxable brokerage

Travel nursing often generates higher income than the same nurse could earn as a staff employee. If you’re disciplined with stipends, you may be saving $2,000-4,000/month beyond what your tax-advantaged accounts can absorb. That excess has to go somewhere — and a taxable brokerage beats a savings account.

The taxable brokerage also serves a key travel nurse-specific function: flexibility. Unlike a Roth IRA or 401k, you can pull money from a taxable account any time without penalties. If you take a contract gap, have a surprise expense, or decide to take a month off, liquid investment assets are your friend.

The Tax Treatment of Gains

You’ll pay taxes on two things in a taxable account:

Dividends: Paid by stocks and funds when underlying companies distribute earnings. Qualified dividends (from most U.S. and some foreign stocks) are taxed at the long-term capital gains rate — 0%, 15%, or 20% depending on your income. Ordinary dividends are taxed at your regular income rate.

Capital gains: When you sell an investment for more than you paid, you owe taxes on the gain.

• Held less than 1 year: short-term capital gains = taxed as ordinary income
• Held more than 1 year: long-term capital gains = 0%, 15%, or 20%

For most travel nurses in the 22% ordinary income bracket, long-term capital gains are taxed at 15%. Short-term gains at 22%. The difference is significant and shapes your investment strategy.

The Travel Nurse Tax Advantage Here

Travel nurses often have lower taxable income than total compensation suggests because stipends are excluded. You might earn $120,000 total but only have $50,000 in taxable wages.

At $50,000 taxable income (single), your long-term capital gains rate is 0% — yes, zero. The 0% rate applies up to $47,025 for single filers in 2024 (and higher for married filing jointly). Even with some capital gains on top, many travel nurses pay little or nothing on long-term gains.

This makes the taxable brokerage even more attractive: if your taxable income stays low due to stipend-heavy pay structures, you can harvest gains annually and pay nothing in tax.

Which Investments Work Best in a Taxable Account

Not all investments are created equal for taxable accounts. Tax efficiency matters here because you’re paying taxes on any distributions.

Most tax-efficient (best for taxable accounts):

• Broad market index ETFs (VTI, FSKAX, SCHB) — low turnover, few taxable events
• Total international ETFs (VXUS, IXUS) — foreign tax credit offsets some taxes
• Municipal bond funds — interest is federal tax-free (less useful if you’re already in low bracket)

Less tax-efficient (better kept in tax-advantaged accounts):

• REITs — dividends taxed as ordinary income
• High-yield bond funds — interest taxed as ordinary income
• Actively managed funds — frequent trading generates taxable events

A simple, powerful taxable brokerage portfolio: VTI (U.S. total market) + VXUS (total international) in roughly 70/30 proportion. Both have expense ratios under 0.10% and minimal taxable distributions.

Tax-Loss Harvesting

When one of your investments is down, you can sell it to realize a loss, which offsets capital gains elsewhere. Then you buy a similar (but not identical) fund to maintain your market exposure. This is called tax-loss harvesting.

Example: You hold $10,000 in VTI and it’s down to $8,500. You sell, capture the $1,500 loss, and immediately buy SCHB (similar exposure, different fund). You now have a $1,500 capital loss that can offset gains elsewhere or reduce ordinary income by up to $3,000/year.

Unused losses carry forward to future years. This is a legitimate, legal strategy and brokerages like Wealthfront and Betterment automate it.

Opening and Funding the Account

You can open a taxable brokerage account in 5-10 minutes at:

• Fidelity — excellent interface, good zero-fee funds
• Schwab — reliable, wide investment selection
• Vanguard — creator of index fund investing, slightly dated interface
• M1 Finance — good for automated portfolio contributions

After opening, set up automatic monthly contributions. Even $300/month invested in index ETFs compounds significantly over 20 years. The specific amount matters less than the consistency.

What to Avoid

Don’t trade individual stocks — most individual stock pickers underperform the market over time, and the trading creates taxable events.

Don’t chase high-yield funds for income — the yield is taxed at ordinary rates and negates the advantage.

Don’t panic sell during downturns — long-term investing means riding out the volatility. Selling in a down market locks in losses and potentially converts them from paper losses to real ones.

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Your next step: After your next full paycheck, calculate how much you have left after expenses and retirement account contributions. If there’s $500 or more, open a Fidelity or Schwab taxable account this week and buy VTI. Set up an automatic monthly contribution so you don’t have to think about it again.