Tax Reform - Implications for Travelers
Last update: Nov 17, 2017
Although the tax reform plans that were recently passed by the House and the Senate could reduce federal income taxes for many Americans, as it currently stands healthcare travelers could be among the losers.
Under the current proposals, traveling health professionals who work as regular employees could lose the ability to deduct unreimbursed expenses for things such as license renewal fees, uniforms, mileage and continuing education according to Joseph Smith, a traveling respiratory therapist turned accountant and president of TravelTax.
“The proposed changes eliminate deductions for out-of-pocket expenses that typically exceed per diem rates and travel stipends in favor of higher standard deductions,” Smith explained.
“Depending on the circumstances, a travel assignment may have less appeal. Especially, if agencies decide to increase reimbursement rates and lower wages.”
Even worse, travelers – and other taxpayers – may lose the ability to write off mortgage, rent or utility costs for a primary residence as well as the cost of COBRA or medical expenses.
However, it’s important to point out that the standard deduction may also rise so your taxes could actually be lower under the current proposal. There’s no way to tell how the proposed changes will impact you unless you crunch the numbers.
Although it’s too early to panic as the two chambers still need to iron out their differences and create a single bill, at the very least the proposals require a call to action and perhaps a change in your flexible work arrangements. Just in case, here are some steps you might want to take.
- If you have unreimbursed employee expenses to deduct in 2017, consider purchasing new uniforms or enrolling in 2018 continuing education classes before the end of the year.
- If you’ve been taking a housing stipend and deducting the “excess” costs, you may want to work through an agency that provides corporate housing. Or, consider an extended stay hotel that offers discounted rates to travelers, free breakfast and kitchens. It behooves you to do some research and to get most — if not all — of your travel costs covered by your allowance.
- Consider working through just one agency or accepting longer-term assignments so you qualify for employer-sponsored healthcare coverage or other benefits. Or, look for assignments closer to home to eliminate out-of-pocket travel costs. Remember, every staffing agency offers different benefit packages to travelers such as rental cars, paid vacation, 401(k) and so forth and some hospitals provide housing as well. However, Smith cautioned travelers to make an informed choice since each benefit or perk you select may have different take-home pay and tax ramifications.
- Becoming an independent contractor (IC) is yet another alternative. This is not a decision to be taken lightly however, since you’ll need to purchase your own liability and malpractice insurance, pay self-employment taxes, build up a client base and oversee billing and accounts receivable among other things. Be advised that some medical facilities refuse to hire ICs since they don’t meet the criteria established by the IRS.
- Stay informed. The effect that the proposed tax changes could have on traveling health professionals is important. It's critical to stay abreast of the amendments to the legislation as it winds its way through Congress. In addition, be sure to stay in touch with your accountant and agency staff. They will be closely monitoring the developments and may offer you advice and options as the details of the final bill become clear.
In conclusion, now is the time to think about your options and whether a new benefit or travel plan could save you money, so you’re ready to hit the road should tax reform pass and take effect in January.
By: Leslie Stevens-Huffman, PanTravelers Staff Writer