How Trump's Tax Plan Affects Travel Nurses In 2019
By Angelina Gibson
We asked Joseph Smith, Owner of Traveltax.com, to explain the most significant changes to travel nurse taxes and pay. Smith holds a BA in Accounting, MS in Taxation and is a former traveling Respiratory Therapist. He is also the Co-Founder of the Traveler’s Conference, NATHO Tax Compliance Committee member and a college Instructor in Taxation.
On December 22, 2017, President Trump signed the “Tax Cuts And Jobs Act” into law. The bill passed with a final tally of 224-201. It introduces extensive changes to the U.S tax law. Experts agree that these are the most significant tax changes our country has seen in over 30 years.
How does the new tax plan affect travel nurses? As with all taxpayers, the law will affect you differently based on filing status, deductions, and income. Across the board, it cuts income tax rates, increases the standard deduction and reduces itemized deductions.
Furthermore, it introduces sweeping changes to business, child and elder-care taxes.
How Does Trump’s Tax Plan Affect Travel Nurses?
When does the new tax law go into effect?
Most of the changes go into effect January 2018.
Does the new tax law affect taxes filed in April 2018?
No, in 2017 you were taxed based on the prior tax law.
How does the new law affect my take-home pay?
Nearly 70% of U.S taxpayers claim the standard deduction and will notice a slight increase in their take-home pay. Income taxes are lower and therefore, employers will take out less money.
Expert Travel Nurse Tax Advise
Will the new tax law of 2018 affect travel nurse per diems and stipends?
The new laws will not affect per diems and stipends. Companies can still give you housing stipends, meal allowances, travel pay and other reimbursements.
How will the new tax law affect travel nurse deductions?
Employee expense deductions no longer exist under the new law. Therefore, travel nurses can no longer deduct travel-related expenses, mileage, CEUs, licenses, etc.
If your agency gives you less than the GSA allowable amount for per diems (meals, incidentals) you are no longer permitted to deduct the remaining amount.
With the previous tax law, for example, if you received $35 a day for meals/incidentals and you were working in a $74 per day area (in regards to the GSA guidelines), you could deduct the additional $39 per day on your tax return. As of January 1, 2018, this is no longer allowed.
As a second example, if you drive 2K miles to a new travel nursing assignment and only get $300 in travel pay, you cannot deduct the difference.
How will the law affect travel nurse pay packages?
It may affect the perceived value of the pay package since travel nursing agencies may need to adjust the structure of the pay package.
Since the mileage, license and CEUs are no longer able to be deducted you may see a smaller housing allowance and a shift to the other categories of the pay package.
Will my home-mortgage deductions change?
If you have an existing mortgage you will not be affected. For those planning on buying a home, the mortgage interest deduction will be capped at $750K.
However, the average travel nurse doesn’t have a mortgage that high. It will diminish the benefit of home ownership for tax purposes.
What tips do you have for travel nurses in regards to the new tax bill?
- Ask for higher travel reimbursements from your agency
- Ask for higher license reimbursements
- Since the tax rates are lower, consider a ROTH IRA vs. a tax-deferred traditional IRS/401K/403B
The new tax law is complex, we will continue to post updates as they become available. In the meantime, if you’re a travel nurse, we’d recommend keeping a close eye on traveltax.com and consulting with a financial advisor.
To learn more about how the new tax plan affects travel nursing agencies, Joseph Smith wrote the article Tax Reform Proposals Will Influence Staffing Agency Reimbursement Policies.
Federal Income Tax Brackets
The 7 federal income tax brackets have changed under the new tax law of 2018. These are the updates,
- 10%: $0 to $9,525 of taxable income for an individual
- 12%: $9,526 to $38,700
- 22%: $38,701 to $82,500
- 24%: $82,501 to $157,500
- 32%: $157,501 to $200,000
- 35%: $200,001 to $500,000
- 37%: over $500,001
Married Joint Filers:
- 10%: $0 to $19,050 for married joint filers
- 12%: $19,051 to $77,400
- 22%: $77,401 to $165,000
- 24%: $165,001 to $315,000
- 32%: $315,001 to $400,000
- 35%: $400,001 to $600,000
- 37%: Over $600,000
Additional Changes For Filers
Next, let’s look at some of the notable changes to the tax law and how it affects all taxpayers.
Will the standard deduction change?
The standard deduction increases to $12,000 for individuals and to $24,000 for married couples filing jointly. However, you lose the personal exemption under the new tax law.
Will local and state deductions change?
Taxpayers are capped at $10K for state and local taxes regardless of category.
Will penalties for not having health insurance change?
The Obamacare penalties for not having health insurance no longer exist under the new tax law. Penalties will not be enforced under Trump’s new tax plan until you file taxes in 2019.
What are the changes to the child tax credit?
The child tax credit increases to $2000. Under the previous tax law, it was $1,000. Furthermore, the refundable portion of the child tax credit has been increased to $1,400.
How does the tax law affect independent contractors?
The new tax law offers a 20% deduction for pass-through income - this includes sole proprietorships, partnerships, LLC and S corporations. Therefore, independent contracting may now be more profitable with the pass-through deductions.
However, independent contractors require much more paperwork and this arrangement can only be accomplished under the right circumstances. Not all travel nursing agencies will work with independent contractors.
Angelina Gibson is a former travel nurse Recruitment Manager and current Content Director for Nurse.org