Many taxpayers are in for a big surprise when they file their returns this year. At the end of 2017, Congress passed one of the most dramatic reforms of the tax code since the 1980s. Which took effect in the 2018 tax year. Many travel nurses have not kept up with the changes or assume the changes will start in 2019.
Most Important Change
The most significant change for travel nurses is the suspension of job / employment expense deductions until 2026. This includes any work-related expense like CEUs, licenses, uniforms, transportation expenses in excess of travel pay, meals in excess of the meal allowance, and seminars. A handful of states will still allow the expenses to be deducted on the STATE return.
The travel nurses most affected by these changes are:
those working hospital based seasonal assignments
those working crisis assignments where the housing is provided without meal allowances
travelers with mortgages whose job expenses were additional deductions on top of the mortgage interest and real estate taxes
travelers with large, unreimbursed mileage in specialties like home care.
So, We Can Toss Receipts?
Wrong. With the job expense deductions gone, the IRS will be retooling the audit selection process. Travel nurses receiving any kind of tax-free reimbursement (per diems, allowances, stipends etc.) will want to be prepared to prove that they qualify to receive these reimbursements without having to report them as additional income on the tax return. Those receiving travel pay should keep a mileage log justifying all the transportation allowances. Likewise, those receiving lodging allowances should keep proof of a lodging expense at the assignment area for each day of the contract. At a minimum, a travel nurse should keep a lease agreement and proof of payment for the period of the assignment.
Keep Contract Copies and Have them Reviewed at Tax Time
Since healthcare staffing is a heavily audited industry, it is vital that each travel nurse keep their employment agreements that show their reimbursements and contact terms. Some agencies in the industry do not have the most compliant policies and a good tax preparer who understands the industry (and similar industries) can help ensure that any non-qualifying reimbursements, per diems or stipends are correctly reported.
Tax Home Rules Unchanged
Several travel nurses have heard rumors that per diems, stipends and allowances (reimbursements) would not longer be allowed on a tax-free basis or that tax home rules had changed. Neither of these rumors are true. A travel nurse must still have a qualifying tax home before receiving any per diems that are not reported as income. A tax advisor familiar with tax home rules can help keep the traveler compliant. It’s easy to get varying opinions on what qualifies from fellow travelers, recruiters and uninformed preparers.
Going Forward
Job expenses are not gone forever. They are only “suspended” until 2026 when they will return. However, here is the lowdown on tax law: it’s like a teenager’s bedroom. Once it is cleaned, it will be messy again by the end of the day. Already, during the last congress, a bill was introduced in the Senate and the House that would reinstate job expenses. Since the recent elections, the bills have not been introduced in the newly assembled Congress which is necessary for consideration. As we work through the tax returns this year, many affected taxpayers will undoubtedly be calling their congressional representatives asking to have the job expense deductions restored.
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