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Tax Reform and Travelers Part 2

Part 2 of 3 on how to navigate through the changes

In part 1, we looked at the new tax laws that took effect on 1/1/18, specifically the end of the employee business expense deduction. In this installment, we will look at the kind of contracts that are most affected by this change.

Under the old rules, travelers could deduct expenses related to assignment travel above their reimbursements (per diems, allowances, stipends etc.) For many travelers, mileage to the assignment and business miles at the assignment were a major source of deductions. Not all travelers could take advantage of these deductions as their total itemized deductions must have exceeded their standard deduction to benefit. There are 4 types of travelers that would commonly itemize. They are the ones most affected by the new laws.

Seasonal Direct Hire ContractsThese contracts offer no reimbursements on a tax-free basis. Typically, these types of contracts are seasonal arrangements directly through a healthcare facility in states that have a considerable number of snowbirds.  These contracts provide housing and travel pay as a taxable benefit. Because the benefit was taxable pay, travelers could deduct these housing and travel costs plus the GSA meal rate for each night away from their tax home. In one 13-week assignment like this a typical traveler would have around $5000 in deductions.

Crisis Assignments

In many crisis assignments, housing is provided tax free, but there are no meal allowances and the travel pay is typically small. Travelers working these shifts could deduct the GSA rate for each night away from home and their mileage more than the travel pay.  In a typical 13-week assignment like this, the traveler would have around $3000 in deductions.

Travelers with Mortgages

Travelers with mortgage interest and real estate tax deductions often itemized without travel deductions to begin with. With a high baseline of itemized deductions, travelers in this category benefited from almost all their travel expenses more than reimbursements.

Travelers with High Mileage 

This scenario is more common in the Industrial Staffing Industry professions, however, some healthcare travelers working a home care contract would not be reimbursed for mileage or their mileage reimbursements were small. In one assignment they could tally 6K of mileage in 13 weeks without reimbursements. This alone was worth over $3000 in deductions.

So, how do we get reimbursed for these items with all the changes? In Part 3, we will discuss the evolving contract dynamics and what travelers should expect to see and do in response to these new laws.

Article written by Joseph C. Smith, RRT, EA, MSTax 

President/Founder of TravelTax

www.traveltax.com – www.traveltax.ca 

Phone (USA): (402) 379-7818 – Phone (CA): (902) 482-8128

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