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Tax Reform Update
Featured

Tax Reform Update

Taxes 01 January 2018

 

Last Update: April 3, 2025

For most healthcare travelers, the news remains relatively steady. Tax policy changes in recent years haven't significantly altered the core financial advantages of traveling versus permanent staff roles. Agency compensation structures—particularly tax-free stipends for housing and meals—are still intact and remain a cornerstone of traveler income.

Standard Deduction & Take-Home Pay

Single travelers who do not itemize deductions in 2025 will continue to benefit from the higher standard deduction. The IRS standard deduction for single filers in 2025 is $14,600, up from $12,000 in 2018. While personal exemptions remain suspended (as per the 2017 Tax Cuts and Jobs Act), most travelers will see a modest increase in take-home pay due to the standard deduction increases and inflation adjustments to tax brackets. The change, however, is subtle on a weekly paycheck—likely less than $10/week for most.

Itemizers See Limitations

Travelers who itemize are still facing reduced deduction opportunities. Many of the itemized deductions removed or limited by the 2017 tax overhaul are still in place in 2025:

  • Mileage deductions for unreimbursed employee business expenses (e.g., travel between housing and worksites) are still gone for W-2 employees. You can no longer deduct mileage that exceeds your agency’s travel stipend.

  • M&IE (Meals and Incidentals) deductions are also no longer available for W-2 travelers. Previously, you could deduct the difference between what your agency paid and the IRS per diem maximums. This is still off the table in 2025.

  • Other unreimbursed job-related expenses like scrubs, licenses, CEU fees, and professional association dues (e.g., PanTravelers membership) are still not deductible for W-2 employees.

What You Can Still Get

Tax-free stipends (for housing, meals, and travel) remain protected for qualifying travelers who maintain a legitimate tax home and meet IRS guidelines. These stipends are not considered taxable income, preserving one of the biggest financial advantages of being a healthcare traveler.

W-2 vs. 1099: The Contractor Question

The idea of switching from W-2 employee status to 1099 independent contractor remains appealing to some, especially given the continued eligibility of independent contractors to deduct business expenses like mileage and M&IE. However, practical and legal challenges remain:

  • Most staffing agencies do not offer 1099 arrangements due to liability and compliance issues (e.g., workers’ comp, unemployment insurance, and IRS scrutiny).

  • Many hospitals and vendor managers specifically prohibit independent contractor staffing in their contracts, leaving limited room for travelers to pursue this route.

  • While the 20% pass-through deduction (Section 199A) is still available for some types of self-employed taxpayers, healthcare professionals—especially those offering personal services—often fall into restricted categories. Unless operating as part of a larger entity with qualifying income structures, many travelers may not benefit.

Rare Exceptions

There is a small number of 1099 travelers who work through boutique agencies or contract directly with facilities. These individuals may still benefit from:

  • Mileage and M&IE deductions on Schedule C

  • Section 199A pass-through deduction in some cases

  • Greater control over their business finances, but with added responsibilities

Fewer still are those who have created their own staffing agency to bypass middlemen. This has become increasingly difficult with the rise of Vendor Management Systems (VMS) and Managed Service Providers (MSP), which control access to facility contracts.


In Summary:

  • Most travelers will see no significant change to their net take-home pay from recent tax updates.

  • The majority of itemized deductions lost in 2018 remain unavailable.

  • The W-2 vs. 1099 debate is largely academic for most travelers due to legal and contractual barriers.

  • Tax-free stipends remain the most valuable financial advantage for healthcare travelers.

We’ll continue to monitor IRS guidance and congressional updates that may impact traveler compensation or classification.

 

Prior update: January 1, 2018

For most travelers, the news is OK. It doesn’t impact the decision to be a traveler versus staff. Current compensation schemes by agencies have not changed. So no one’s take-home pay from agencies will drop.

Single travelers who don’t itemize will see a net gain of $1,650 not subject to federal income tax because of the net changes to the standard deduction and personal exemption total. That is around a $400 annual increase in take-home pay. That might be a bit of shrug for most as it will be all but unnoticeable on a weekly basis (about $8/week).

Some travelers who itemize will lose out, especially if they were accustomed to claiming certain deductions usually only familiar to a tax professional who specializes in healthcare travelers. The rules have changed for a couple of items. One is the ability to deduct mileage costs based on IRS allowable amounts (53.5 cents in 2017) if it exceeds the travel allowance from your agency - as it usually does. Some travelers also deduct the commute mileage from the remote housing to the remote workplace. That is also gone.

The other important item for travelers who itemize are M&IE, or meals and incidentals, sometimes called per diems.  If an agency does not pay the maximum allowable amounts (per this .gov site), previously you could deduct the difference. That is gone.

There are a number of other federal return deduction reductions that have made news including limits on mortgage interest deductions, contributions to charities, and local and state taxes. Also unreimbursed miscellaneous business deductions such as scrubs and professional associations (including PanTravelers) and licenses/certifications. However tax-free reimbursements (technically what tax free stipends such as housing and per diems are called by the IRS) from agencies can continue.

These itemized reductions affect travelers and staff equally, so they should not change the financial calculus to be a traveler versus staff.

This article will be updated as the actual bill is analyzed further, and the IRS adopts rules to implement it. That could take us a few months into 2018 before everything is clear.

One item that has met with much news coverage is how changing your tax status from an employee to an independent contractor can provide a new reduction in taxes. And indeed that could lower your tax bill and increase your after-tax net income. However, service companies are generally excluded, and it is not clear if the same is true for healthcare travelers (who seem to fit that category as a business rather than an employee).  It does seem unlikely as physicians are on the excluded list. When the IRS crunches the new tax bill, their new regulations should make it clear.

There are other practical impediments for independent contractors. Few agencies allow reporting on an IRS 1099 form (revenue) for an independent contractor (a “pass-through” tax structure) versus a regular employee W-2 (income). Many facility or vendor manager contracts specifically disallow the use of independent contractors. There are a number of legal issues related to agencies and hospitals that discourage the use of independent contractors, from workers compensation, to unemployment, to IRS audits of agencies that use independent contractors (generally found to be legal from a tax court perspective for travelers, but still a costly legal hassle for the smaller agencies who might use independent contractors).

Taking an independent contractor path is difficult and most travelers will find it impractical.

That said, there are a small number of 1099 travelers, and they do benefit versus W-4 both before and after the 2017 tax bill. They will still be able to take mileage and M&IE deductions first dollar before it is passed through to their 1040 return. 

There are even fewer travelers who have set up their own agency to bypass the middleman and contract directly with hospitals. This has become much harder with the rise of additional middlemen in the form of vendor managers who handle all contracts with agencies.

 

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Featured

Tax Reform - Implications for Travelers

Articles 14 December 2017

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.

Action Steps

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Featured

Non-compete FAQ

Legal 01 July 2009

What is a non-compete clause?

A non-compete clause (also called a do-not-compete agreement, or more whimsically a faithless servant doctrine) in an employment contract is a hiring restriction.

 

What is it for?

It is intended to limit your choices of other employers (competition) or protect or maximize an employer’s investment in your services. Typically this means protecting trade secrets, confidential information or an investment in an employee’s training and skills.

0 comments
Featured

Overtime rate negotiation

Articles 06 April 2007

negotiation

Overtime Rate Negotiation


 
This is an interesting subject. Most travelers are surprised to learn that overtime is something that can be negotiated like any other item. Here are some examples: everyone is familiar with negotiating your base rate. If you negotiate the base rate down, perhaps due to an upgrade in housing, or a tax free reimbursement, why should your overtime rate suffer and the agency benefit? Many travelers are also familiar with agencies that pay double time for overtime instead of the usual time and a half. How is it possible for them to do this? And there are number of agencies who pay less than time and a half for overtime. Is that legal? 

Key Points: 

  • There are several methods of setting overtime pay.
  • Generally speaking, all methods are legal.

  • Overtime is negotiable just like any other contract item.
  • Agencies typically make excessive profits on overtime hours. 
  • Research is critical before negotiation.
  • Third parties to the contract make a difference in negotiating approaches.

 

Basic concepts

In fact, almost any rate an agency pays for overtime is legal. In many states, overtime laws have been interpreted to mean time and a half based on state or federal minimum wage. All healthcare professionals make substantially more than that, limiting intervention by state labor departments. Recent federal laws passed further obscure the issue of overtime (for nurses) as they define nurses  as supervisory personnel exempt from overtime regulations. While it this legislation turns out to be a red herring for hourly employees, it is still misunderstood by some employers and even some lawyers.

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For the purposes of this article today, we will ignore labor legislation and agree that as contract employees, overtime is governed solely by our contracts with the agency. Realizing this gives the traveler the freedom to negotiate a contract based on not only the traveler's individual work patterns, but also on the ability of agency to pay a fair percentage of the bill rate they receive for your hard work.

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    • Large agencies
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    • Overview
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    • Failure to complete
    • California Overtime Rules
    • Meet Your Legal Team
    • Guaranteed Hours
    • GroupOne Blacklist
    • Legal Blacklists
    • Background/Credit Checks
  • Taxes
    • Tax Home
    • Itinerant!
    • Tax Deductions
    • Tax Advantage
    • Tax Advantage FAQ
    • Tax Advantage & Social Security
    • Tax Advantage vs Itemizing
    • IRS Per Diem Rates
  • Articles
    • History!
    • Traveling Basics
    • Becoming a Traveler
    • The Agency Interview
    • Finding an agency
    • The Agency Interview
    • Finding an assignment
    • The facility Interview
    • Housing options
    • What to bring on assignment
    • Professional Portfolio
    • Communications on the Road
    • How to Negotiate
    • Overtime Rate Negotiation
    • Landing an Assignment: Advanced
    • Completion Bonuses
    • Health Insurance
    • Overseas Gov Jobs
    • About Strikes
  • Editorials, etc.
    • Working Strikes
    • Agencies and Blacklists
    • Strangers in our midst
    • Do travelers reduce staff pay?
    • Total Nurse Travelers
  • Columns
    • What you can learn from audits
    • State tax agencies auditing licenses
    • Deducting Travel Expenses - part 1
    • Deducting Travel Expenses - part 2
  • Cartoons
    • Canteloupe a Day
    • Got your nose!
    • Cell Phone
    • Hypochondriac
    • Congestion
    • Goldilocks
    • Eat Grass
    • Bright eyed
    • Second Opinion
    • Apple a day...
    • Nose Check
    • Planetary Alignment
    • Ringtone
    • Silent Treatment
    • Turnip Truck
    • Million Bucks
    • Thinner
    • Nurse Sharks
    • Calcium Deficiency
    • Leftovers
    • Dirty Underwear
    • Road Less Traveled
    • Keeping the Doctor Away
    • First Doctor's Note
    • Germaphobes Anonymous
    • Early Acupunture
    • New Traveler Orientation
  • Useful Links
  • Political Action