TCJA reform: 3 important changes you should know if you work in health care
Near the end of December 2017, President Trump signed into law the Tax Cuts and Jobs Act (TCJA), which put in place numerous new laws that impacted the ways individuals pay their annual taxes. While the reform does not impact 2017 taxes, it will affect income and deductions of 2018 earnings.
The TCJA has specific implications for health care workers in particular. Let’s take a closer look at the ways in which the tax reform will impact physicians, nurses and other individuals in the health care sector.
Increased take-home pay
One highly touted benefit of the reformed tax laws is a rise in take-home pay. This will impact employees across the health care sector regardless of their position or income tax . As Scott Mariani, partner at Withum, Smith and Brown, notes the federal corporate income tax rate was decreased to a flat metric of 21 percent, meaning that employees will see a modest increase in their take-home pay.
Elimination of the Alternative Minimum Tax
The TCJA also removed the alternative minimum tax (AMT), which was put in place in 1969 to prevent high-earning individuals from using loopholes and deductions to avoid paying the correct level of taxes on their income.
Prior to the TCJA being signed into law, Medscape contributor Karen Riccio stated that the elimination of the AMT will be a benefit for physicians, surgeons and administrators especially, as they are some of the highest-earning members of the health care sector.
“This would make a ton of docs happy, as physicians are frequently in that income range ($150K-$400K) where the AMT takes a bite,” one physician told Riccio.
Despite the AMT being repealed, it’s important to note that phase-out limits are still in place, meaning that some physicians won’t be able to leverage increased personal exemptions.
Elimination of employee expense deductions
However, the reformed tax laws aren’t all good news: The TCJA also removes certain expense deductions commonly leveraged by health care employees in past years. The TCJA prevents the use of miscellaneous itemized deductions, where previously workers were able to write off and receive deductions for job-related expenses.
CNBC contributor Annie Nova notes the implications both inside and outside of the health care industry: “Nurses can’t write off their scrubs anymore. Salespeople can’t deduct their travel expenses. Professors can’t subtract research costs,” Nova wrote. “Those are just a few examples on a long list of expenses that, under the old tax code, employees could potentially write off.”
And as Nurse.org observes, the elimination of these expense deductions will significantly impact traveling nurses and other traveling health care workers.
Navigating the new tax codes
Chances are good that health care workers will have questions for the Human Resources (HR) team about changes to their taxable income. In order to properly navigate in the current landscape, business and HR administrators should have granular visibility into their income and benefits processes. This requires specialized, advanced software that can support and streamline key administrative work.
To find out more, connect with the experts at Secova today.