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Your employment classification — W-2 employee or 1099 independent contractor — fundamentally changes how your taxes work. Most travel nurses are W-2, but some agencies use 1099 arrangements. TaxHomeBase handles both.

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Side-by-Side Comparison

W-2 Employee1099 Contractor
Tax withholdingAgency withholds federal/state income tax + FICAYou pay all taxes yourself
FICA taxes7.65% (employer pays matching 7.65%)15.3% self-employment tax (you pay both halves)
Federal deductionsStandard deduction only (TCJA suspension is permanent)Schedule C business expenses + standard deduction
State deductions5 states still allow (NY, CA, AL, HI, AR)Full deductions in all states
Quarterly paymentsUsually not needed (withheld by employer)Required — penalties for underpayment
Tax formsW-2 from each agency1099-NEC from each agency

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How Deductions Work

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Federal Deductions

The Tax Cuts and Jobs Act (TCJA) of 2017 suspended the ability for W-2 employees to deduct unreimbursed business expenses on their federal return. The One Big Beautiful Bill Act (2025) made this suspension permanent. W-2 employees are limited to the standard deduction on their federal return.TaxHomeBase still tracks your expenses because:
  • 5 states allow them — NY, CA, AL, HI, and AR didn’t conform to TCJA and still allow W-2 expense deductions on state returns
  • Profitability tracking — Expenses are factored into per-assignment net profit

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State-Level Deductions

If you work in a non-conforming state, TaxHomeBase automatically calculates your state deduction:
StateFloorRule
NY2% AGIDeduct amount exceeding 2% of federal AGI
CANoneDeductible from the first dollar
AL2% AGISame as NY
HI2% AGISame as NY
AR2% AGISame as NY
Non-resident apportionment applies: the deduction is proportional to your income earned in that state.

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Self-Employment Tax (1099 Only)

1099 contractors pay self-employment tax (the combined employer + employee portions of Social Security and Medicare):
ComponentRateWage Base (2025)
Social Security12.4%$176,100
Medicare2.9%No limit
Total SE Tax15.3%
The tax is calculated on 92.35% of net self-employment income (the 7.65% adjustment mirrors the employer’s FICA contribution).

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Filing Status

Your filing status affects your standard deduction amount:
Status2025 Standard Deduction
Single$15,000
Married Filing Jointly$30,000
Married Filing Separately$15,000
Head of Household$22,500
Set your filing status in Profile → Personal Info.

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TCJA Suspension (Permanent)

The One Big Beautiful Bill Act, signed July 4, 2025, made the TCJA suspension of W-2 expense deductions permanent. W-2 employees cannot deduct unreimbursed business expenses on their federal return. The standard deduction is applied automatically. However, 5 states (NY, CA, AL, HI, AR) still allow these deductions on state returns — TaxHomeBase tracks and applies these state-level savings automatically.