Lewes CPA
officeProgar & Company, P.A.
Certified Public Accounting services for businesses and individuals
Deductions for temporary job assignments away from home (MS Word)
Deductions for temporary job assignments away from home (.pdf)
Deductions for temporary job assignments away from home
Dear reader:
You recently inquired about the tax consequences of your temporary
job assignment away from home.
The most important question for tax purposes relates to the length
of the assignment. If you are away from home for more than one year,
the assignment is classified as “indefinite” (as opposed to
“temporary”), and you won't be able to deduct any of your personal
living expenses. On the other hand, if you are actually away for one
year or less and it was realistic to expect that you would be
away for one year or less, then your assignment can qualify as
“temporary” (unless particular facts and circumstances indicate
otherwise).
If your assignment qualifies as temporary you can deduct the
personal living costs you incur while away from home. Significantly,
this includes the costs of lodging and meals as long as they are not
lavish or extravagant (although meals are subject to the regular
rules for deductible meals which generally only allow half of their
cost to be deductible). Other incidental living expenses, such as
for laundry or dry cleaning, are also deductible. You can deduct the
costs of trips “home,” e.g., on weekends, but only up to the amount
you would have spent on meals and lodging at your temporary work
location had you not gone home.
These employee business expenses are miscellaneous itemized
deductions that are subject to the 2% floor rule. That means that
your employee expenses, when added to your other miscellaneous
itemized deductions, are deductible only to the extent that they
exceed 2% of your adjusted gross income. Other miscellaneous
itemized deductions include tax preparation fees and investment
expenses.
If, however, your employer reimburses the expenses under a plan that
meets certain requirements, a so-called “accountable” plan, you can
avoid the 2% floor. Instead, you don't include the reimbursements in
income and you don't deduct the expenses. Expenses in excess of
reimbursements, or expenses that are reimbursed from a
non-accountable plan, are subject to the 2% floor.
These rules allow for substantial deductions in many cases, and you
must be careful to meet the substantiation requirements. That is,
save all receipts and documentation regarding your deductible
expenses. Keep a logbook showing your costs while away from home on
your temporary job assignment.
Additionally, in the event IRS seeks to make the case that your
assignment was “indefinite,” it's advisable to establish a record
showing it was reasonable to expect the assignment would last one
year or less. For example, save any memos or documentation from your
employer regarding the nature of your assignment. An explicit
statement in writing from your employer to the effect that the
assignment isn't expected to exceed one year could prove helpful.