Bloggers
Search Blogs
Travel Tax Expert and owner of TravelTax, LLC
Do you drive 50 Miles, 100 miles or 121 miles to get to your main job?
Do you drive 50 Miles, 100 miles or 121 miles to get to your main job?
It's not deductible nor qualifying for lodging allowances!
One of the most ridiculous myths in the healthcare staffing industry is that the IRS allows a tax break and tax free housing allowances to anyone that drives more than 50 miles to work. While it might seem unfair for someone to incur significant transportation expense to get to work without a tax benefit, the fact of the matter is that permanent or long term employment far from home is still a personal choice. Not an involuntary burden that is deserving of tax relief.
A recent court case brought this to light. Mr. Chacin was a building contractor that drove 121 miles to his company’s headquarters and received instructions on where to work for that day. All of the work was done in the area of the company headquarters and his employment with the company had lasted more than 12 months. As a result, the Tax Court ruled that the stop at the company headquarters was part of the routine commute in getting to the worksite. As a result, none of the mileage was allowed.
Alternatives
When would this mileage be deductible? If Mr Chacin was employed on a temporary basis at this site and outside of the metropolitan area of where he normally worked, all of the mileage would be deductible as an employee business expense. Temporary is defined as any assignment that does not last longer than 12 months and this is generally inclusive of short breaks.
Mr Chacin also worked a second job which he commuted to after finishing at the main place of work twice a week. These expenses were deductible despite the fact that this second job was close to his primary home. It is a long held regulation that commuting expenses to the first job site and the last trip home are nondeductible personal expenses but trips between multiple worksites in between the first and last trip are deductible. For home care workers this is an important principal in planning the day’s work.
Housing and Agency practice
There are many agencies that hold fast to a 50 mile rule when evaluating taxability of lodging allowances. The use of a mileage benchmark is understandable in anticipating additional lodging expenses, but there is a stronger relationship between housing expenses and housing reimbursements than a mileage policy. In other words, since housing allowances are designed to cover housing expenses, a mileage policy should have no bearing on the treatment of housing allowances. Only the proof that duplicative housing expenses are incurred should justify the initial tax free treatment of lodging allowances.
Reference Tax court Summary Opinion 2009-127
Joseph Smith EA/RRT Joseph Smith is a former travel respiratory therapist and CEO of TravelTax LLC, a tax preparation and advisory firm for healthcare travelers. www.traveltax.com
It's not deductible nor qualifying for lodging allowances!
One of the most ridiculous myths in the healthcare staffing industry is that the IRS allows a tax break and tax free housing allowances to anyone that drives more than 50 miles to work. While it might seem unfair for someone to incur significant transportation expense to get to work without a tax benefit, the fact of the matter is that permanent or long term employment far from home is still a personal choice. Not an involuntary burden that is deserving of tax relief.A recent court case brought this to light. Mr. Chacin was a building contractor that drove 121 miles to his company’s headquarters and received instructions on where to work for that day. All of the work was done in the area of the company headquarters and his employment with the company had lasted more than 12 months. As a result, the Tax Court ruled that the stop at the company headquarters was part of the routine commute in getting to the worksite. As a result, none of the mileage was allowed.
Alternatives
When would this mileage be deductible? If Mr Chacin was employed on a temporary basis at this site and outside of the metropolitan area of where he normally worked, all of the mileage would be deductible as an employee business expense. Temporary is defined as any assignment that does not last longer than 12 months and this is generally inclusive of short breaks.
Mr Chacin also worked a second job which he commuted to after finishing at the main place of work twice a week. These expenses were deductible despite the fact that this second job was close to his primary home. It is a long held regulation that commuting expenses to the first job site and the last trip home are nondeductible personal expenses but trips between multiple worksites in between the first and last trip are deductible. For home care workers this is an important principal in planning the day’s work.
Housing and Agency practice
There are many agencies that hold fast to a 50 mile rule when evaluating taxability of lodging allowances. The use of a mileage benchmark is understandable in anticipating additional lodging expenses, but there is a stronger relationship between housing expenses and housing reimbursements than a mileage policy. In other words, since housing allowances are designed to cover housing expenses, a mileage policy should have no bearing on the treatment of housing allowances. Only the proof that duplicative housing expenses are incurred should justify the initial tax free treatment of lodging allowances.
Reference Tax court Summary Opinion 2009-127
Joseph Smith EA/RRT Joseph Smith is a former travel respiratory therapist and CEO of TravelTax LLC, a tax preparation and advisory firm for healthcare travelers. www.traveltax.com
Comments
Date Posted: Jan 1, 2011 at 7:15 PM
The documentation that you are referring to is found in IRS Publication 463, about the 6th page which defines the concept of a tax home. You have to read this section in context before applying it to your situation.
The publication begins with the basic definition of a tax home- which is the place you earn your income, not where you live. Expanding from this, it discusses the tax home from the perspective of someone who has more than one job at a given time, or a series of jobs during the year in various locations. The section you are referencing is the third part of this discussion of addresses situations for individuals that have no primary place of income, are constant motion as the location of work, and/or working temporary assignments “away from their tax home”. This section is an exception to the general rule of a tax home being located where you earn your income. This “temporarily away from home” status requires that you incur an overnight stay to conduct the duties that you were assigned due to the unreasonableness of the demands of the job. In other words, it would be unreasonable for individual to perform the normal duties, return home, and the return back to work. In the normal course of this job, you are returning home at the end of the shift - because of this, the assignment would not be considered to be “away from home”. Random and infrequent overnight stays does not recharacterize the assignment as “away from home” from one is clearly within your metropolitan area evidenced by the fact that you regularly return home at the end of the shift.
If the situation was in reverse, were you regularly stayed overnight but infrequently returned home at the end of the shift, we would have a different story.
This premise expands to the mileage deduction as well. If you were engaged in two different jobs at the same time, again, the results would be different.
The publication begins with the basic definition of a tax home- which is the place you earn your income, not where you live. Expanding from this, it discusses the tax home from the perspective of someone who has more than one job at a given time, or a series of jobs during the year in various locations. The section you are referencing is the third part of this discussion of addresses situations for individuals that have no primary place of income, are constant motion as the location of work, and/or working temporary assignments “away from their tax home”. This section is an exception to the general rule of a tax home being located where you earn your income. This “temporarily away from home” status requires that you incur an overnight stay to conduct the duties that you were assigned due to the unreasonableness of the demands of the job. In other words, it would be unreasonable for individual to perform the normal duties, return home, and the return back to work. In the normal course of this job, you are returning home at the end of the shift - because of this, the assignment would not be considered to be “away from home”. Random and infrequent overnight stays does not recharacterize the assignment as “away from home” from one is clearly within your metropolitan area evidenced by the fact that you regularly return home at the end of the shift.
If the situation was in reverse, were you regularly stayed overnight but infrequently returned home at the end of the shift, we would have a different story.
This premise expands to the mileage deduction as well. If you were engaged in two different jobs at the same time, again, the results would be different.
Date Posted: Dec 30, 2010 at 11:28 PM
In regard to the overnight stays, I would need to know the mileage from the hotel to the facility and to your home. I would also need to know what the terms of the call periods are. Do your work 12, on call 12 and required to be less than X miles from the facility?
Mileage from hotel to site is 6 miles one way. Mileage from home to site is 45 miles one way. Call terms are this: Once my shift ends, ex: 1530, I am then on "call - aka standby" and must be able to respond and be ready within 30 minutes until 0700 the next morning or, if a weekend call shift, thru the entire weekend until Monday at 0700.
If you return home after the end of the shift, none of the mileage is deductible. Since this is your only job, it becomes your base. Here's something I found recently: Tax home
Your residence can be treated as your tax home so that if you travel away from home on business your costs are deductible if you meet three conditions:
1. You do some work in the vicinity of your residence. (Yes – Walnut Creek)
2. You have mortgage expenses or pay rent for the residence while you are on the road. (Yes)
3. You or a member of your immediate family has lived in the area of your residence for a long time. (Yes)
If you meet two of the three conditions, you may be able to use your residence as your tax home, but if you meet only one condition, you cannot do so.
I'm leaning towards deducting my mileage, etc expenses for the 6 month assignment...But, I'd hate to be audited for something that should be clear.
BTW, thanks for the responses.
xray
Mileage from hotel to site is 6 miles one way. Mileage from home to site is 45 miles one way. Call terms are this: Once my shift ends, ex: 1530, I am then on "call - aka standby" and must be able to respond and be ready within 30 minutes until 0700 the next morning or, if a weekend call shift, thru the entire weekend until Monday at 0700.
If you return home after the end of the shift, none of the mileage is deductible. Since this is your only job, it becomes your base. Here's something I found recently: Tax home
Your residence can be treated as your tax home so that if you travel away from home on business your costs are deductible if you meet three conditions:
1. You do some work in the vicinity of your residence. (Yes – Walnut Creek)
2. You have mortgage expenses or pay rent for the residence while you are on the road. (Yes)
3. You or a member of your immediate family has lived in the area of your residence for a long time. (Yes)
If you meet two of the three conditions, you may be able to use your residence as your tax home, but if you meet only one condition, you cannot do so.
I'm leaning towards deducting my mileage, etc expenses for the 6 month assignment...But, I'd hate to be audited for something that should be clear.
BTW, thanks for the responses.
xray
Date Posted: Nov 21, 2010 at 10:59 PM
If you return home after the end of the shift, none of the mileage is deductible. Since this is your only job, it becomes your base.
In regard to the overnight stays, I would need to know the mileage from the hotel to the facility and to your home. I would also need to know what the terms of the call periods are. Do your work 12, on call 12 and required to be less than X miles from the facility?
In regard to the overnight stays, I would need to know the mileage from the hotel to the facility and to your home. I would also need to know what the terms of the call periods are. Do your work 12, on call 12 and required to be less than X miles from the facility?