- What is a tax home?
- Is there a specific distance you need to be away from your tax home?
Why do travelers get to collect Tax-Free money?
One of the reasons travelers get paid so much more than perm staff, is because of the tax benefits that travelers can receive. We, as traveler, get to collect tax- free money for housing and meals because we are traveling for work.
The maximum daily allowable amount paid for housing and meals (also referred to as per diem) stipend can be determined based in location at gsa.gov.
But in order to collect this stipend, we have to adhere to regulations.
What are the requirements to collect Tax-Free stipends?
More specifically, according to the IRS, travelers can collect tax-free money because they travel a “non-commutable distance” away from their “tax home” and “duplicate living expenses.” I know- that’s a mouth- full, right?
Let’s examine what each of these words mean a little further…
-A “non-commutable” distance means too far from “home” to commute there and back in an ordinaries day of work.
–“Tax home” means a place of residence, either historic and/or family lives there, returns there often, & does not abandon it.
–“Duplicating living expenses” means that you are paying to maintain your tax- home in addition to renting an apartment where your assignment is (because it is too far to commute in one day).
In order to collect the tax-free money, all of the above must be true. However, I am NOT a tax professional, so please consult with one.
What is a Tax Home?
According to the IRS website, these are the requirements for a tax home:
You maintain a Tax home if you:
1. You perform part of your business in the area of your main home and use that home for lodging while doing business in the area.
2. You have living expenses at your main home that you duplicate because your business requires you to be away from that home.
3. You have not abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging.
This info is from the IRS/GSA website. Click here is a reference from the IRS to explain the above in more detail.
Is there a specific distance you need to be away from your tax home?
TravelTax.com explains this:
“It is not distance but what you do at the end of the shift that determines if the assignment is far enough away to qualify as a travel assignment. If you work a travel contract but return home at the end of the shift, you cannot deduct miles or meals, and all tax-free per diems or stipends are taxable. Sad, but true. The “50-mile radius” [that you might have heard about from companies] is an internal company benchmark for their own policies. They are not based on IRS guidelines.
Why?
All of those deductions/tax-free income is based on: 1) the worksite being too far to return home every day and 2) it is a temporary job (so you can’t be expected to move your residence there). When that happens, an employee has the double burden of maintaining two residences and everything in relation to that second residence is now deductible or can be given as a tax-free reimbursement. If you return home at the end of each shift, you are showing that it is a commutable distance and deductions are disallowed. The IRS uses the term “sleep and rest test,” so far away that you need to stop and rest/sleep before you can safely return home.
Lastly, just because you sleep away from home, does not mean that an assignment 30 miles away qualifies you. It still has to be farther than a normal commute for a local. Maybe 90 min or more?”
(https://traveltax.com/tax-preparation-for-travelers/ )
For those of you who might have heard from recruiters or companies that you just have to travel “50 miles away from your home in order to collect tax- free stipend,” I want you to know this is not accurate, according to IRS guidelines. The 50 mile “rule” is not a rule at all, but instead only company policy within a recruiting agency, not governing rules of the IRS. It is the rules above that qualify travelers to collect non-taxable per diem money: traveling a non-commutable distance, sleeping away from home, duplicating living expenses, and having and not abandoning a tax home. Traveling “50 miles away” from your home is not a qualifying reason. Do not work with any company or recruiter who tries to tell you otherwise.
TRAVELTAX
Instead of reinventing the wheel, I am going to refer you to the experts who have already done a fine job of explaining all about tax home and how to maintain one.
If you have questions about whether you qualify, if you have a tax- home, I recommend consulting with the tax professionals at TravelTax.com, an accounting firm that specifically does taxes for travel healthcare professionals.
I also recommend TRAVELTAX do your taxes at the end of the year, if you plan on traveling.
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*THE INFORMATION PROVIDED BY THIS POST IS NOT INTENDED TO CONSTITUTE LEGAL ADVICE, ACCOUNTING ADVICE, OR ANY OTHER ADVICE OF A PROFESSIONAL NATURE. THE CONTENT OF THIS BLOG POST SHOULD NOT BE USED AS A SUBSTITUTE FOR PROFESSIONAL ADVICE.
