 Deducting
business expenses in the field
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 Dear
Tax Talk,
I work for an engineering company and spend most of my time
working on field assignments. When in the field, I receive per diem
and a vehicle mileage allowance. I am now working on a project in
the company's office in Houston. I do not live in Houston, so I
must pay for housing, meals, etc., as though I were in the field.
Are any or all of these expenses deductible?
-- Wade
 Dear
Wade,
You can claim travel expenses while away from
home as employee business expense on Form 2106. Travel away from
home means that you're temporarily away from your tax home. You're
temporarily away from home if your work assignment is expected to
last, and in fact does last, for one year or less. Otherwise it
is considered an indefinite assignment, and you are not allowed
to deduct living expenses. Generally, your tax home is your regular
place of business, or post of duty, regardless of where you maintain
your family home. It includes the entire city or general area in
which your business or work is located.
If
you do not have a regular or a main place of business because of the nature of
your work, then your tax home may be the place where you regularly live. This
means that if your regular office is in Dallas, that will be considered your tax
home. Publication 463 provides further
clarification (some might call it obfuscation) of what tax home means: Factors
used to determine tax home. If you do not have a regular or main place of business
or work, use the following three factors to determine where your tax home is.
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.
If you satisfy all three factors,
your tax home is the home where you regularly live. If you satisfy
only two factors, you may have a tax home depending on all the facts
and circumstances. If you satisfy only one factor, you are a transient;
your tax home is wherever you work, and you cannot deduct travel
expenses.
Once
you've determined that you're temporarily away from your tax home, your life on
the road becomes a deductible employee business expense. Table 1-1 in Publication
463 provides a list of the expenses that you can deduct, which includes lodging
(such as apartment rental), transportation, laundry, tips and meals. You would
reduce your expenses by the per diem allowance provided by your employer (line
7 of Form 2106). Only half of your
meals after the allowance would be deductible, so it is better to have the employer
pay for the meals. The IRS does not require receipts for expenses less than $75.
Instead you can maintain a contemporaneous log where you record these small expenditures
such as lunches and taxi fares. Form 2106 expenses are miscellaneous itemized
deductions subject to reduction by 2 percent of your adjusted gross income.
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