Writing off travel expenses

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Dear Tax Talk,
I was on temporary assignment in Houston for six months. While there, I rented an apartment. Can I use the standard per diem tables for both lodging and miscellaneous and incidental expenses to calculate my business expenses on Form 2106? Or, since I rented an apartment, can I only deduct the rent, utilities, etc.? I am a W-2 employee and was not reimbursed for any out-of-pocket expenses.
— Linda


Dear Linda,
You can deduct your travel expenses when away from home on a temporary work assignment. Your travel expenses have to otherwise qualify for deduction, such as be reasonable and ordinary. Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for one year or less.

However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you cannot deduct your travel expenses while there. An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than one year, whether or not it actually lasts for more than one year.

The per diem rate applies only to meals and not lodging. To deduct your lodging expenses you must use your actual costs such as your rent and utilities. Generally, you can use the “standard meal allowance” method as an alternative to the actual cost of your meals.  It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs. The set amount varies depending on where and when you travel.

The term “incidental expenses” means:

• Fees and tips given to porters, baggage carriers, bellhops, hotel maids, stewards or stewardesses and others on ships, and hotel servants in foreign countries.

• Transportation between places of lodging or business and places where meals are taken, if suitable meals can be obtained at the temporary duty site.

• Mailing costs associated with filing travel vouchers and payment of employer-sponsored charge card billings.

 

Incidental expenses do not include expenses for laundry, cleaning and pressing of clothing, lodging taxes, or the costs of telegrams or telephone calls.

Most major cities and many other localities in the United States are designated as high-cost areas, qualifying for higher standard meal allowances. These rates are listed in Publication 1542.

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.

To ask a question on Tax Talk, go to the ” Ask the Experts” page, and select “taxes” as the topic.

— Updated: Nov. 7, 2007