The 50-mile rule to determine whether stipends can be received tax-free is basically a myth. ITs not about the distance, it’s about whether you require and pay for lodging at the assignment. However, hospitals (facilities) often have a distance rule and it frequently is 50 miles. See how this can create confusion in the conversation with the recruiter and what to ask.
Okay- Don’t be afraid to ask questions ….. Since the first post on this topic, I have heard from a few people who want to know the accepted rule but don’t want to ask publicly. Ok, that’s fine 🙂
The benchmark for deductible lodging expenses – OR better, in tax jargon as it applies to per diems for lodging – the benchmark for determining if the housing/lodging reimbursement is excluded from your reported wages is …… guess what? ……….. an overnight stay where you have to pay for lodging!!! Pretty logical huh? Our tax code does make sense at times.
Why should you receive a tax free reimbursement for lodging unless you have an expense to reimburse? As I said earlier, a trucker who sleeps in their cab cannot receive a tax free lodging per diem and they are traveling how far away from home? I guess the “50 mile rule” has that covered…..
Now, you cant just waltz 25 miles down the road and decide you don’t like your main home and stay in an apartment OR for those of you that are more honest: you don’t like your stick house that you masquerade as a residence to get tax free money because the in-laws live there …….. Its a bit “unreasonable” (another one of those terms of art in the tax code) to need a second home such a short distance away.
The next time a recruiter tries to sell you on the 50 MILE RULE, send them here and let them ask why! 🙂
I have been preparing tax returns for travelers for almost 20 years and one thing that never seems to die is the urban myth of a 50 Mile Rule that recruiters and travelers talk about with religious conviction. The tale goes like this: as long as you drive over 50 miles to get to your assignment, you can get tax free housing allowances. You can even use someone else’s address on your tax forms to get the money, since all the IRS cares about is your permanent residence address.
Really? Wow. If it is really this easy, everyone should live 51 miles a way from their job.
The logic and facts: Why should you get tax free housing allowances without having a lodging expense to reimburse? A trucker who sleeps in their cab can’t get it and we all know long distance truckers are far, far away from home.
It really defies common sense that the IRS could have that much confidence in a mileage benchmark to give up so much tax revenue.
Yet the myth continues to emerge just like a game of Whac a Mole………