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Wondering when the Per Diem Revenue Procedure was ever going to be updated? Well the IRS just updated it! Click the following link to go to new IRS Revenue Procedure 2019-48 which addresses per diems. This replaces IRS Revenue Procedure 2011-47.
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The PDF has an overview of the tax home rules for military spouse/travelers
A lot of Travelers mistakenly think that paying rent is a magic carpet ride to a tax home. This is not the case. You must be maintaining a dwelling that you use for your own lodging. Paying rent and maintaining a home you pay rent for are different things. That means the following types of arrangements that some speak of do not rise to the level of a “maintaining a dwelling”:
When its an arrangement with a related party, the entire package needs to look, smell and taste like a real rental OR an equitable sharing of expenses.
The court case linked below distinguishes #5 above from a real rental or maintenance of a home. As the discussion states, “[t]he reason for allowing deductions for expenses while away from home {and / or allow tax free reimbursements (per diems) is to mitigate the burden placed on taxpayers who, for business reasons, must maintain two places of abode”
In the case the taxpayer tried to use her benevolance payments to an aunt as proof of duplicated expenses.
We are often asked about whether trips home are deductible during assignments or between extensions.
A trip home during an assignment is considered a personal expense by the IRS unless there is a business purpose for the journey. If one is returning home for work then most all of the trip is deductible, but if the return home is for personal reasons, then the deductions are limited to what would be deducted if the traveler stayed at the assignment area. For example, if one has an apartment at the assignment area, the lodging costs do not change however, the employee cannot deduct meal allowances when at home. The meal allowances are the only part that could have been deductible had the traveler stayed. If the meal allowance was $50/day and the employee when home for 4 days then $200 of transportation expenses for the journey home would be allowed
For reference, read the next to last paragraph of this ruling
Want to decline tax free reimbursements for travel expenses and deduct them on your return instead? You cannot claim the deduction if you were offered or had access to an employer reimbursement..
Linked below is an old court case that is still cited in current cases involving an executive that refused to submit his expense reports to his company for reimbursement and then claimed the expenses on his return. The court denied his deduction because “he {was} attempting to convert the employer’s right to a deduction into a right of his own.”
I have spent the last 20 years explaining the concept of a tax home to clients and those that claim to know more than the IRS. This is a very instructive and candid Tax Court case that uses more common vocabulary so non-attorney readers can understand. A good description of a tax home.
The case also focuses on a common practice among mobile professionals of using a friends or relatives home as a tax residence and what should be expected.
Also, the case introduces another term to the tax home vocabulary: it defines an itinerant – someone who does not have a fixed tax home – as a “Tax Turtle” 🙂
Enjoy
