Local Assignments and Tax-Free Lodging during COVID

lodging

During the COVID crisis, several healthcare providers are taking local assignments to help with the surge of affected patients. They have valid concerns about exposing their family or those they share a home with to the virus.

Can they receive tax free housing even though they are working locally?

The answer is yes.  Tucked away in the Regulations (Section 1.162-32(a)) is a little-known provision for local lodging primary designed to accommodate local business meetings, conferences, training and other related activity. In addition to these situations, it also allows the lodging to be provided when the facts and circumstances of a situation require local lodging. The current COVID pandemic is such an event that would fit those limitations.

There are a few items to note.

  • The lodging should be a dwelling that the employer/agency/hospital provides in kind. In other words, they pay for the lodging directly. That can be a hotel, house or apartment.
  • The lodging must be a necessity rather than a personal preference
  • The lodging cannot be lavish or extravagant
  • There cannot be a greater social or personal benefit beyond the provision of a place to stay to fulfill one’s duties at the care facility.
  • These limitations do not allow giving a per diem in place of directly paying the lodging provider or paying by receipt. Agencies are required to track their non-taxable lodging and meal reimbursements

Reference: https://www.law.cornell.edu/cfr/text/26/1.162-32

Article in WSJ: https://www.wsj.com/articles/after-fighting-coronavirus-new-yorks-health-care-workers-sleep-away-from-home-11586895678?shareToken=st121eaf18385849a282c7e5712da35085

Youtube Channel – Episode 3: The difference between a Facility 50 Mile Rule and a Taxable Stipend 50 mile rule

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.