As a remote contract employee without per diem, are my living expenses tax deductible?

May 17, 2017
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If I am a contract employee working 200 miles from home and do not receive per diem, are my living expenses tax deductible?

If you receive a Form 1099-MISC as an independent contractor and you report your income on Schedule C, Profit or Loss from Business, then you can deduct certain business expenses for individual income tax purposes.

You are able to deduct travel (plane and train tickets and taxis), meals and lodging, and incidental expenses (e.g., tips to hotel staff, etc.) that are incurred in connection with completing your work for your temporary assignment away from home. A temporary assignment in a single location is one that is reasonably expected to last (and does in fact last) for one year or less. However, if your assignment in a single location is indefinite (it is reasonably expected to last for more than one year), then your "tax home" moves to the single location where you are working. In this case, you are not considered to be away from home, and your travel expenses are not deductible.

The actual cost of your meals while traveling is deductible, even if they are “personal” (i.e., not connected with business), although, as with all deductible meals, only 50 percent of the cost is allowed.

You can use the "standard meal allowance" method as an alternative to the actual cost method for travel-related meals. This method allows you to use a set amount for your daily meals and incidental expenses (M&IE) instead of keeping records of your actual costs. See IRS Publication 17 for more details.

Personal entertainment costs on the trip are not deductible, but business-related costs, such as for laundry, dry-cleaning, phone calls, and computer rentals, are.

If you are travelling by car to the location, you can deduct either the actual expenses of operating and maintaining your car or the standard mileage rate (53.5 cents per mile) plus business-related tolls and parking.

When taking any business deductions against the income you earn as an independent contractor, it is required that you keep adequate records. If you are reimbursed by your client for any of the travel expenses that you incur, then the amount that is reimbursed may not be deducted.

 
For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.
Answered by: James G. McGrory, CPA, and Stephanie K. Otake, CPA, are with Drucker & Scaccetti in Philadelphia.
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