Temporary Living Expense Tax Deductions
The Internal Revenue Service does not provide taxpayers with a deduction for personal, temporary living expenses as of 2010. However, you may qualify to deduct the costs as a travel expense if the temporary living arrangement relates to work. The IRS is restrictive of what you can take as a travel expense deduction. Taxpayers must pay careful attention to all requirements to avoid paying interest and penalties on erroneous deductions.
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Traveling
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Eligibility to deduct travel expenses requires that the travel be ordinary and necessary to the business or employment. Ordinary expenses are those that are common and acceptable in a trade or business. For an expense to meet the necessary requirement, it must be helpful to the business. However, an expense can be necessary, even if not a requirement.
Temporary Assignment
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If an employer requires you to temporarily work in a location beyond a reasonable commuting distance from the home, you can deduct the living expenses that relate to the temporary assignment. To qualify, you must not expect the assignment to last longer than one year and it must be in a single location. Assignments that last longer than one year may qualify for the deduction if initially you did not expect it to run beyond a year.
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Travel Expenses
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Fully deductible travel expenses that relate to a temporary move for work-related assignments include the initial transportation costs of getting to the new location, and the cost of local commuting once you arrive. Commuting costs can include taxi fare, rental cars and public transportation. If you bring a personal vehicle, you can deduct the work-related travel by multiplying the IRS standard mileage rate by the total miles you drive for business purposes or by calculating the portion of actual costs that relate to business purposes. Taxpayers may also deduct the cost of hotels and temporary apartments when on a temporary assignment. However, in order to deduct housing expenses, you must maintain another home outside of the assignment's location to which you intend to return. Additional deductions include the cost of making business-related calls, dry cleaning and laundry services.
Meals
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The IRS allows you to deduct half of the costs you incur to purchase meals while away on a temporary assignment. Taxpayers may choose the actual cost or the per-diem rate methodology for calculating the deduction. To use the actual cost, you must keep accurate records for each food purchase. The daily per-diem rate to calculate the deduction imposes less burdensome record-keeping requirements. The daily rate is an IRS predetermined average cost of eating three meals per day in the relevant geographic area. The rate is available regardless of whether you actually spend that amount.
Reporting
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To take deductions for temporary living expenses, you must report each expense on IRS Form 2106 and file it with a personal income tax return. You can substitute IRS Form 2106-EZ if you do not receive reimbursement for any of the expenses from an employer and use the standard mileage rate for calculating personal vehicle deductions.
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