Temporary housing might not be your idea of a perfect residential arrangement, but it does have one advantage. Unlike your normal housing expenses, your temporary quarters might qualify for a tax deduction, whether your temporary location is out-of-state or not. If you are moving, temporarily assigned to a different work location, self-employed or in the military, you might be able to claim the deduction. However, you must meet certain guidelines established by the Internal Revenue Service to qualify.
The deduction for temporary housing related to a move is the most limited. You can only deduct housing or lodging expenses while you are in transit to your new location. The IRS allows you an additional day at the beginning if you must vacate your home prior to starting your travel; your day of arrival is also deductible. The move must be job-related, and you must expect to work or actually work 39 weeks during the first year you live in the new city. For self-employed individuals, the time is doubled to 78 weeks during the first two years, with 39 on those weeks falling in the first year. The distance between your new work location and your previous home must be at least 50 miles greater than the distance between your previous home and your former work location.
If you are temporarily reassigned or you travel on business, you might be able to deduct your lodging costs. The IRS does not limit lodging to just hotels or motels; corporate apartments and rentals are also eligible. Your presence in the city must have a business purpose. Your temporary assignment must last no more than 12 months. At the outset, it must be realistically expected that the length of the assignment will not exceed one year. If your assignment is for an indefinite period, the expense is not deductible even if the assignment does not exceed 12 months. Whether your travel takes you to another state or you are traveling within the same state, you cannot deduct expenses in the location considered your tax home. The IRS definition of a tax home is the city, including its suburbs, in which your primary work site is located. For example, if you live in Kansas City, Missouri, a temporary assignment to Kansas City, Kansas, does not qualify even though the location is in a different state.
Although the basic rules are the same for self-employed individuals and those employed by a company, there are some special situations that the former may face. For example, your bill to your client might include a charge for your expenses, including your lodging, or you may receive a per diem allowance. If either of these covers your lodging, you cannot take a deduction for your temporary housing. You might also have difficulty defining your tax home if you do not have a regular work location. In that case, the IRS considers certain factors to define your tax home.
Slightly different rules apply to members of the military. When changing duty stations, entering the service, or leaving the service, you do not need to meet the distance tests to deduct lodging while in transit during a move. Your tax home becomes the base, ship or other location that represents your permanent duty station. If your orders take you away from your tax home, you might be able to deduct temporary housing. For example, if you are assigned to duty aboard an aircraft carrier and are ordered to attend a six-month training course stateside, you can deduct the cost of paying for your own housing during the training. You can only deduct amounts that are not paid or reimbursed by the military; if you are furnished a housing allowance, you can only deduct amounts in excess of the allowance.
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