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No tax-free reimbursement for a long-distance commute

by on
in Office Management,Payroll Management

Question: An employee lives in New York, but commutes to our offices in Maryland every week. He returns home on Friday. We are contractually obligated to reimburse him for his weekly hotel/housing expenses. Are his reimbursements taxable, or do they qualify as tax-free local lodging expenses?

Answer: These expenses are taxable. The critical consideration is where the employee works (called the tax home), and not where he lives. The employee’s tax home is in Maryland. His Maryland living expenses, therefore, are personal expenses, which can’t be picked up tax-free. The local lodging exception doesn’t apply because it applies to employees who aren’t traveling away from home and is limited to five days per calendar quarter.

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