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Map out tax breaks for temporary assignments

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in Small Business Tax,Small Business Tax Deduction Strategies

When you travel away from your tax home on business by car, you can deduct your gas and related expenses. However, you generally can’t write off “commuting” expenses, even if you travel a long distance each day.

Suppose you’re working on a project that takes you far from home for several months.

Strategy: Wrap up temporary assignments in less than one year. As a result, you may be able to write off your travel expenses between your home and the temporary job site. However, if the assignment lasts indefinitely, you won’t qualify for deductions under this special tax law exception.

It all has to do with the way the IRS defines your “tax home” and “temporary assignments.”

Here’s the whole story: If your assignment or job away from your main place of work is temporary, your tax home doesn’t change. You’re considered to be away from home for the entire period while you’re away from your main place of work. In this case, you can deduct your travel expenses if they otherwise qualify for deductions.

Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for one year or less. However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home. Thus, you can’t deduct travel expenses to get from your actual home to your new tax home.

An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than one year—whether or not it actually lasts for more than one year.

If your assignment is indefinite, you must include in your income any amounts received from your employer for living expenses, even if they are called travel allowances and you account to your employer for them. Note: Under the Tax Cuts and Jobs Act (TCJA), for 2018 through 2025 you can no longer deduct moving expenses for relocating your tax home (except for moves by certain military personnel). Similarly, the TCJA suspends the tax exclusion for moving expense reimbursements paid to employees (except for moving reimbursements to certain military personnel).

Tip: When you stay near a temporary work site during the week, you even may be able to deduct your travel expenses of coming home on the weekend!

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