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Making the Most of the Tax Advantage | IRS Rules | State Rules

Making the Most of the Tax Advantage

When you take a travel assignment through Alliant, you may be provided with housing and receive reimbursement for other expenses related to the assignment. Many travelers believe that the benefits they are offered through their travel agency will automatically be tax free. In fact, the tax treatment of these kinds of compensation depends on certain tax rules being satisfied.

The main rules are:
  • You must have a permanent tax home and continue to have
    living expenses at that location while
    you are away
  • Your assignment must be temporary such that the assignment
    and any extensions is expected to
    last less than one year
  • Your assignment must be beyond typical commuting distance
    from your permanent home

If these rules are satisfied, travel benefits offered by Alliant, such as housing allowances, company provided housing and mileage expenses, will be treated as non-taxable compensation, which will increase the overall value of the assignment package. Additionally, travelers who are able to demonstrate that they meet the rules may be able to deduct other travel and professional expenditures, such as licensure fees, tuition and continuing education costs, thus reducing even further the overall amount of tax that they pay.

If you are a traveler who is truly itinerant, i.e. your home is wherever you happen to be working, you cannot claim the same tax treatment. Since you are not actually away from home, all expenses incurred for travel, housing, and meals are personal and non-deductible. Any allowances or housing provided by Alliant are taxable, included in W-2 wages, and subject to tax withholding.

Each individual traveler' s circumstances are different. To determine your eligibility for tax free treatment of the travel assignment benefits you enjoy, Alliant requires each traveler to complete a Permanent Tax Residence Questionnaire for every assignment, including renewals. We also strongly encourage you to seek advice about your personal circumstances from an independent tax advisor.

The preceding discussion is general in nature, and should not be considered advice for any individual tax situation. You should consult with an independent tax advisor for specific guidance relating to your unique circumstances.

 

IRS Rules

The three main rules that must be satisfied for travel benefits to be considered non-taxable compensation are:

  • You must have a permanent tax home and continue to
    have living expenses at that location while
    you are away
  • Your assignment must be temporary such that the
    assignment and any extensions is expected to
    last less than one year
  • Your assignment must be beyond typical commuting
    distance from your permanent home

Tax Home
Your tax home is your permanent residence that you return to regularly and for which you pay substantial and recurring expenses, such as a mortgage, rent and utilities. It will also be the place where you are registered to vote, where your car is registered and where you have a driver's license.

In addition you should be able to demonstrate that you make frequent return trips to your home and that there is accommodation for you in your home when you do return (as opposed to the home being rented out entirely to others).

Temporary Assignment
IRS rules require that the travel away from home in any one location must be temporary. The reason for this is that if the change in location is permanent, your tax home has changed and you are no longer able to claim that you have incurred travel expenses while away from home.

For an assignment to be temporary, you must intend that the assignment will last less than one year, and it must in fact last less than one year. If at some point during the assignment, either the assignment is extended beyond the one year limit or you decide to stay in the area where you are working, the value of any housing, housing allowances or other travel benefits become taxable from that time forward.

The one year rule applies to the work location and not just the specific assignment. For example, you may take a travel nurse assignment in California for 6 months and then move to a new assignment in Florida for the next 9 months. Travel benefits for both assignments could be treated as tax free. However, if you were to take an assignment in Los Angeles for 6 months and then take another assignment at another hospital in Los Angeles for a further 6 months, travel benefits for the second assignment would be taxable.

Returning home for a couple of weeks between assignments will not start the one year period over again if you then return to the same work area as you were in before.

Away from Home
You have probably seen this referred to as the "fifty mile" rule. In fact, there is no such guideline in the IRS regulations. The requirement is that you must be traveling away from home. In essence, your place of work needs to be too far from your home for you to commute daily. Put another way, the distance you must travel to work is so far and takes so long that you need to stay away overnight. While 50 miles might be a good general guideline, there will be some areas where that is a typical commuting distance and thus would not be far enough to qualify you for tax free travel benefits.

The preceding discussion is general in nature, and should not be considered advice for any individual tax situation. You should consult with an independent tax advisor for specific guidance relating to your unique circumstances.

 

States Taxes

Travelers who work in multiple states will have to deal with more complicated year-end income tax return filings. Filing may be necessary in your resident state and in the states where you have worked during the year. For this reason, we recommend that you have a tax professional prepare the returns for you.

Most states levy income tax and require taxes to be paid in the state where the work is performed, even if the worker lives in another state. Therefore, generally a traveler will have income tax withheld in the work state and will receive a credit on the home state tax return for the taxes paid to the work state. If the work state and home state have a reciprocal agreement (which is common among neighboring states), the states agree that state withholding does not need to be made in the work state. For details of how state income taxation will apply to your personal circumstances, please consult your tax advisor.

The preceding discussion is general in nature, and should not be considered advice for any individual tax situation. You should consult with an independent tax advisor for specific guidance relating to your unique circumstances.