Q: Tax Playa, I am a sales rep for a consumer goods company. In August of this year, I accepted a 1.5 - 2 year temporary relocation from Pittsburgh, PA to Bentonville, AR. My wife, dog, and home still reside in Pittsburgh and I am renting a home in Bentonville. The company moved some of my furniture and gave me a $10,000 signing bonus since they didn't have to incur closing costs on the sale of my Pittsburgh home, but essentially I'm on my own for rent, utilities, groceries/dining out, etc.
What are the major areas I can deduct for as unreimbursed business expenses and at what percentage can I deduct?
Thanks for your help and for the insight you provide on your blog. I'll be sure to visit the tip jar upon your reply!
Best Regards,
Michael, Bentonville AR by way of Pittsburgh, PA
A: Michael:
I'm afraid you're out of luck. The IRS considers a "temporary assignment" to be one which is expected to last for one year or less. In your case, the assignment is expected to last for at least a year and a half.
Once the primary location in which you conduct business or work changes for more than a year, your "tax home" is considered changed. Expenses associated with your tax home are considered personal and non-deductible. Your tax home is separate and distinct from your family home.
Any expenses or bonuses paid by your company are taxable to you (with the exception of the moving costs, which they are allowed to pick up since you moved more than 50 miles from your old tax home). This includes the value of any lodging, meals, etc. paid to you.
One silver lining is that if you are travelling away from your tax home (Bentonville, at this point) on business (including to Pittsburgh) your travel expenses are deductible under the rules.
If you have actual unreimbursed business expenses (cell phone bills, internet fees, car mileage, business meals, etc.) that you would normally have deducted back in the Steel City, they are equally-deductible to you here. However, as you can read from my post on unreimbursed employee business expenses, that isn't exactly a lucrative tax deduction.
A better option for you would be to negotiate to submit receipts for expenses to your employer. Anything deductible as an unreimbursed business expense can be reimbursed to you by your employer. The employer then takes the tax deduction. If your employer balks, offer to take a pay cut equal to the reimbursed amount. You'll still come out ahead since the reimbursement (unlike your wages) will be tax-free, and you don't have to worry about qualifying for the deduction.
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