(03/09) Q: If your employer has to relocate to another location because of a disaster, how do you determine if you will be able to deduct your travel costs?
A: The answer will depend on whether the employer move is realistically expected to be for less than or more than one year. A temporary assignment away from home, an assignment whose termination can be foreseen within a fixed and reasonably short period (less than one year), does not shift the "tax home."
Therefore, a taxpayer may deduct the necessary traveling expenses in getting to his temporary assignment and also for the return trip to his tax home after the temporary assignment is completed, and his expenses for lodging and 50% of the cost of the meals while he is in the place to which he is temporarily assigned.
A taxpayer is not treated as being temporarily away from home if his period of employment exceeds one year (Code Sec. 162(a)). The one-year rule generally isn't triggered by short intermittent assignments that span more than one year.
Employment away from home at a single location for a period of less than a year is treated as temporary, in the absence of facts and circumstances indicating otherwise. If employment away from home is a single location initially is realistically expected to last for one year or less, but later is realistically expected to exceed one year, then the employment will be treated as temporary until the date that the taxpayer's realistic expectation changes (at which point the employment will no longer be "temporary").
An indefinite assignment away from home shifts the "tax home" and the taxpayer cannot deduct expenses of travel, meals, and lodging while in the location of the "indefinite assignment." Employment is indefinite if it lasts for more than one year, or there is no realistic expectation that the employment will last for one year or less.
(03/09) Q: May a taxpayer claim travel expense deductions if the taxpayer is displaced by a disaster and must live and work in another locality?
A: The tax law generally allows business expense deductions for ordinary and necessary traveling expenses (including meals and lodging) incurred while away from home in pursuit of a trade or business. For this purpose, a taxpayer's "home" is generally the vicinity of the taxpayer's principal place of business, as determined by all the facts and circumstances. However, if the taxpayer realistically expects to work in a single location for more than one year (or there is no realistic expectation that the employment in the single location will last for one year or less), that location must be treated as the tax home (regardless of whether employment actually exceeds a year).
Thus, if a displaced taxpayer lives and works in another locality, but realistically expects to return to live and work in the affected area within one year, the taxpayer may be considered to be traveling away from home in pursuit of a trade or business. If the displaced taxpayer works in more than one locality, however, the facts and circumstances must be taken into account to determine which locality is the taxpayer's "home."