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Travel Nurse Tax Guide 2023

Navigating travel nurse taxes can be a challenge, especially because travel nurse tax amounts can be a bit different depending on what state or states you worked in. In general, however, taxes are very different for travel nurses compared to traditional staff nurses. From choosing a tax home to keeping your receipts to knowing exactly how your income will affect your long-term financial goals, here is the information you need to know about travel nurse taxes.

RN’s can earn up to $2,300 per week as a travel nurse. Speak to a recruiter today!

Travel Nurse Taxes + Income Breakdown

Travel nurses are paid differently than staff nurses because they receive both a base hourly pay that is taxed and additional “payments” that are non-taxed to make up their “total” pay. When you sign up to commit to a travel nurse position you’ll receive a pay package that will detail all of the different aspects of what will make up your actual compensation.

Essentially it’s in the travel nursing agency’s best interest to keep the base rate of a travel nurse’s pay package low, so many travel nurses have a modest base pay but will receive additional stipends. In a technical and legal sense, those additional stipends — which typically cover things like meals, housing , and work-related expenses — are expense reimbursements for doing your job as a travel nurse, which is why they aren’t considered income and are non-taxable.

Travel agencies offer “standardized” bill rates. This means that there is one rate for all workers with any given license covered by the contract. For example, all Registered Nurses have the same bill rate, all Physical Therapists have the same bill rate, and so on. It’s also possible for the licenses to be broken down by specialty and every so often by level of experience. For example, Medical Surgical and Telemetry Registered Nurses have one rate while all other Registered Nurses have another. Registered Nurses with 1-3 years of experience get one rate, while those with more than 3 years of experience get a slightly higher rate. The important thing to understand is that standardized bill rates are set in stone by the contract for all intents and purposes. There is no possibility of negotiating a higher bill rate based on a particular travel nurse’s salary history or work experience.

Joseph Smith, EA/MS Tax, an international “taxation master” and founder of Travel Tax , explains that in addition to their base pay, most travel nurses can reasonably expect to see $20,000-$30,000 of non-tax reimbursement payments in a typical year working as a travel nurse.

Find travel nurse credit cards to earn points or miles while traveling.

Qualifying For Non-Taxable Income

In order to avoid being taxed on those reimbursement payments, however, you need to clearly prove that you have what’s called a “tax home” to the IRS. The IRS defines a tax home as “the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home.”

Smith explains that you can qualify for a tax home in two main ways:

• If your primary area of residence is also your main area of income, which typically does not apply to travel nurses.
• You visit your primary residence at least once every 12 months and can prove that you are paying for expenses to maintain your primary home.

If you can’t prove that you have a tax home, or don’t meet the qualifications for having a tax home, you will be taxed on the stipend payments you receive as part of your travel nurse pay package. Additionally, Smith cautions that most travel nursing agencies will not verify that you qualify for a tax home, so it’s up to you, the travel nurse, to ensure that you are meeting all requirements for establishing a tax home in order to collect your non-taxable stipends.

Joseph Smith, EA/MS Tax, an international “taxation master” and founder of Travel Tax, explains that in addition to their base pay, most travel nurses can reasonably expect to see $20,000-$30,000 of non-tax reimbursement payments in a typical year working as a travel nurse.

While many people commonly believe that you must have your tax home at least 50 miles away from where you work as a travel nurse, there’s actually no specific distance requirement . The only real requirement is that you must prove that it’s farther away than a reasonable commute and requires rest and sleep before going back and forth.

You should always check with a tax professional, but in general, travel nurses can take the following steps to help ensure that they qualify for a tax home in the eyes of the IRS:

• Keep proof of any payments you are making to show that someone else is maintaining your primary residence, such as receipts for a house sitter, mortgage, rent, utilities, or home maintenance expenses.
• Maintain your driver’s license and voter registration in your home state.
• Keep your car registered in your home state.
• Keep a per-diem position, if possible, in your home state.
• Return to your permanent home at least once every 13 months.
• File a Residence Tax Return with your home state.

To file taxes correctly, it’s very important to maintain your tax home and prove that you have to actually pay for “double” of everything—for both your tax home and your new living situation as a travel nurse. That means that if you rent out your home temporarily while you’re gone, you no longer can classify it as a tax home.

What About State Taxes?

Travel nurses should plan on filing their taxes by the April 15th deadline, just like everyone else in the United States, although there may be a little wiggle room for extensions due to the nature of being a multi-state professional as a travel nurse, according to Smith. Every state has different laws for filing taxes, but travel nurses may need to file a non-resident tax return in every state they have worked in, as well as the state that they consider their permanent tax home.

Travel Nurse Tax Tips

Smith advises travel nurses to keep a receipt book to help them make tax preparation a little easier by having all of their paperwork in one place. Although digital receipts may be more convenient or “modern” for younger nurses, keeping paper copies as a backup is always recommended. Your receipts can include things like:

• Housing and lodging expenses while traveling
• Mileage travel
• Uniform and scrub expenses
• Work-related expenses, such as continuing education courses or certifications you must maintain to keep your position
• Costs for Internet and phone providers

The 2022 tax reform laws did away with many job expenses at the federal level , which means that travel nurses can’t deduct certain travel-related expenses such as food, mileage, and gas on their federal return. You can still get a stipend or reimbursement from your travel agency for those expenses, but they may not count as deductions.

That being said, a handful of states still allow job expense deductions on your state tax return, such as New York , California , Alabama, Hawaii , and Arkansas, so there may be additional tax deductions you can make if you’ve worked in a qualifying state.

Smith also adds to be careful when filling out residency on your tax return, as he sees many travel nurses make the mistake that working a travel assignment means they have moved. However, working a temporary (under 12 months) travel nursing position does not qualify as a move of your permanent residence — instead, they are just away from home temporarily and that’s an important distinction to make come tax time.

Keep your tax home as a permanent residence address, and don’t change it unless you actually move permanently!

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Can You Get Audited As A Travel Nurse?

The travel nursing industry as a whole does tend to be scrutinized closely, says Smith. As a travel nurse, you may be more at risk for an audit if you’re displaying high expenses and low income. For instance, if your mortgage is $10,000 a month, but your overall income with your base pay as a travel nurse is only $20,000 annually, the IRS may be puzzled as to how you’re actually affording your lifestyle.

You can reduce your risk of an audit, or increase your risk of getting through an audit favorably by always making sure to work with a certified tax professional who is familiar with traveling healthcare professionals and not solely relying on your nurse recruiter or travel staffing agency for tax advice.

Lower Taxable Income Considerations

One of the appeals of travel nursing is that you have the potential to make a high income, especially through non-taxed stipends. And although at first glance, having non-tax stipends for things like housing may sound like a great deal for you as a travel nurse, it does come with a catch: because the additional stipends you receive as a travel nurse are not taxed, they are not considered income, and as such, will not be reflected in your annual income.

That may not sound like that big of a deal unless you find yourself in need of a loan, mortgage, or disability payment, or are nearing the age to collect Social Security. All of the aforementioned items are calculated based on your income. The lower your income, the lower the loan amount you will qualify for, and the less you are contributing to Social Security and therefore will be eligible to collect when you’re ready for retirement.

If you know that you will be needing a loan or a mortgage in the near future, Smith suggests talking to your lender as far in advance as possible to explain your situation and plan ahead. Working with a lender who is familiar with the pay structure for travel nurses can also be helpful.

In some circumstances, such as for nurses who are nearing Social Security’s retirement age, it may also be helpful to legally declare that you don’t have a tax home on your tax return, and instead, pay taxes on all of your stipends, so you can count it as taxable income.

And remember – you should use this guide as information to help you learn more about filing taxes as a travel nurse but remember that it is not tax advice. You should always consult your own CPA or tax professional before filing your tax return.

Travel Nurse Tax FAQs

Yes, all travel nurses must pay taxes on all income that they earned. They will need to file a tax return for every state that they worked in, as well as their home state where they have permanent residence.

If possible, it’s always beneficial to work with a tax professional, such as a Certified Public Accountant who can help you file and pay taxes that you owe as a travel nurse. An accountant can provide you with the physical paperwork that you can use to mail your tax payment in or help you set up an online account if digital payments are acceptable. If you file your own taxes using TurboTax or another software, you will be provided with the exact mailing address and instructions to submit payment. If you don’t have one already, you may need a book of checks in order to pay your taxes. The most important thing you need to know about paying taxes as a travel nurse is that you will need to both pay taxes and file a tax return in every single state you have worked in. If you’ve worked in many different states, that’s where hiring a CPA can be very helpful to help you navigate all that paperwork and payment.

It depends. American Traveler explains that you may end up paying taxes in every state you worked in as a travel nurse, depending on which states those are. Some states have what’s called a “reciprocity” agreement, which means that they have agreed that travel nurses working in those states will only be responsible for paying taxes to one state in total. You will have to check with your accountant or look into the tax rules for each state that you’ve worked in to determine exactly how much you owe in taxes. You should also check with your travel nursing agency if this is your situation because you will most likely need to file tax exemption paperwork through them as well. You will also need to pay taxes in both your home state and any state you worked in. That means that all income you make will be ultimately taxed through your home state taxes as well as the state where you earned the money. That might look like getting taxed twice, but the good news is, your home state will deduct the difference if the percentage rate of your home state is higher. And if it’s the other way around, you will generally only pay the higher state rate. This can get a little confusing, which is why we recommend hiring a tax professional.

Some states do not have an income tax , including Alaska , Washington , Wyoming, Nevada, South Dakota, Tennessee, Texas , Florida , New Hampshire, USVI, and the District of Columbia (if you don’t live there.) If you live in one of these states, you will still need to pay any set income tax rate in the state where you work. If you don’t live in those states but you do work in those states, you will still pay your home state tax rate, so be sure you keep that in mind with your total earnings so you can have enough to pay your taxes come tax time.

This depends on if you’re considered a W2 employee or a 1099 contractor, but in general, travel nurses may be able to deduct the following expenses: – Mileage or the cost of gas – A rental car – Uniform and equipment costs – Continuing education – Licensing fees – Travel expenses – Some meals – Retirement and insurance contributions – Expenses that go into paying for your tax home

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Important Travel Nurse Tax Home Rules, Exceptions, & Advice From a CPA

It's tax season. Travel nurses are often confused by the term ‘tax home'  and are unsure why it is important, and how it affects them when filing taxes . I spoke with a certified public accountant (CPA) to learn more.

What Is A Travel Nurse Tax Home?

According to the IRS , “your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home.” In other words, it is the city where you work or the place where you are getting taxed.  

For travel nurses, if you do not have a permanent work location, then “your tax home may be the place you regularly live” or the place you would return to in between travel nurse contracts.  

Why Is It Important To Have An Established Tax Home?

I spoke with Josh Katz, a CPA from Universal Tax Professionals ; he explained, “a tax home is important for your stipend.” If you want a tax-free stipend, meaning the income on your paycheck labeled as the stipend is not included in your taxable income, then it is essential to have a tax home where you are duplicating living expenses.  

Duplicating living expenses means you are spending money to maintain a permanent residence by paying rent, a mortgage, or residential taxes, while at the same time paying rent or living expenses in your travel location or place of employment.  

Is A Tax Home Important?

It depends on your circumstances and goals. If you want your stipend tax-free, then it is vital to establish a tax home and show proof of duplicating your living expenses. Consider these points and how they apply to your situation:  

• If you travel from place to place and do not establish a tax home, you could end up paying more federal and state taxes.  
• If you are a local travel nurse who does not need to spend money on overnight lodging, you may need to include your stipend as taxable income.  
• But you do not have to have a permanent tax home. If it is too difficult to maintain a permanent residence, you do not have to. Still, you must disclose this information honestly to your travel nurse agency and ensure you follow the correct tax rules where you work.

Can You Use Your Parents’ Home as Your Tax Home?

Your parents’ home can be your tax home if you can show you are paying to maintain your residence there. In other words, you must keep receipts showing you are paying your parents for lodging while working in another location where you are also paying for travel nurse housing .

Is There Really A 50-mile Rule for Tax Homes?

According to Josh, “50 miles is a good benchmark, but not a set-in-stone rule.” What’s more important is where you rest between shifts. If you live far enough away that you are unable to drive home to get adequate rest before your next shift and need to pay for lodging, then it would be considered duplicating your tax home, even if it is less than 50 miles away.  

Napping in your car does not count. You must be away from your permanent residence from dusk to dawn and show payment for your lodging.  

Do I Still Get A Stipend If I am A Local Travel Nurse?

On the flip side, if you are on a local assignment and working at the hospital across town and do not need to pay for lodging between shifts, then your stipend should be included in your taxable income. Don't get caught with a large tax bill at the end of the year because you didn't know your stipend should be taxed.

Do I Have To Pay State Taxes In All The States I Work In?

Yes, you'll pay taxes for each state and file differently in each state. In your home state, you will file as a resident. In all the other states, you will file as a nonresident. You can often get a tax credit for the extra taxes paid. In other words, if you paid $100 in state taxes as a nonresident, you may get a tax credit for that amount in your home state.

An example would be if you have established your tax home in Illinois, but are working in California. You will still have to pay the state taxes in California. If you paid $100 in California state taxes, you could get a tax credit in Illinois.  

Every state is different, so it is important to follow the state rules where you are working. Many states like Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, New Hampshire, Washington, and Wyoming do not have personal income taxes, meaning you would not need to file or pay state taxes in those locations.  

If you live in a state where you do not file state taxes, you may not be eligible for a tax credit.  

What If I Don’t Have A Tax Home Or Permanent Residence?

For nurses who travel in their homes, whether it is a converted van or an RV, or you just travel from location to location, your tax situation is a bit different. According to the IRS, you are considered an itinerant.  

An itinerant is a person who travels from place to place for work. In this case, your tax home is your place of employment. As a result, you may be subject to pay state taxes in each state without a tax credit because you do not have a home state. Your stipend may also be taxable since you are not duplicating expenses.  

What Is The 12-Month Rule For A Travel Nurse Tax Home?

When extending travel assignments, take care not to extend past 12 months. The IRS will consider this your new tax home. You can avoid this by returning to your tax home before the 1-year mark or taking an assignment in another location.

Keeping Your Stipend Tax-Free

The main takeaway from this article is that you must maintain a tax home and duplicate your expenses if you wish to accept a tax-free stipend. Per the IRS, the best practice is to return to your tax home 30 days out of the year, even if that time is spread out over several trips.  

You can maintain evidence of your tax home in the following ways:

• Payments for rent, mortgage, utilities, or home insurance
• Paying another person to watch the home for you
• Maintaining a driver’s license and car registration in your home state
• Maintaining your voter registration in your home state
• Using credit cards when returning to your home state

Every State and Situation Is Different

Even though these are the general rules when it comes to tax homes, every state and personal tax situation is different. Always consult a tax professional when filing your taxes to ensure you are protecting your earnings.  

This article is not tax advice. You should consult a professional tax advisor for more information about your unique situation.  

If your head is swimming with information about stipends, housing, taxes, insurance, or more, our Clinician Success Team , accessible through the AdvantisConnect portal, is with you every step of the way to help you land a high-paying assignment, secure all necessary documentation, and answer any questions.  

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How can you learn about your taxpayer rights, what can tas do for you, how can you reach tas, how else does tas help taxpayers, low income taxpayer clinics (litcs), appendix a-1. inclusion amounts for passenger automobiles first leased in 2018, appendix a-2. inclusion amounts for passenger automobiles first leased in 2019, appendix a-3. inclusion amounts for passenger automobiles first leased in 2020, appendix a-4. inclusion amounts for passenger automobiles first leased in 2021, appendix a-5. inclusion amounts for passenger automobiles first leased in 2022, appendix a-6. inclusion amounts for passenger automobiles first leased in 2023, publication 463 - additional material, publication 463 (2023), travel, gift, and car expenses.

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Publication 463 - Introductory Material

For the latest information about developments related to Pub. 463, such as legislation enacted after it was published, go to IRS.gov/Pub463 .

Standard mileage rate. For 2023, the standard mileage rate for the cost of operating your car for business use is 65.5 cents ($0.655) per mile. Car expenses and use of the standard mileage rate are explained in chapter 4.

Depreciation limits on cars, trucks, and vans. The first-year limit on the depreciation deduction, special depreciation allowance, and section 179 deduction for vehicles acquired before September 28, 2017, and placed in service during 2023, is $12,200. The first-year limit on depreciation, special depreciation allowance, and section 179 deduction for vehicles acquired after September 27, 2017, and placed in service during 2023 increases to $20,200. If you elect not to claim a special depreciation allowance for a vehicle placed in service in 2023, the amount increases to $12,200. Depreciation limits are explained in chapter 4.

Section 179 deduction. The maximum amount you can elect to deduct for section 179 property (including cars, trucks, and vans) you placed in service in tax years beginning in 2023 is $1,160,000. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $2,890,000. Section 179 deduction is explained in chapter 4.Also, the maximum section 179 expense deduction for sport utility vehicles placed in service in tax years beginning in 2023 is $28,900.

Temporary deduction of 100% business meals. The 100% deduction on certain business meals expenses as amended under the Taxpayer Certainty and Disaster Tax Relief Act of 2020, and enacted by the Consolidated Appropriations Act, 2021, has expired. Generally, the cost of business meals remains deductible, subject to the 50% limitation. See 50% Limit in chapter 2 for more information.

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How to report them on your return,

What records you need to prove your expenses, and

How to treat any expense reimbursements you may receive.

You should read this publication if you are an employee or a sole proprietor who has business-related travel, non-entertainment-related meals, gift, or transportation expenses.

If an employer-provided vehicle was available for your use, you received a fringe benefit. Generally, your employer must include the value of the use or availability of the vehicle in your income. However, there are exceptions if the use of the vehicle qualifies as a working condition fringe benefit (such as the use of a qualified nonpersonal use vehicle).

A working condition fringe benefit is any property or service provided to you by your employer, the cost of which would be allowable as an employee business expense deduction if you had paid for it.

A qualified nonpersonal use vehicle is one that isn’t likely to be used more than minimally for personal purposes because of its design. See Qualified nonpersonal use vehicles under Actual Car Expenses in chapter 4.

For information on how to report your car expenses that your employer didn’t provide or reimburse you for (such as when you pay for gas and maintenance for a car your employer provides), see Vehicle Provided by Your Employer in chapter 6.

Partnerships, corporations, trusts, and employers who reimburse their employees for business expenses should refer to the instructions for their required tax forms, for information on deducting travel, meals, and entertainment expenses.

If you are an employee, you won’t need to read this publication if all of the following are true.

You fully accounted to your employer for your work-related expenses.

You received full reimbursement for your expenses.

Your employer required you to return any excess reimbursement and you did so.

There is no amount shown with a code L in box 12 of your Form W-2, Wage and Tax Statement.

If you perform services as a volunteer worker for a qualified charity, you may be able to deduct some of your costs as a charitable contribution. See Out-of-Pocket Expenses in Giving Services in Pub. 526, Charitable Contributions, for information on the expenses you can deduct.

We welcome your comments about this publication and suggestions for future editions.

You can send us comments through IRS.gov/FormComments . Or, you can write to the Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224.

Although we can’t respond individually to each comment received, we do appreciate your feedback and will consider your comments and suggestions as we revise our tax forms, instructions, and publications. Don’t send tax questions, tax returns, or payments to the above address.

If you have a tax question not answered by this publication or the How To Get Tax Help section at the end of this publication, go to the IRS Interactive Tax Assistant page at IRS.gov/Help/ITA where you can find topics by using the search feature or viewing the categories listed.

Go to IRS.gov/Forms to download current and prior-year forms, instructions, and publications.

Go to IRS.gov/OrderForms to order current forms, instructions, and publications; call 800-829-3676 to order prior-year forms and instructions. The IRS will process your order for forms and publications as soon as possible. Don’t resubmit requests you’ve already sent us. You can get forms and publications faster online.

Useful Items

Publication

946 How To Depreciate Property

Form (and Instructions)

Schedule A (Form 1040) Itemized Deductions

Schedule C (Form 1040) Profit or Loss From Business (Sole Proprietorship)

Schedule F (Form 1040) Profit or Loss From Farming

2106 Employee Business Expenses

4562 Depreciation and Amortization (Including Information on Listed Property)

See How To Get Tax Help for information about getting these publications and forms.

If you temporarily travel away from your tax home, you can use this chapter to determine if you have deductible travel expenses.

This chapter discusses:

Traveling away from home,

Temporary assignment or job, and

What travel expenses are deductible.

For tax purposes, travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job.

An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your business. An expense doesn’t have to be required to be considered necessary.

You will find examples of deductible travel expenses in Table 1-1 .

Traveling Away From Home

You are traveling away from home if:

Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work, and

You need to sleep or rest to meet the demands of your work while away from home.

You are a railroad conductor. You leave your home terminal on a regularly scheduled round-trip run between two cities and return home 16 hours later. During the run, you have 6 hours off at your turnaround point where you eat two meals and rent a hotel room to get necessary sleep before starting the return trip. You are considered to be away from home.

You are a truck driver. You leave your terminal and return to it later the same day. You get an hour off at your turnaround point to eat. Because you aren’t off to get necessary sleep and the brief time off isn’t an adequate rest period, you aren’t traveling away from home.

If you are a member of the U.S. Armed Forces on a permanent duty assignment overseas, you aren’t traveling away from home. You can’t deduct your expenses for meals and lodging. You can’t deduct these expenses even if you have to maintain a home in the United States for your family members who aren’t allowed to accompany you overseas. If you are transferred from one permanent duty station to another, you may have deductible moving expenses, which are explained in Pub. 3, Armed Forces' Tax Guide.

A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a tax home (explained next) aboard the ship for travel expense purposes.

To determine whether you are traveling away from home, you must first determine the location of your tax home.

Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. It includes the entire city or general area in which your business or work is located.

If you have more than one regular place of business, your tax home is your main place of business. See Main place of business or work , later.

If you don’t have a regular or a main place of business because of the nature of your work, then your tax home may be the place where you regularly live. See No main place of business or work , later.

If you don’t have a regular or main place of business or post of duty and there is no place where you regularly live, you are considered an itinerant (a transient) and your tax home is wherever you work. As an itinerant, you can’t claim a travel expense deduction because you are never considered to be traveling away from home.

If you have more than one place of work, consider the following when determining which one is your main place of business or work.

The total time you ordinarily spend in each place.

The level of your business activity in each place.

Whether your income from each place is significant or insignificant.

You live in Cincinnati where you have a seasonal job for 8 months each year and earn $40,000. You work the other 4 months in Miami, also at a seasonal job, and earn $15,000. Cincinnati is your main place of work because you spend most of your time there and earn most of your income there.

You may have a tax home even if you don’t have a regular or main place of work. Your tax home may be the home where you regularly live.

If you don’t have a regular or main place of business or work, use the following three factors to determine where your tax home is.

You perform part of your business in the area of your main home and use that home for lodging while doing business in the area.

You have living expenses at your main home that you duplicate because your business requires you to be away from that home.

You haven’t abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging.

If you satisfy all three factors, your tax home is the home where you regularly live. If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. If you satisfy only one factor, you are an itinerant; your tax home is wherever you work and you can’t deduct travel expenses.

You are single and live in Boston in an apartment you rent. You have worked for your employer in Boston for a number of years. Your employer enrolls you in a 12-month executive training program. You don’t expect to return to work in Boston after you complete your training.

During your training, you don’t do any work in Boston. Instead, you receive classroom and on-the-job training throughout the United States. You keep your apartment in Boston and return to it frequently. You use your apartment to conduct your personal business. You also keep up your community contacts in Boston. When you complete your training, you are transferred to Los Angeles.

You don’t satisfy factor (1) because you didn’t work in Boston. You satisfy factor (2) because you had duplicate living expenses. You also satisfy factor (3) because you didn’t abandon your apartment in Boston as your main home, you kept your community contacts, and you frequently returned to live in your apartment. Therefore, you have a tax home in Boston.

You are an outside salesperson with a sales territory covering several states. Your employer's main office is in Newark, but you don’t conduct any business there. Your work assignments are temporary, and you have no way of knowing where your future assignments will be located. You have a room in your married sister's house in Dayton. You stay there for one or two weekends a year, but you do no work in the area. You don’t pay your sister for the use of the room.

You don’t satisfy any of the three factors listed earlier. You are an itinerant and have no tax home.

If you (and your family) don’t live at your tax home (defined earlier), you can’t deduct the cost of traveling between your tax home and your family home. You also can’t deduct the cost of meals and lodging while at your tax home. See Example 1 , later.

If you are working temporarily in the same city where you and your family live, you may be considered as traveling away from home. See Example 2 , later.

You are a truck driver and you and your family live in Tucson. You are employed by a trucking firm that has its terminal in Phoenix. At the end of your long runs, you return to your home terminal in Phoenix and spend one night there before returning home. You can’t deduct any expenses you have for meals and lodging in Phoenix or the cost of traveling from Phoenix to Tucson. This is because Phoenix is your tax home.

Your family home is in Pittsburgh, where you work 12 weeks a year. The rest of the year you work for the same employer in Baltimore. In Baltimore, you eat in restaurants and sleep in a rooming house. Your salary is the same whether you are in Pittsburgh or Baltimore.

Because you spend most of your working time and earn most of your salary in Baltimore, that city is your tax home. You can’t deduct any expenses you have for meals and lodging there. However, when you return to work in Pittsburgh, you are away from your tax home even though you stay at your family home. You can deduct the cost of your round trip between Baltimore and Pittsburgh. You can also deduct your part of your family's living expenses for non-entertainment-related meals and lodging while you are living and working in Pittsburgh.

Temporary Assignment or Job

You may regularly work at your tax home and also work at another location. It may not be practical to return to your tax home from this other location at the end of each workday.

If your assignment or job away from your main place of work is temporary, your tax home doesn’t change. You are considered to be away from home for the whole period you are away from your main place of work. You can deduct your travel expenses if they otherwise qualify for deduction. Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less.

However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you can’t deduct your travel expenses while there. An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than 1 year, whether or not it actually lasts for more than 1 year.

If your assignment is indefinite, you must include in your income any amounts you receive from your employer for living expenses, even if they are called “travel allowances” and you account to your employer for them. You may be able to deduct the cost of relocating to your new tax home as a moving expense. See Pub. 3 for more information.

If you are a federal employee participating in a federal crime investigation or prosecution, you aren’t subject to the 1-year rule. This means you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year provided you meet the other requirements for deductibility.

For you to qualify, the Attorney General (or their designee) must certify that you are traveling:

For the federal government;

In a temporary duty status; and

To investigate, prosecute, or provide support services for the investigation or prosecution of a federal crime.

You must determine whether your assignment is temporary or indefinite when you start work. If you expect an assignment or job to last for 1 year or less, it is temporary unless there are facts and circumstances that indicate otherwise. An assignment or job that is initially temporary may become indefinite due to changed circumstances. A series of assignments to the same location, all for short periods but that together cover a long period, may be considered an indefinite assignment.

The following examples illustrate whether an assignment or job is temporary or indefinite.

You are a construction worker. You live and regularly work in Los Angeles. You are a member of a trade union in Los Angeles that helps you get work in the Los Angeles area. Your tax home is Los Angeles. Because of a shortage of work, you took a job on a construction project in Fresno. Your job was scheduled to end in 8 months. The job actually lasted 10 months.

You realistically expected the job in Fresno to last 8 months. The job actually did last less than 1 year. The job is temporary and your tax home is still in Los Angeles.

The facts are the same as in Example 1 , except that you realistically expected the work in Fresno to last 18 months. The job was actually completed in 10 months.

Your job in Fresno is indefinite because you realistically expected the work to last longer than 1 year, even though it actually lasted less than 1 year. You can’t deduct any travel expenses you had in Fresno because Fresno became your tax home.

The facts are the same as in Example 1 , except that you realistically expected the work in Fresno to last 9 months. After 8 months, however, you were asked to remain for 7 more months (for a total actual stay of 15 months).

Initially, you realistically expected the job in Fresno to last for only 9 months. However, due to changed circumstances occurring after 8 months, it was no longer realistic for you to expect that the job in Fresno would last for 1 year or less. You can deduct only your travel expenses for the first 8 months. You can’t deduct any travel expenses you had after that time because Fresno became your tax home when the job became indefinite.

If you go back to your tax home from a temporary assignment on your days off, you aren’t considered away from home while you are in your hometown. You can’t deduct the cost of your meals and lodging there. However, you can deduct your travel expenses, including meals and lodging, while traveling between your temporary place of work and your tax home. You can claim these expenses up to the amount it would have cost you to stay at your temporary place of work.

If you keep your hotel room during your visit home, you can deduct the cost of your hotel room. In addition, you can deduct your expenses of returning home up to the amount you would have spent for meals had you stayed at your temporary place of work.

If you take a job that requires you to move, with the understanding that you will keep the job if your work is satisfactory during a probationary period, the job is indefinite. You can’t deduct any of your expenses for meals and lodging during the probationary period.

What Travel Expenses Are Deductible?

Once you have determined that you are traveling away from your tax home, you can determine what travel expenses are deductible.

You can deduct ordinary and necessary expenses you have when you travel away from home on business. The type of expense you can deduct depends on the facts and your circumstances.

Table 1-1 summarizes travel expenses you may be able to deduct. You may have other deductible travel expenses that aren’t covered there, depending on the facts and your circumstances.

If you have one expense that includes the costs of non-entertainment-related meals, entertainment, and other services (such as lodging or transportation), you must allocate that expense between the cost of non-entertainment-related meals, and entertainment and the cost of other services. You must have a reasonable basis for making this allocation. For example, you must allocate your expenses if a hotel includes one or more meals in its room charge.

If a spouse, dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, you generally can’t deduct their travel expenses.

You can deduct the travel expenses of someone who goes with you if that person:

Is your employee,

Has a bona fide business purpose for the travel, and

Would otherwise be allowed to deduct the travel expenses.

If a business associate travels with you and meets the conditions in (2) and (3) above, you can deduct the travel expenses you have for that person. A business associate is someone with whom you could reasonably expect to actively conduct business. A business associate can be a current or prospective (likely to become) customer, client, supplier, employee, agent, partner, or professional advisor.

Table 1-1. Travel Expenses You Can Deduct

A bona fide business purpose exists if you can prove a real business purpose for the individual's presence. Incidental services, such as typing notes or assisting in entertaining customers, aren’t enough to make the expenses deductible.

You drive to Chicago on business and take your spouse with you. Your spouse isn’t your employee. Your spouse occasionally types notes, performs similar services, and accompanies you to luncheons and dinners. The performance of these services doesn’t establish that your spouse’s presence on the trip is necessary to the conduct of your business. Your spouse’s expenses aren’t deductible.

You pay $199 a day for a double room. A single room costs $149 a day. You can deduct the total cost of driving your car to and from Chicago, but only $149 a day for your hotel room. If both you and your spouse use public transportation, you can only deduct your fare.

You can deduct a portion of the cost of meals if it is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business. Meal and entertainment expenses are discussed in chapter 2 .

You can't deduct expenses for meals that are lavish or extravagant. An expense isn't considered lavish or extravagant if it is reasonable based on the facts and circumstances. Meal expenses won't be disallowed merely because they are more than a fixed dollar amount or because the meals take place at deluxe restaurants, hotels, or resorts.

You can figure your meal expenses using either of the following methods.

Actual cost.

If you are reimbursed for the cost of your meals, how you apply the 50% limit depends on whether your employer's reimbursement plan was accountable or nonaccountable. If you aren’t reimbursed, the 50% limit applies even if the unreimbursed meal expense is for business travel. Chapter 2 discusses the 50% Limit in more detail, and chapter 6 discusses accountable and nonaccountable plans.

You can use the actual cost of your meals to figure the amount of your expense before reimbursement and application of the 50% deduction limit. If you use this method, you must keep records of your actual cost.

Standard Meal Allowance

Generally, you can use the “standard meal allowance” method as an alternative to the actual cost method. It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs. The set amount varies depending on where and when you travel. In this publication, “standard meal allowance” refers to the federal rate for M&IE, discussed later under Amount of standard meal allowance . If you use the standard meal allowance, you must still keep records to prove the time, place, and business purpose of your travel. See the recordkeeping rules for travel in chapter 5 .

The term “incidental expenses” means fees and tips given to porters, baggage carriers, hotel staff, and staff on ships.

Incidental expenses don’t include expenses for laundry, cleaning and pressing of clothing, lodging taxes, costs of telegrams or telephone calls, transportation between places of lodging or business and places where meals are taken, or the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings.

You can use an optional method (instead of actual cost) for deducting incidental expenses only. The amount of the deduction is $5 a day. You can use this method only if you didn’t pay or incur any meal expenses. You can’t use this method on any day that you use the standard meal allowance. This method is subject to the proration rules for partial days. See Travel for days you depart and return , later, in this chapter.

The incidental-expenses-only method isn’t subject to the 50% limit discussed below.

If you use the standard meal allowance method for non-entertainment-related meal expenses and you aren’t reimbursed or you are reimbursed under a nonaccountable plan, you can generally deduct only 50% of the standard meal allowance. If you are reimbursed under an accountable plan and you are deducting amounts that are more than your reimbursements, you can deduct only 50% of the excess amount. The 50% Limit is discussed in more detail in chapter 2, and accountable and nonaccountable plans are discussed in chapter 6.

You can use the standard meal allowance whether you are an employee or self-employed, and whether or not you are reimbursed for your traveling expenses.

You can use the standard meal allowance to figure your meal expenses when you travel in connection with investment and other income-producing property. You can also use it to figure your meal expenses when you travel for qualifying educational purposes. You can’t use the standard meal allowance to figure the cost of your meals when you travel for medical or charitable purposes.

The standard meal allowance is the federal M&IE rate. For travel in 2023, the rate for most small localities in the United States is $59 per day.

Most major cities and many other localities in the United States are designated as high-cost areas, qualifying for higher standard meal allowances.

If you travel to more than one location in one day, use the rate in effect for the area where you stop for sleep or rest. If you work in the transportation industry, however, see Special rate for transportation workers , later.

Per diem rates are listed by the federal government's fiscal year, which runs from October 1 to September 30. You can choose to use the rates from the 2022 fiscal year per diem tables or the rates from the 2023 fiscal year tables, but you must consistently use the same tables for all travel you are reporting on your income tax return for the year. See Transition Rules , later.

The standard meal allowance rates above don’t apply to travel in Alaska, Hawaii, or any other location outside the continental United States. The Department of Defense establishes per diem rates for Alaska, Hawaii, Puerto Rico, American Samoa, Guam, Midway, the Northern Mariana Islands, the U.S. Virgin Islands, Wake Island, and other non-foreign areas outside the continental United States. The Department of State establishes per diem rates for all other foreign areas.

You can use a special standard meal allowance if you work in the transportation industry. You are in the transportation industry if your work:

Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck; and

Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates.

Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. If you choose to use the special rate for any trip, you must use the special rate (and not use the regular standard meal allowance rates) for all trips you take that year.

For both the day you depart for and the day you return from a business trip, you must prorate the standard meal allowance (figure a reduced amount for each day). You can do so by one of two methods.

Method 1: You can claim 3 / 4 of the standard meal allowance.

Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice.

You are employed in New Orleans as a convention planner. In March, your employer sent you on a 3-day trip to Washington, DC, to attend a planning seminar. You left your home in New Orleans at 10 a.m. on Wednesday and arrived in Washington, DC, at 5:30 p.m. After spending 2 nights there, you flew back to New Orleans on Friday and arrived back home at 8 p.m. Your employer gave you a flat amount to cover your expenses and included it with your wages.

Under Method 1 , you can claim 2½ days of the standard meal allowance for Washington, DC: 3 / 4 of the daily rate for Wednesday and Friday (the days you departed and returned), and the full daily rate for Thursday.

Under Method 2 , you could also use any method that you apply consistently and that is in accordance with reasonable business practice. For example, you could claim 3 days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited to only 2½ days.

Travel in the United States

The following discussion applies to travel in the United States. For this purpose, the United States includes the 50 states and the District of Columbia. The treatment of your travel expenses depends on how much of your trip was business related and on how much of your trip occurred within the United States. See Part of Trip Outside the United States , later.

You can deduct all of your travel expenses if your trip was entirely business related. If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct only your business-related travel expenses. These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination.

You work in Atlanta and take a business trip to New Orleans in May. Your business travel totals 900 miles round trip. On your way home, you stop in Mobile to visit your parents. You spend $2,165 for the 9 days you are away from home for travel, non-entertainment-related meals, lodging, and other travel expenses. If you hadn’t stopped in Mobile, you would have been gone only 6 days, and your total cost would have been $1,633.50. You can deduct $1,633.50 for your trip, including the cost of round-trip transportation to and from New Orleans. The deduction for your non-entertainment-related meals is subject to the 50% limit on meals mentioned earlier.

If your trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. However, you can deduct any expenses you have while at your destination that are directly related to your business.

A trip to a resort or on a cruise ship may be a vacation even if the promoter advertises that it is primarily for business. The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, won’t change what is really a vacation into a business trip.

Part of Trip Outside the United States

If part of your trip is outside the United States, use the rules described later in this chapter under Travel Outside the United States for that part of the trip. For the part of your trip that is inside the United States, use the rules for travel in the United States. Travel outside the United States doesn’t include travel from one point in the United States to another point in the United States. The following discussion can help you determine whether your trip was entirely within the United States.

If you travel by public transportation, any place in the United States where that vehicle makes a scheduled stop is a point in the United States. Once the vehicle leaves the last scheduled stop in the United States on its way to a point outside the United States, you apply the rules under Travel Outside the United States , later.

You fly from New York to Puerto Rico with a scheduled stop in Miami. Puerto Rico isn’t considered part of the United States for purposes of travel. You return to New York nonstop. The flight from New York to Miami is in the United States, so only the flight from Miami to Puerto Rico is outside the United States. Because there are no scheduled stops between Puerto Rico and New York, all of the return trip is outside the United States.

Travel by private car in the United States is travel between points in the United States, even though you are on your way to a destination outside the United States.

You travel by car from Denver to Mexico City and return. Your travel from Denver to the border and from the border back to Denver is travel in the United States, and the rules in this section apply. The rules below under Travel Outside the United States apply to your trip from the border to Mexico City and back to the border.

Travel Outside the United States

If any part of your business travel is outside the United States, some of your deductions for the cost of getting to and from your destination may be limited. For this purpose, the United States includes the 50 states and the District of Columbia.

How much of your travel expenses you can deduct depends in part upon how much of your trip outside the United States was business related.

Travel Entirely for Business or Considered Entirely for Business

You can deduct all your travel expenses of getting to and from your business destination if your trip is entirely for business or considered entirely for business.

If you travel outside the United States and you spend the entire time on business activities, you can deduct all of your travel expenses.

Even if you didn’t spend your entire time on business activities, your trip is considered entirely for business if you meet at least one of the following four exceptions.

Your trip is considered entirely for business if you didn’t have substantial control over arranging the trip. The fact that you control the timing of your trip doesn’t, by itself, mean that you have substantial control over arranging your trip.

You don’t have substantial control over your trip if you:

Are an employee who was reimbursed or paid a travel expense allowance, and

Aren’t related to your employer, or

Aren’t a managing executive.

“Related to your employer” is defined later in chapter 6 under Per Diem and Car Allowances .

A “managing executive” is an employee who has the authority and responsibility, without being subject to the veto of another, to decide on the need for the business travel.

A self-employed person generally has substantial control over arranging business trips.

Your trip is considered entirely for business if you were outside the United States for a week or less, combining business and nonbusiness activities. One week means 7 consecutive days. In counting the days, don’t count the day you leave the United States, but do count the day you return to the United States.

You traveled to Brussels primarily for business. You left Denver on Tuesday and flew to New York. On Wednesday, you flew from New York to Brussels, arriving the next morning. On Thursday and Friday, you had business discussions, and from Saturday until Tuesday, you were sightseeing. You flew back to New York, arriving Wednesday afternoon. On Thursday, you flew back to Denver.

Although you were away from your home in Denver for more than a week, you weren’t outside the United States for more than a week. This is because the day you depart doesn’t count as a day outside the United States.

You can deduct your cost of the round-trip flight between Denver and Brussels. You can also deduct the cost of your stay in Brussels for Thursday and Friday while you conducted business. However, you can’t deduct the cost of your stay in Brussels from Saturday through Tuesday because those days were spent on nonbusiness activities.

Your trip is considered entirely for business if:

You were outside the United States for more than a week, and

You spent less than 25% of the total time you were outside the United States on nonbusiness activities.

You flew from Seattle to Tokyo, where you spent 14 days on business and 5 days on personal matters. You then flew back to Seattle. You spent 1 day flying in each direction.

Because only 5 / 21 (less than 25%) of your total time abroad was for nonbusiness activities, you can deduct as travel expenses what it would have cost you to make the trip if you hadn’t engaged in any nonbusiness activity. The amount you can deduct is the cost of the round-trip plane fare and 16 days of non-entertainment-related meals (subject to the 50% Limit ), lodging, and other related expenses.

Your trip is considered entirely for business if you can establish that a personal vacation wasn’t a major consideration, even if you have substantial control over arranging the trip.

Travel Primarily for Business

If you travel outside the United States primarily for business but spend some of your time on other activities, you generally can’t deduct all of your travel expenses. You can only deduct the business portion of your cost of getting to and from your destination. You must allocate the costs between your business and other activities to determine your deductible amount. See Travel allocation rules , later.

If your trip outside the United States was primarily for business, you must allocate your travel time on a day-to-day basis between business days and nonbusiness days. The days you depart from and return to the United States are both counted as days outside the United States.

To figure the deductible amount of your round-trip travel expenses, use the following fraction. The numerator (top number) is the total number of business days outside the United States. The denominator (bottom number) is the total number of business and nonbusiness days of travel.

Your business days include transportation days, days your presence was required, days you spent on business, and certain weekends and holidays.

Count as a business day any day you spend traveling to or from a business destination. However, if because of a nonbusiness activity you don’t travel by a direct route, your business days are the days it would take you to travel a reasonably direct route to your business destination. Extra days for side trips or nonbusiness activities can’t be counted as business days.

Count as a business day any day your presence is required at a particular place for a specific business purpose. Count it as a business day even if you spend most of the day on nonbusiness activities.

If your principal activity during working hours is the pursuit of your trade or business, count the day as a business day. Also, count as a business day any day you are prevented from working because of circumstances beyond your control.

Count weekends, holidays, and other necessary standby days as business days if they fall between business days. But if they follow your business meetings or activity and you remain at your business destination for nonbusiness or personal reasons, don’t count them as business days.

Your tax home is New York City. You travel to Quebec, where you have a business meeting on Friday. You have another meeting on the following Monday. Because your presence was required on both Friday and Monday, they are business days. Because the weekend is between business days, Saturday and Sunday are counted as business days. This is true even though you use the weekend for sightseeing, visiting friends, or other nonbusiness activity.

If, in Example 1 , you had no business in Quebec after Friday, but stayed until Monday before starting home, Saturday and Sunday would be nonbusiness days.

If you stopped for a vacation or other nonbusiness activity either on the way from the United States to your business destination, or on the way back to the United States from your business destination, you must allocate part of your travel expenses to the nonbusiness activity.

The part you must allocate is the amount it would have cost you to travel between the point where travel outside the United States begins and your nonbusiness destination and a return to the point where travel outside the United States ends.

You determine the nonbusiness portion of that expense by multiplying it by a fraction. The numerator (top number) of the fraction is the number of nonbusiness days during your travel outside the United States, and the denominator (bottom number) is the total number of days you spend outside the United States.

You live in New York. On May 4, you flew to Paris to attend a business conference that began on May 5. The conference ended at noon on May 14. That evening, you flew to Dublin where you visited with friends until the afternoon of May 21, when you flew directly home to New York. The primary purpose for the trip was to attend the conference.

If you hadn’t stopped in Dublin, you would have arrived home the evening of May 14. You don’t meet any of the exceptions that would allow you to consider your travel entirely for business. May 4 through May 14 (11 days) are business days and May 15 through May 21 (7 days) are nonbusiness days.

You can deduct the cost of your non-entertainment-related meals (subject to the 50% Limit ), lodging, and other business-related travel expenses while in Paris.

You can’t deduct your expenses while in Dublin. You also can’t deduct 7 / 18 of what it would have cost you to travel round trip between New York and Dublin.

You paid $750 to fly from New York to Paris, $400 to fly from Paris to Dublin, and $700 to fly from Dublin back to New York. Round-trip airfare from New York to Dublin would have been $1,250.

You figure the deductible part of your air travel expenses by subtracting 7 / 18 of the round-trip airfare and other expenses you would have had in traveling directly between New York and Dublin ($1,250 × 7 / 18 = $486) from your total expenses in traveling from New York to Paris to Dublin and back to New York ($750 + $400 + $700 = $1,850).

Your deductible air travel expense is $1,364 ($1,850 − $486).

If you had a vacation or other nonbusiness activity at, near, or beyond your business destination, you must allocate part of your travel expenses to the nonbusiness activity.

The part you must allocate is the amount it would have cost you to travel between the point where travel outside the United States begins and your business destination and a return to the point where travel outside the United States ends.

None of your travel expenses for nonbusiness activities at, near, or beyond your business destination are deductible.

Assume that the dates are the same as in the previous example but that instead of going to Dublin for your vacation, you fly to Venice, Italy, for a vacation.

You can’t deduct any part of the cost of your trip from Paris to Venice and return to Paris. In addition, you can’t deduct 7 / 18 of the airfare and other expenses from New York to Paris and back to New York.

You can deduct 11 / 18 of the round-trip plane fare and other travel expenses from New York to Paris, plus your non-entertainment-related meals (subject to the 50% Limit ), lodging, and any other business expenses you had in Paris. (Assume these expenses total $4,939.) If the round-trip plane fare and other travel-related expenses (such as food during the trip) are $1,750, you can deduct travel costs of $1,069 ( 11 / 18 × $1,750), plus the full $4,939 for the expenses you had in Paris.

You can use another method of counting business days if you establish that it more clearly reflects the time spent on other than business activities outside the United States.

If you travel outside the United States primarily for vacation or for investment purposes, the entire cost of the trip is a nondeductible personal expense. However, if you spend some time attending brief professional seminars or a continuing education program, you can deduct your registration fees and other expenses you have that are directly related to your business.

The university from which you graduated has a continuing education program for members of its alumni association. This program consists of trips to various foreign countries where academic exercises and conferences are set up to acquaint individuals in most occupations with selected facilities in several regions of the world. However, none of the conferences are directed toward specific occupations or professions. It is up to each participant to seek out specialists and organizational settings appropriate to their occupational interests.

Three-hour sessions are held each day over a 5-day period at each of the selected overseas facilities where participants can meet with individual practitioners. These sessions are composed of a variety of activities including workshops, mini-lectures, roleplaying, skill development, and exercises. Professional conference directors schedule and conduct the sessions. Participants can choose those sessions they wish to attend.

You can participate in this program because you are a member of the alumni association. You and your family take one of the trips. You spend about 2 hours at each of the planned sessions. The rest of the time you go touring and sightseeing with your family. The trip lasts less than 1 week.

Your travel expenses for the trip aren’t deductible since the trip was primarily a vacation. However, registration fees and any other incidental expenses you have for the five planned sessions you attended that are directly related and beneficial to your business are deductible business expenses. These expenses should be specifically stated in your records to ensure proper allocation of your deductible business expenses.

Luxury Water Travel

If you travel by ocean liner, cruise ship, or other form of luxury water transportation for business purposes, there is a daily limit on the amount you can deduct. The limit is twice the highest federal per diem rate allowable at the time of your travel. (Generally, the federal per diem is the amount paid to federal government employees for daily living expenses when they travel away from home within the United States for business purposes.)

The highest federal per diem rate allowed and the daily limit for luxury water travel in 2023 are shown in the following table.

You are a travel agent and traveled by ocean liner from New York to London, England, on business in May. Your expense for the 6-day cruise was $6,200. Your deduction for the cruise can’t exceed $4,776 (6 days × $796 daily limit).

If your expenses for luxury water travel include separately stated amounts for meals or entertainment, those amounts are subject to the 50% limit on non-entertainment-related meals and entertainment before you apply the daily limit. For a discussion of the 50% Limit , see chapter 2.

In the previous example, your luxury water travel had a total cost of $6,200. Of that amount, $3,700 was separately stated as non-entertainment-related meals and $1,000 was separately stated as entertainment. Considering that you are self-employed, you aren’t reimbursed for any of your travel expenses. You figure your deductible travel expenses as follows.

If your meal or entertainment charges aren’t separately stated or aren’t clearly identifiable, you don’t have to allocate any portion of the total charge to meals or entertainment.

The daily limit on luxury water travel (discussed earlier) doesn’t apply to expenses you have to attend a convention, seminar, or meeting on board a cruise ship. See Cruise Ships , later, under Conventions.

Conventions

You can deduct your travel expenses when you attend a convention if you can show that your attendance benefits your trade or business. You can’t deduct the travel expenses for your family.

If the convention is for investment, political, social, or other purposes unrelated to your trade or business, you can’t deduct the expenses.

The convention agenda or program generally shows the purpose of the convention. You can show your attendance at the convention benefits your trade or business by comparing the agenda with the official duties and responsibilities of your position. The agenda doesn’t have to deal specifically with your official duties and responsibilities; it will be enough if the agenda is so related to your position that it shows your attendance was for business purposes.

Conventions Held Outside the North American Area

You can’t deduct expenses for attending a convention, seminar, or similar meeting held outside the North American area unless:

The meeting is directly related to the active conduct of your trade or business, and

It is as reasonable to hold the meeting outside the North American area as within the North American area. See Reasonableness test , later.

The North American area includes the following locations.

The following factors are taken into account to determine if it was as reasonable to hold the meeting outside the North American area as within the North American area.

The purpose of the meeting and the activities taking place at the meeting.

The purposes and activities of the sponsoring organizations or groups.

The homes of the active members of the sponsoring organizations and the places at which other meetings of the sponsoring organizations or groups have been or will be held.

Other relevant factors you may present.

You can deduct up to $2,000 per year of your expenses of attending conventions, seminars, or similar meetings held on cruise ships. All ships that sail are considered cruise ships.

You can deduct these expenses only if all of the following requirements are met.

The convention, seminar, or meeting is directly related to the active conduct of your trade or business.

The cruise ship is a vessel registered in the United States.

All of the cruise ship's ports of call are in the United States or in territories of the United States.

You attach to your return a written statement signed by you that includes information about:

The total days of the trip (not including the days of transportation to and from the cruise ship port),

The number of hours each day that you devoted to scheduled business activities, and

A program of the scheduled business activities of the meeting.

You attach to your return a written statement signed by an officer of the organization or group sponsoring the meeting that includes:

A schedule of the business activities of each day of the meeting, and

The number of hours you attended the scheduled business activities.

2. Meals and Entertainment

You can no longer take a deduction for any expense related to activities generally considered entertainment, amusement, or recreation. You can continue to deduct 50% of the cost of business meals if you (or your employee) are present and the food or beverages aren't considered lavish or extravagant.

Entertainment

Entertainment—defined.

Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; on yachts; or on hunting, fishing, vacation, and similar trips. Entertainment may also include meeting personal, living, or family needs of individuals, such as providing meals, a hotel suite, or a car to customers or their families.

Your kind of business may determine if a particular activity is considered entertainment. For example, if you are a dress designer and have a fashion show to introduce your new designs to store buyers, the show generally isn’t considered entertainment. This is because fashion shows are typical in your business. But, if you are an appliance distributor and hold a fashion show for the spouses of your retailers, the show is generally considered entertainment.

If you have one expense that includes the costs of entertainment and other services (such as lodging or transportation), you must allocate that expense between the cost of entertainment and the cost of other services. You must have a reasonable basis for making this allocation. For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge.

In general, entertainment expenses are nondeductible. However, there are a few exceptions to the general rule, including:

Entertainment treated as compensation on your originally filed tax returns (and treated as wages to your employees);

Recreational expenses for employees such as a holiday party or a summer picnic;

Expenses related to attending business meetings or conventions of certain exempt organizations such as business leagues, chambers of commerce, professional associations, etc.; and

Entertainment sold to customers. For example, if you run a nightclub, your expenses for the entertainment you furnish to your customers, such as a floor show, aren’t subject to the nondeductible rules.

Examples of Nondeductible Entertainment

Generally, you can't deduct any expense for an entertainment event. This includes expenses for entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; on yachts; or on hunting, fishing, vacation, and similar trips.

Generally, you can’t deduct any expense for the use of an entertainment facility. This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection.

An entertainment facility is any property you own, rent, or use for entertainment. Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort.

You can’t deduct dues (including initiation fees) for membership in any club organized for business, pleasure, recreation, or other social purposes.

This rule applies to any membership organization if one of its principal purposes is either:

To conduct entertainment activities for members or their guests; or

To provide members or their guests with access to entertainment facilities, discussed later.

The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. You can’t deduct dues paid to:

Country clubs,

Golf and athletic clubs,

Airline clubs,

Hotel clubs, and

Clubs operated to provide meals under circumstances generally considered to be conducive to business discussions.

Any item that might be considered either a gift or entertainment will generally be considered entertainment. However, if you give a customer packaged food or beverages that you intend the customer to use at a later date, treat it as a gift.

As discussed above, entertainment expenses are generally nondeductible. However, you may continue to deduct 50% of the cost of business meals if you (or an employee) is present and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant, or similar business contact.

Food and beverages that are provided during entertainment events are not considered entertainment if purchased separately from the entertainment, or if the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts. However, the entertainment disallowance rule may not be circumvented through inflating the amount charged for food and beverages.

Any allowed expense must be ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your business. An expense doesn't have to be required to be considered necessary. Expenses must not be lavish or extravagant. An expense isn't considered lavish or extravagant if it is reasonable based on the facts and circumstances.

For each example, assume that the food and beverage expenses are ordinary and necessary expenses under section 162(a) paid or incurred during the tax year in carrying on a trade or business and are not lavish or extravagant under the circumstances. Also assume that the taxpayer and the business contact are not engaged in a trade or business that has any relation to the entertainment activity.

Taxpayer A invites B, a business contact, to a baseball game. A purchases tickets for A and B to attend the game. While at the game, A buys hot dogs and drinks for A and B. The baseball game is entertainment as defined in Regulations section 1.274-11(b)(1)(i) and, thus, the cost of the game tickets is an entertainment expense and is not deductible by A. The cost of the hot dogs and drinks, which are purchased separately from the game tickets, is not an entertainment expense and is not subject to the section 274(a)(1) disallowance. Therefore, A may deduct 50% of the expenses associated with the hot dogs and drinks purchased at the game.

Taxpayer C invites D, a business contact, to a basketball game. C purchases tickets for C and D to attend the game in a suite, where they have access to food and beverages. The cost of the basketball game tickets, as stated on the invoice, includes the food and beverages. The basketball game is entertainment as defined in Regulations section 1.274-11(b)(1)(i) and, thus, the cost of the game tickets is an entertainment expense and is not deductible by C. The cost of the food and beverages, which are not purchased separately from the game tickets, is not stated separately on the invoice. Thus, the cost of the food and beverages is also an entertainment expense that is subject to the section 274(a)(1) disallowance. Therefore, C may not deduct any of the expenses associated with the basketball game.

Assume the same facts as in Example 2 , except that the invoice for the basketball game tickets separately states the cost of the food and beverages. As in Example 2 , the basketball game is entertainment as defined in Regulations section 1.274-2(b)(1)(i) and, thus, the cost of the game tickets, other than the cost of the food and beverages, is an entertainment expense and is not deductible by C. However, the cost of the food and beverages, which is stated separately on the invoice for the game tickets, is not an entertainment expense and is not subject to the section 274(a)(1) disallowance. Therefore, C may deduct 50% of the expenses associated with the food and beverages provided at the game.

In general, you can deduct only 50% of your business-related meal expenses, unless an exception applies. (If you are subject to the Department of Transportation's “hours of service” limits, you can deduct 80% of your business-related meal expenses. See Individuals subject to hours of service limits , later.)

The 50% limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed.

Examples of meals might include:

Meals while traveling away from home (whether eating alone or with others) on business, or

Meal at a business convention or business league meeting.

Figure A. Does the 50% Limit Apply to Your Expenses?

There are exceptions to these rules. See Exceptions to the 50% Limit for Meals , later.

Figure A. Does the 50% limit apply to Your Expenses?TAs for Figure A are: Notice 87-23; Form 2106 instructions

Summary: This is a flowchart used to determine if employees and self-employed persons need to put a 50% limit on their business expense deductions.

This is the starting of the flowchart.

Decision (1)

Were your meal and entertainment expenses reimbursed? (Count only reimbursements your employer didn’t include in box 1 of your Form W-2. If self-employed, count only reimbursements from clients or customers that aren’t included on Form 1099-MISC, Miscellaneous Income.)

Decision (2)

If an employee, did you adequately account to your employer under an accountable plan? If self-employed, did you provide the payer with adequate records? (See Chapter 6.)

Decision (3)

Did your expenses exceed the reimbursement?

Decision (4)

Process (a)

Your meal and entertainment expenses are NOT subject to the limitations. However, since the reimbursement wasn’t treated as wages or as other taxable income, you can’t deduct the expenses.

Process (b)

Your nonentertainment meal expenses ARE subject to the 50% limit. Your entertainment expenses are nondeductible.

This is the ending of the flowchart.

Please click here for the text description of the image.

Taxes and tips relating to a business meal are included as a cost of the meal and are subject to the 50% limit. However, the cost of transportation to and from the meal is not treated as part of the cost and would not be subject to the limit.

The 50% limit on meal expenses applies if the expense is otherwise deductible and isn’t covered by one of the exceptions discussed later. Figure A can help you determine if the 50% limit applies to you.

The 50% limit also applies to certain meal expenses that aren’t business related. It applies to meal expenses you have for the production of income, including rental or royalty income. It also applies to the cost of meals included in deductible educational expenses.

The 50% limit will apply after determining the amount that would otherwise qualify for a deduction. You first have to determine the amount of meal expenses that would be deductible under the other rules discussed in this publication.

If a group of business acquaintances takes turns picking up each others' meal checks primarily for personal reasons, without regard to whether any business purposes are served, no member of the group can deduct any part of the expense.

You spend $200 (including tax and tip) for a business meal. If $110 of that amount isn’t allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. Your deduction can’t be more than $45 (50% (0.50) × $90).

You purchase two tickets to a concert for $200 for you and your client. Your deduction is zero because no deduction is allowed for entertainment expenses.

Exception to the 50% Limit for Meals

Your meal expense isn’t subject to the 50% limit if the expense meets one of the following exceptions.

In general, expenses for goods, services, and facilities, to the extent the expenses are treated by the taxpayer, with respect to entertainment, amusement, or recreation, as compensation to an employee and as wages to the employee for tax purposes.

If you are an employee, you aren’t subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. Accountable plans are discussed in chapter 6.

If you are self-employed, your deductible meal expenses aren’t subject to the 50% limit if all of the following requirements are met.

You have these expenses as an independent contractor.

Your customer or client reimburses you or gives you an allowance for these expenses in connection with services you perform.

You provide adequate records of these expenses to your customer or client. (See chapter 5 .)

In this case, your client or customer is subject to the 50% limit on the expenses.

You are a self-employed attorney who adequately accounts for meal expenses to a client who reimburses you for these expenses. You aren’t subject to the limitation on meal expenses. If the client can deduct the expenses, the client is subject to the 50% limit.

If you (as an independent contractor) have expenses for meals related to providing services for a client but don’t adequately account for and seek reimbursement from the client for those expenses, you are subject to the 50% limit on non-entertainment-related meals and the entertainment-related meal expenses are nondeductible to you.

You aren't subject to the 50% limit for expenses for recreational, social, or similar activities (including facilities) such as a holiday party or a summer picnic.

You aren’t subject to the 50% limit if you provide meals to the general public as a means of advertising or promoting goodwill in the community. For example, neither the expense of sponsoring a television or radio show nor the expense of distributing free food and beverages to the general public is subject to the 50% limit.

You aren’t subject to the 50% limit if you actually sell meals to the public. For example, if you run a restaurant, your expense for the food you furnish to your customers isn’t subject to the 50% limit.

You can deduct a higher percentage of your meal expenses while traveling away from your tax home if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. The percentage is 80%.

Individuals subject to the Department of Transportation's “hours of service” limits include the following persons.

Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations.

Interstate truck operators and bus drivers who are under Department of Transportation regulations.

Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations.

Certain merchant mariners who are under Coast Guard regulations.

If you give gifts in the course of your trade or business, you may be able to deduct all or part of the cost. This chapter explains the limits and rules for deducting the costs of gifts.

You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift.

If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. This rule doesn’t apply if you have a bona fide, independent business connection with that family member and the gift isn’t intended for the customer's eventual use.

If you and your spouse both give gifts, both of you are treated as one taxpayer. It doesn’t matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. If a partnership gives gifts, the partnership and the partners are treated as one taxpayer.

You sell products to a local company. You and your spouse gave the local company three gourmet gift baskets to thank them for their business. You and your spouse paid $80 for each gift basket, or $240 total. Three of the local company's executives took the gift baskets home for their families' use. You and your spouse have no independent business relationship with any of the executives' other family members. You and your spouse can deduct a total of $75 ($25 limit × 3) for the gift baskets.

Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit.

A cost is incidental only if it doesn’t add substantial value to the gift. For example, the cost of gift wrapping is an incidental cost. However, the purchase of an ornamental basket for packaging fruit isn’t an incidental cost if the value of the basket is substantial compared to the value of the fruit.

The following items aren’t considered gifts for purposes of the $25 limit.

An item that costs $4 or less and:

Has your name clearly and permanently imprinted on the gift, and

Is one of a number of identical items you widely distribute. Examples include pens, desk sets, and plastic bags and cases.

Signs, display racks, or other promotional material to be used on the business premises of the recipient.

Figure B. When Are Transportation Expenses Deductible?

Most employees and self-employed persons can use this chart. (Don’t use this chart if your home is your principal place of business. See Office in the home , later.)

Figure B. When Are Local Transportation Expenses Deductible?TAs for Figure B are: Reg 1.162-1(a); RR 55–109; RR 94–47

Summary: This illustration depicts the rules used to determine if transportation expenses are deductible.

The image then lists definitions for words used in the graphic:

Any item that might be considered either a gift or entertainment will generally be considered entertainment. However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift.

4. Transportation

This chapter discusses expenses you can deduct for business transportation when you aren’t traveling away from home , as defined in chapter 1. These expenses include the cost of transportation by air, rail, bus, taxi, etc., and the cost of driving and maintaining your car.

Transportation expenses include the ordinary and necessary costs of all of the following.

Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Tax home is defined in chapter 1.

Visiting clients or customers.

Going to a business meeting away from your regular workplace.

Getting from your home to a temporary workplace when you have one or more regular places of work. These temporary workplaces can be either within the area of your tax home or outside that area.

Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. However, there may be exceptions to this general rule. You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. Also, daily transportation expenses can be deducted if (1) you have one or more regular work locations away from your residence; or (2) your residence is your principal place of business and you incur expenses going between the residence and another work location in the same trade or business, regardless of whether the work is temporary or permanent and regardless of the distance.

Illustration of transportation expenses.

Figure B above illustrates the rules that apply for deducting transportation expenses when you have a regular or main job away from your home. You may want to refer to it when deciding whether you can deduct your transportation expenses.

If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance.

If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise.

If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment isn’t temporary, regardless of whether it actually lasts for more than 1 year.

If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. It won’t be treated as temporary after the date you determine it will last more than 1 year.

If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. You may have deductible travel expenses, as discussed in chapter 1 .

If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area.

Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area.

You can’t deduct daily transportation costs between your home and temporary work sites within your metropolitan area. These are nondeductible commuting expenses.

If you work at two places in 1 day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. However, if for some personal reason you don’t go directly from one location to the other, you can’t deduct more than the amount it would have cost you to go directly from the first location to the second.

Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. You can’t deduct them.

A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work .

You usually can’t deduct the expense if the reserve meeting is held on a day on which you don’t work at your regular job. In this case, your transportation is generally a nondeductible commuting expense. However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work.

If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses.

If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. These expenses are discussed in chapter 1 .

If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to gross income rather than as an itemized deduction. For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules in chapter 6.

You can’t deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. These costs are personal commuting expenses. You can’t deduct commuting expenses no matter how far your home is from your regular place of work. You can’t deduct commuting expenses even if you work during the commuting trip.

You sometimes use your cell phone to make business calls while commuting to and from work. Sometimes business associates ride with you to and from work, and you have a business discussion in the car. These activities don’t change the trip from personal to business. You can’t deduct your commuting expenses.

Fees you pay to park your car at your place of business are nondeductible commuting expenses. You can, however, deduct business-related parking fees when visiting a customer or client.

Putting display material that advertises your business on your car doesn’t change the use of your car from personal use to business use. If you use this car for commuting or other personal uses, you still can’t deduct your expenses for those uses.

You can’t deduct the cost of using your car in a nonprofit car pool. Don’t include payments you receive from the passengers in your income. These payments are considered reimbursements of your expenses. However, if you operate a car pool for a profit, you must include payments from passengers in your income. You can then deduct your car expenses (using the rules in this publication).

Hauling tools or instruments in your car while commuting to and from work doesn’t make your car expenses deductible. However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car).

If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located.

If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. (See Pub. 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business.)

The following examples show when you can deduct transportation expenses based on the location of your work and your home.

You regularly work in an office in the city where you live. Your employer sends you to a 1-week training session at a different office in the same city. You travel directly from your home to the training location and return each day. You can deduct the cost of your daily round-trip transportation between your home and the training location.

Your principal place of business is in your home. You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business.

You have no regular office, and you don’t have an office in your home. In this case, the location of your first business contact inside the metropolitan area is considered your office. Transportation expenses between your home and this first contact are nondeductible commuting expenses. Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. While you can’t deduct the costs of these trips, you can deduct the costs of going from one client or customer to another.

Car Expenses

If you use your car for business purposes, you may be able to deduct car expenses. You can generally use one of the two following methods to figure your deductible expenses.

Actual car expenses.

The cost of using your car as an employee, whether measured using actual expenses or the standard mileage rate, will no longer be allowed to be claimed as an unreimbursed employee travel expense as a miscellaneous itemized deduction due to the suspension of miscellaneous itemized deductions that are subject to the 2% floor under section 67(a). The suspension applies to tax years beginning after December 2017 and before January 2026. Deductions for expenses that are deductible in determining adjusted gross income are not suspended. For example, Armed Forces reservists, qualified performing artists, and fee-basis state or local government officials are allowed to deduct unreimbursed employee travel expenses as an adjustment to total income on Schedule 1 (Form 1040), line 12.

If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. See Leasing a Car , later.

In this publication, “car” includes a van, pickup, or panel truck. For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses , later.

Standard Mileage Rate

For 2023, the standard mileage rate for the cost of operating your car for business use is 65.5 cents ($0.655) per mile.

You can generally use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. See chapter 6 for more information on reimbursements .

If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then, in later years, you can choose to use either the standard mileage rate or actual expenses.

If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after 1997.

You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. You can’t revoke the choice. However, in later years, you can switch from the standard mileage rate to the actual expenses method. If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation for the car’s remaining estimated useful life, subject to depreciation limits (discussed later).

For more information about depreciation included in the standard mileage rate, see Exception under Methods of depreciation , later.

You can’t use the standard mileage rate if you:

Use five or more cars at the same time (such as in fleet operations);

Claimed a depreciation deduction for the car using any method other than straight line for the car’s estimated useful life;

Used the Modified Accelerated Cost Recovery System (MACRS) (as discussed later under Depreciation Deduction );

Claimed a section 179 deduction (discussed later) on the car;

Claimed the special depreciation allowance on the car; or

Claimed actual car expenses after 1997 for a car you leased.

You can elect to use the standard mileage rate if you used a car for hire (such as a taxi) unless the standard mileage rate is otherwise not allowed, as discussed above.

If you own or lease five or more cars that are used for business at the same time, you can’t use the standard mileage rate for the business use of any car. However, you may be able to deduct your actual expenses for operating each of the cars in your business. See Actual Car Expenses , later, for information on how to figure your deduction.

You aren’t using five or more cars for business at the same time if you alternate using (use at different times) the cars for business.

The following examples illustrate the rules for when you can and can’t use the standard mileage rate for five or more cars.

A salesperson owns three cars and two vans that they alternate using for calling on their customers. The salesperson can use the standard mileage rate for the business mileage of the three cars and the two vans because they don’t use them at the same time.

You and your employees use your four pickup trucks in your landscaping business. During the year, you traded in two of your old trucks for two newer ones. You can use the standard mileage rate for the business mileage of all six of the trucks you owned during the year.

You own a repair shop and an insurance business. You and your employees use your two pickup trucks and van for the repair shop. You alternate using your two cars for the insurance business. No one else uses the cars for business purposes. You can use the standard mileage rate for the business use of the pickup trucks, the van, and the cars because you never have more than four vehicles used for business at the same time.

You own a car and four vans that are used in your housecleaning business. Your employees use the vans, and you use the car to travel to various customers. You can’t use the standard mileage rate for the car or the vans. This is because all five vehicles are used in your business at the same time. You must use actual expenses for all vehicles.

If you are an employee, you can’t deduct any interest paid on a car loan. This applies even if you use the car 100% for business as an employee.

However, if you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car. For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). You can’t deduct the part of the interest expense that represents your personal use of the car.

If you itemize your deductions on Schedule A (Form 1040), you can deduct on line 5c state and local personal property taxes on motor vehicles. You can take this deduction even if you use the standard mileage rate or if you don’t use the car for business.

If you are self-employed and use your car in your business, you can deduct the business part of state and local personal property taxes on motor vehicles on Schedule C (Form 1040), or Schedule F (Form 1040). If you itemize your deductions, you can include the remainder of your state and local personal property taxes on the car on Schedule A (Form 1040).

In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses.)

If you sell, trade in, or otherwise dispose of your car, you may have a gain or loss on the transaction or an adjustment to the basis of your new car. See Disposition of a Car , later.

Actual Car Expenses

If you don’t use the standard mileage rate, you may be able to deduct your actual car expenses.

Actual car expenses include:

If you have fully depreciated a car that you still use in your business, you can continue to claim your other actual car expenses. Continue to keep records, as explained later in chapter 5 .

If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. You can divide your expense based on the miles driven for each purpose.

You are a contractor and drive your car 20,000 miles during the year: 12,000 miles for business use and 8,000 miles for personal use. You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense.

If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. You can’t use the standard mileage rate. See Vehicle Provided by Your Employer in chapter 6.

If you are an employee, you can’t deduct any interest paid on a car loan. This interest is treated as personal interest and isn’t deductible. If you are self-employed and use your car in that business, see Interest , earlier, under Standard Mileage Rate.

If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. Enter the amount paid on Schedule A (Form 1040), line 5c.

Generally, sales taxes on your car are part of your car's basis and are recovered through depreciation, discussed later.

You can’t deduct fines you pay or collateral you forfeit for traffic violations.

If your car is damaged, destroyed, or stolen, you may be able to deduct part of the loss not covered by insurance. See Pub. 547, Casualties, Disasters, and Thefts, for information on deducting a loss on your car.

Generally, the cost of a car, plus sales tax and improvements, is a capital expense. Because the benefits last longer than 1 year, you generally can’t deduct a capital expense. However, you can recover this cost through the section 179 deduction (the deduction allowed by section 179 of the Internal Revenue Code), special depreciation allowance, and depreciation deductions. Depreciation allows you to recover the cost over more than 1 year by deducting part of it each year. The section 179 deduction , special depreciation allowance , and depreciation deductions are discussed later.

Generally, there are limits on these deductions. Special rules apply if you use your car 50% or less in your work or business.

You can claim a section 179 deduction and use a depreciation method other than straight line only if you don’t use the standard mileage rate to figure your business-related car expenses in the year you first place a car in service.

If, in the year you first place a car in service, you claim either a section 179 deduction or use a depreciation method other than straight line for its estimated useful life, you can’t use the standard mileage rate on that car in any future year.

For depreciation purposes, a car is any four-wheeled vehicle (including a truck or van) made primarily for use on public streets, roads, and highways. Its unloaded gross vehicle weight (for trucks and vans, gross vehicle weight) must not be more than 6,000 pounds. A car includes any part, component, or other item physically attached to it or usually included in the purchase price.

A car doesn’t include:

An ambulance, hearse, or combination ambulance-hearse used directly in a business;

A vehicle used directly in the business of transporting persons or property for pay or hire; or

A truck or van that is a qualified nonpersonal use vehicle.

These are vehicles that by their nature aren’t likely to be used more than a minimal amount for personal purposes. They include trucks and vans that have been specially modified so that they aren’t likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles.

See Depreciation Deduction , later, for more information on how to depreciate your vehicle.

Section 179 Deduction

You can elect to recover all or part of the cost of a car that is qualifying section 179 property, up to a limit, by deducting it in the year you place the property in service. This is the section 179 deduction. If you elect the section 179 deduction, you must reduce your depreciable basis in the car by the amount of the section 179 deduction.

You can claim the section 179 deduction only in the year you place the car in service. For this purpose, a car is placed in service when it is ready and available for a specifically assigned use in a trade or business. Even if you aren’t using the property, it is in service when it is ready and available for its specifically assigned use.

A car first used for personal purposes can’t qualify for the deduction in a later year when its use changes to business.

In 2022, you bought a new car and used it for personal purposes. In 2023, you began to use it for business. Changing its use to business use doesn’t qualify the cost of your car for a section 179 deduction in 2023. However, you can claim a depreciation deduction for the business use of the car starting in 2023. See Depreciation Deduction , later.

You must use the property more than 50% for business to claim any section 179 deduction. If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. The result is the cost of the property that can qualify for the section 179 deduction.

You purchased a new car in April 2023 for $24,500 and used it 60% for business. Based on your business usage, the total cost of your car that qualifies for the section 179 deduction is $14,700 ($24,500 cost × 60% (0.60) business use). But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later.

There are limits on:

The amount of the section 179 deduction;

The section 179 deduction for sport utility and certain other vehicles; and

The total amount of the section 179 deduction, special depreciation allowance, and depreciation deduction (discussed later ) you can claim for a qualified property.

For tax years beginning in 2023, the total amount you can elect to deduct under section 179 can’t be more than $1,160,000.

If the cost of your section 179 property placed in service in tax years beginning in 2023 is over $2,890,000, you must reduce the $1,160,000 dollar limit (but not below zero) by the amount of cost over $2,890,000. If the cost of your section 179 property placed in service during tax years beginning in 2023 is $4,050,000 or more, you can’t take a section 179 deduction.

The total amount you can deduct under section 179 each year after you apply the limits listed above cannot be more than the taxable income from the active conduct of any trade or business during the year.

If you are married and file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service.

If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit. You must allocate the dollar limit (after any reduction) between you.

For more information on the above section 179 deduction limits, see Pub. 946, How To Depreciate Property.

You cannot elect to deduct more than $28,900 of the cost of any heavy sport utility vehicle (SUV) and certain other vehicles placed in service during the tax years beginning in 2023. This rule applies to any four-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways that isn’t subject to any of the passenger automobile limits explained under Depreciation Limits , later, and that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. However, the $28,900 limit doesn’t apply to any vehicle:

Designed to have a seating capacity of more than nine persons behind the driver's seat;

Equipped with a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and isn’t readily accessible directly from the passenger compartment; or

That has an integral enclosure, fully enclosing the driver compartment and load carrying device, doesn’t have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield.

The first-year limit on the depreciation deduction, special depreciation allowance, and section 179 deduction for vehicles acquired before September 28, 2017, and placed in service during 2023, is $12,200. The first-year limit on depreciation, special depreciation allowance, and section 179 deduction for vehicles acquired after September 27, 2017, and placed in service during 2023 increases to $20,200. If you elect not to claim a special depreciation allowance for a vehicle placed in service in 2023, the amount increases to $12,200. The limit is reduced if your business use of the vehicle is less than 100%. See Depreciation Limits , later, for more information.

In the earlier example under More than 50% business use requirement , you had a car with a cost (for purposes of the section 179 deduction) of $14,700. However, based on your business usage of the car, the total of your section 179 deduction, special depreciation allowance, and depreciation deductions is limited to $12,120 ($20,200 limit x 60% (0.60) business use) because the car was acquired after September 27, 2017, and placed in service during 2023.

For purposes of the section 179 deduction, the cost of the car doesn’t include any amount figured by reference to any other property held by you at any time. For example, if you buy a car as a replacement for a car that was stolen or that was destroyed in a casualty loss, and you use section 1033 to determine the basis in your replacement vehicle, your cost for purposes of the section 179 deduction doesn’t include your adjusted basis in the relinquished car. In that case, your cost includes only the cash you paid.

The amount of the section 179 deduction reduces your basis in your car. If you choose the section 179 deduction, you must subtract the amount of the deduction from the cost of your car. The resulting amount is the basis in your car you use to figure your depreciation deduction.

If you want to take the section 179 deduction, you must make the election in the tax year you place the car in service for business or work.

Employees use Form 2106, Employee Business Expenses, to make the election and report the section 179 deduction. All others use Form 4562, Depreciation and Amortization, to make an election.

File the appropriate form with either of the following.

Your original tax return filed for the year the property was placed in service (whether or not you file it timely).

An amended return filed within the time prescribed by law. An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. The amended return must also include any resulting adjustments to taxable income.

An election (or any specification made in the election) to take a section 179 deduction for 2023 can only be revoked with the Commissioner's approval.

To be eligible to claim the section 179 deduction, you must use your car more than 50% for business or work in the year you acquired it. If your business use of the car is 50% or less in a later tax year during the recovery period, you have to recapture (include in income) in that later year any excess depreciation. Any section 179 deduction claimed on the car is included in figuring the excess depreciation. For information on this calculation, see Excess depreciation , later in this chapter under Car Used 50% or Less for Business. For more information on recapture of a section 179 deduction, see Pub. 946.

If you dispose of a car on which you had claimed the section 179 deduction, the amount of that deduction is treated as a depreciation deduction for recapture purposes. You treat any gain on the disposition of the property as ordinary income up to the amount of the section 179 deduction and any allowable depreciation (unless you establish the amount actually allowed). For information on the disposition of a car, see Disposition of a Car , later. For more information on recapture of a section 179 deduction, see Pub. 946.

Special Depreciation Allowance

You may be able to claim the special depreciation allowance for your car, truck, or van if it is qualified property and was placed in service in 2023. The allowance for 2023 is an additional depreciation deduction for 100% of the car's depreciable basis (after any section 179 deduction, but before figuring your regular depreciation deduction under MACRS) if the vehicle was acquired after September 27, 2017, and placed in service during 2023. Further, while it applies to a new vehicle, it also applies to a used vehicle only if the vehicle meets the used property requirements. For more information on the used property requirements, see section 168(k)(2)(E)(ii). To qualify for the allowance, more than 50% of the use of the car must be in a qualified business use (as defined under Depreciation Deduction , later).

The first-year limit on the depreciation deduction, special depreciation allowance, and section 179 deduction for vehicles acquired before September 28, 2017, and placed in service during 2023, is $12,200. Your combined section 179 depreciation, special depreciation allowance, and regular MACRS depreciation deduction is limited to the maximum allowable depreciation deduction for vehicles acquired after September 27, 2017, and placed in service during 2023 is $20,200. If you elect not to claim a special depreciation allowance for a vehicle placed in service in 2023, the amount is $12,200. See Depreciation Limits , later in this chapter.

To be qualified property, the car (including the truck or van) must meet all of the following tests.

You acquired the car after September 27, 2017, but only if no written binding contract to acquire the car existed before September 28, 2017.

You acquired the car new or used.

You placed the car in service in your trade or business before January 1, 2027.

You used the car more than 50% in a qualified business use during the tax year.

You can elect not to claim the special depreciation allowance for your car, truck, or van that is qualified property. If you make this election, it applies to all 5-year property placed in service during the year.

To make this election, attach a statement to your timely filed return (including extensions) indicating the class of property (5-year for cars) for which you are making the election and that you are electing not to claim the special depreciation allowance for qualified property in that class of property.

Depreciation Deduction

If you use actual car expenses to figure your deduction for a car you own and use in your business, you can claim a depreciation deduction. This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car.

You generally need to know the following things about the car you intend to depreciate.

Your basis in the car.

The date you place the car in service.

The method of depreciation and recovery period you will use.

Your basis in a car for figuring depreciation is generally its cost. This includes any amount you borrow or pay in cash, other property, or services.

Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis , later). However, in some situations, you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). For one of these situations, see Exception under Methods of depreciation , later.

If you change the use of a car from personal to business, your basis for depreciation is the lesser of the fair market value or your adjusted basis in the car on the date of conversion. Additional rules concerning basis are discussed later in this chapter under Unadjusted basis .

You generally place a car in service when it is available for use in your work or business, in an income-producing activity, or in a personal activity. Depreciation begins when the car is placed in service for use in your work or business or for the production of income.

For purposes of figuring depreciation, if you first start using the car only for personal use and later convert it to business use, you place the car in service on the date of conversion.

If you place a car in service and dispose of it in the same tax year, you can’t claim any depreciation deduction for that car.

Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery (MACRS) discussed later in this chapter.

If you used the standard mileage rate in the first year of business use and change to the actual expenses method in a later year, you can’t depreciate your car under the MACRS rules. You must use straight line depreciation over the estimated remaining useful life of the car. The amount you depreciate can’t be more than the depreciation limit that applies for that year. See Depreciation Limits , later.

To figure depreciation under the straight line method, you must reduce your basis in the car (but not below zero) by a set rate per mile for all miles for which you used the standard mileage rate. The rate per mile varies depending on the year(s) you used the standard mileage rate. For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car , later.

This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis . You must use your adjusted basis in your car to figure your depreciation deduction. For additional information on the straight line method of depreciation, see Pub. 946.

Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car.

If your business use is 50% or less, you must use the straight line method to depreciate your car. This is explained later under Car Used 50% or Less for Business .

A qualified business use is any use in your trade or business. It doesn’t include use for the production of income (investment use), or use provided under lease to, or as compensation to, a 5% owner or related person. However, you do combine your business and investment use to figure your depreciation deduction for the tax year.

Don’t treat any use of your car by another person as use in your trade or business unless that use meets one of the following conditions.

It is directly connected with your business.

It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income).

It results in a payment of fair market rent. This includes any payment to you for the use of your car.

If you used your car more than 50% in qualified business use in the year you placed it in service, but 50% or less in a later year (including the year of disposition), you have to change to the straight line method of depreciation. See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business , later.

If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. You do this on the basis of mileage. Figure the percentage of qualified business use by dividing the number of miles you drive your car for business purposes during the year by the total number of miles you drive the car during the year for any purpose.

If you change the use of a car from 100% personal use to business use during the tax year, you may not have mileage records for the time before the change to business use. In this case, you figure the percentage of business use for the year as follows.

Determine the percentage of business use for the period following the change. Do this by dividing business miles by total miles driven during that period.

Multiply the percentage in (1) by a fraction. The numerator (top number) is the number of months the car is used for business, and the denominator (bottom number) is 12.

You use a car only for personal purposes during the first 6 months of the year. During the last 6 months of the year, you drive the car a total of 15,000 miles of which 12,000 miles are for business. This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. Your business use for the year is 40% (80% (0.80) × 6 / 12 ).

The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. The maximum amount you can claim depends on the year in which you placed your car in service. You have to reduce the maximum amount if you did not use the car exclusively for business. See Depreciation Limits , later.

You use your unadjusted basis (often referred to as your basis or your basis for depreciation) to figure your depreciation using the MACRS depreciation chart, explained later under Modified Accelerated Cost Recovery System (MACRS) . Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts.

To figure your unadjusted basis, begin with your car's original basis, which is generally its cost. Cost includes sales taxes (see Sales taxes , earlier), destination charges, and dealer preparation. Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. Decrease your basis by any section 179 deduction, special depreciation allowance, gas guzzler tax, and vehicle credits claimed. See Pub. 551, Basis of Assets, for further details.

If you acquired the car by gift or inheritance, see Pub. 551, Basis of Assets, for information on your basis in the car.

A major improvement to a car is treated as a new item of 5-year recovery property. It is treated as placed in service in the year the improvement is made. It doesn’t matter how old the car is when the improvement is added. Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. Your car's depreciation deduction for the year (plus any section 179 deduction, special depreciation allowance, and depreciation on any improvements) can’t be more than the depreciation limit that applies for that year. See Depreciation Limits , later.

If you traded one car (the “old car”) for another car (the “new car”) in 2023, you must treat the transaction as a disposition of the old car and the purchase of the new car. You must treat the old car as disposed of at the time of the trade-in. The depreciable basis of the new car is the adjusted basis of the old car (figured as if 100% of the car’s use had been for business purposes) plus any additional amount you paid for the new car. You then figure your depreciation deduction for the new car beginning with the date you placed it in service. You must also complete Form 2106, Part II, Section D. This method is explained later, beginning at Effect of trade-in on basis .

The discussion that follows applies to trade-ins of cars in 2023, where the election was made to treat the transaction as a disposition of the old car and the purchase of the new car. For information on how to figure depreciation for cars involved in a like-kind exchange (trade-in) in 2023, for which the election wasn’t made, see Pub. 946 and Regulations section 1.168(i)-6(d)(3).

Like‐kind exchanges completed after December 31, 2017, are generally limited to exchanges of real property not held primarily for sale. Regulations section 1.168(i)-6 doesn't reflect this change in law.

If you trade in a car you used only in your business for another car that will be used only in your business, your original basis in the new car is your adjusted basis in the old car, plus any additional amount you pay for the new car.

You trade in a car that has an adjusted basis of $5,000 for a new car. In addition, you pay cash of $20,000 for the new car. Your original basis of the new car is $25,000 (your $5,000 adjusted basis in the old car plus the $20,000 cash paid). Your unadjusted basis is $25,000 unless you claim the section 179 deduction, special depreciation allowance, or have other increases or decreases to your original basis, discussed under Unadjusted basis , earlier.

If you trade in a car you used partly in your business for a new car you will use in your business, you must make a “trade-in” adjustment for the personal use of the old car. This adjustment has the effect of reducing your basis in your old car, but not below zero, for purposes of figuring your depreciation deduction for the new car. (This adjustment isn’t used, however, when you determine the gain or loss on the later disposition of the new car. See Pub. 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car.)

To figure the unadjusted basis of your new car for depreciation, first add to your adjusted basis in the old car any additional amount you pay for the new car. Then subtract from that total the excess, if any, of:

The total of the amounts that would have been allowable as depreciation during the tax years before the trade if 100% of the use of the car had been business and investment use, over

The total of the amounts actually allowed as depreciation during those years.

MACRS is the name given to the tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income.

The maximum amount you can deduct is limited, depending on the year you placed your car in service. See Depreciation Limits , later.

Under MACRS, cars are classified as 5-year property. You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. This is because your car is generally treated as placed in service in the middle of the year, and you claim depreciation for one-half of both the first year and the sixth year.

For more information on the qualifications for this shorter recovery period and the percentages to use in figuring the depreciation deduction, see chapter 4 of Pub. 946.

You can use one of the following methods to depreciate your car.

The 200% declining balance method (200% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction.

The 150% declining balance method (150% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction.

The straight line method (SL) over a 5-year recovery period.

Before choosing a method, you may wish to consider the following facts.

Using the straight line method provides equal yearly deductions throughout the recovery period.

Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year.

A 2023 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1 . Using this table will make it easy for you to figure the 2023 depreciation deduction for your car. A similar chart appears in the Instructions for Form 2106.

You must use the Depreciation Tables in Pub. 946 rather than the 2023 MACRS Depreciation Chart in this publication if any one of the following three conditions applies to you.

You file your return on a fiscal year basis.

You file your return for a short tax year (less than 12 months).

During the year, all of the following conditions apply.

You placed some property in service from January through September.

You placed some property in service from October through December.

Your basis in the property you placed in service from October through December (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) was more than 40% of your total bases in all property you placed in service during the year.

If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. However, you can’t continue to use the chart if your basis in your car is adjusted because of a casualty. In that case, for the year of the adjustment and the remaining recovery period, figure the depreciation without the chart using your adjusted basis in the car at the end of the year of the adjustment and over the remaining recovery period. See Figuring the Deduction Without Using the Tables in chapter 4 of Pub. 946.

If you dispose of the car before the last year of the recovery period, you are generally allowed a half-year of depreciation in the year of disposition. This rule applies unless the mid-quarter convention applies to the vehicle being disposed of. See Depreciation deduction for the year of disposition under Disposition of a Car , later, for information on how to figure the depreciation allowed in the year of disposition.

To figure your depreciation deduction for 2023, find the percentage in the column of Table 4-1 based on the date that you first placed the car in service and the depreciation method that you are using. Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. If you prefer to figure your depreciation deduction without the help of the chart, see Pub. 946.

You bought a used truck in February 2022 to use exclusively in your landscape business. You paid $9,200 for the truck with no trade-in. You didn’t claim any section 179 deduction, the truck didn’t qualify for the special depreciation allowance, and you chose to use the 200% DB method to get the largest depreciation deduction in the early years.

You used the MACRS Depreciation Chart in 2022 to find your percentage. The unadjusted basis of the truck equals its cost because you used it exclusively for business. You multiplied the unadjusted basis of the truck, $9,200, by the percentage that applied, 20%, to figure your 2022 depreciation deduction of $1,840.

In 2023, you used the truck for personal purposes when you repaired your parent’s cabin. Your records show that the business use of the truck was 90% in 2023. You used Table 4-1 to find your percentage. Reading down the first column for the date placed in service and across to the 200% DB column, you locate your percentage, 32%. You multiply the unadjusted basis of the truck, $8,280 ($9,200 cost × 90% (0.90) business use), by 32% (0.32) to figure your 2023 depreciation deduction of $2,650.

Depreciation Limits

There are limits on the amount you can deduct for depreciation of your car, truck, or van. The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. The maximum amount you can deduct each year depends on the date you acquired the passenger automobile and the year you place the passenger automobile in service. These limits are shown in the following tables for 2023.

Maximum Depreciation Deduction for Passenger Automobiles (Including Trucks and Vans) Acquired Before September 28, 2017, and Placed in Service During 2018–2023

Maximum depreciation deduction for passenger automobiles (including trucks and vans) acquired after september 27, 2017, and placed in service during 2018 or later.

The maximum amount you can deduct each year depends on the year you place the car in service. These limits are shown in the following tables for prior years.

Maximum Depreciation Deduction for Cars Placed in Service Prior to 2018

For tax years prior to 2018, the maximum depreciation deductions for trucks and vans are generally higher than those for cars. A truck or van is a passenger automobile that is classified by the manufacturer as a truck or van and rated at 6,000 pounds gross vehicle weight or less.

Maximum Depreciation Deduction for Trucks and Vans Placed in Service Prior to 2018

The depreciation limits aren’t reduced if you use a car for less than a full year. This means that you don’t reduce the limit when you either place a car in service or dispose of a car during the year. However, the depreciation limits are reduced if you don’t use the car exclusively for business and investment purposes. See Reduction for personal use next.

The depreciation limits are reduced based on your percentage of personal use. If you use a car less than 100% in your business or work, you must determine the depreciation deduction limit by multiplying the limit amount by the percentage of business and investment use during the tax year.

The section 179 deduction is treated as a depreciation deduction. If you acquired a passenger automobile (including trucks and vans) after September 27, 2017, and placed it in service in 2023, use it only for business, and choose the section 179 deduction, the special depreciation allowance and depreciation deduction for that vehicle for 2023 is limited to $20,200.

On September 4, 2023, you bought and placed in service a used car for $15,000. You used it 80% for your business, and you choose to take a section 179 deduction for the car. The car isn’t qualified property for purposes of the special depreciation allowance.

Before applying the limit, you figure your maximum section 179 deduction to be $12,000. This is the cost of your qualifying property (up to the maximum $1,160,000 amount) multiplied by your business use ($15,000 × 80% (0.80)).

You then figure that your section 179 deduction for 2023 is limited to $9,760 (80% of $12,200). You then figure your unadjusted basis of $2,440 (($15,000 × 80% (0.80)) − $9,760) for determining your depreciation deduction. You have reached your maximum depreciation deduction for 2023. For 2024, you will use your unadjusted basis of $2,440 to figure your depreciation deduction.

If the depreciation deductions for your car are reduced under the passenger automobile limits (discussed earlier), you will have unrecovered basis in your car at the end of the recovery period. If you continue to use your car for business, you can deduct that unrecovered basis (subject to depreciation limits) after the recovery period ends.

This is your cost or other basis in the car reduced by any clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), alternative motor vehicle credit, electric vehicle credit, gas guzzler tax, and depreciation (including any special depreciation allowance , discussed earlier, unless you elect not to claim it) and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use.

For 5-year property, your recovery period is 6 calendar years. A part year's depreciation is allowed in the first calendar year, a full year's depreciation is allowed in each of the next 4 calendar years, and a part year's depreciation is allowed in the 6th calendar year.

Under MACRS, your recovery period is the same whether you use declining balance or straight line depreciation. You determine your unrecovered basis in the 7th year after you placed the car in service.

If you continue to use your car for business after the recovery period, you can claim a depreciation deduction in each succeeding tax year until you recover your basis in the car. The maximum amount you can deduct each year is determined by the date you placed the car in service and your business-use percentage. For example, no deduction is allowed for a year you use your car 100% for personal purposes.

In April 2017, you bought and placed in service a car you used exclusively in your business. The car cost $31,500. You didn’t claim a section 179 deduction or the special depreciation allowance for the car. You continued to use the car 100% in your business throughout the recovery period (2017 through 2022). For those years, you used the MACRS Depreciation Chart (200% DB method), the Maximum Depreciation Deduction for Cars Placed in Service Prior to 2018 table and Maximum Depreciation Deduction for Passenger Automobiles (Including Trucks and Vans) Acquired Before September 28, 2017, and Placed in Service During 2018–2023 table, earlier, for the applicable tax year to figure your depreciation deductions during the recovery period. Your depreciation deductions were subject to the depreciation limits, so you will have unrecovered basis at the end of the recovery period as shown in the following table.

At the end of 2022, you had an unrecovered basis in the car of $14,626 ($31,500 – $16,874). If you continued to use the car 100% for business in 2023 and later years, you can claim a depreciation deduction equal to the lesser of $1,875 or your remaining unrecovered basis.

If your business use of the car was less than 100% during any year, your depreciation deduction would be less than the maximum amount allowable for that year. However, in determining your unrecovered basis in the car, you would still reduce your original basis by the maximum amount allowable as if the business use had been 100%. For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $10,124 ($16,874 × 60% (0.60)), but you still would have to reduce your basis by $16,874 to determine your unrecovered basis.

Table 4-1. 2023 MACRS Depreciation Chart (Use To Figure Depreciation for 2023)

Car used 50% or less for business.

If you use your car 50% or less for qualified business use (defined earlier under Depreciation Deduction ) either in the year the car is placed in service or in a later year, special rules apply. The rules that apply in these two situations are explained in the following paragraphs. (For this purpose, “car” was defined earlier under Actual Car Expenses and includes certain trucks and vans.)

If you use your car 50% or less for qualified business use, the following rules apply.

You can’t take the section 179 deduction.

You can’t take the special depreciation allowance.

You must figure depreciation using the straight line method over a 5-year recovery period. You must continue to use the straight line method even if your percentage of business use increases to more than 50% in a later year.

Instead of making the computation yourself, you can use column (c) of Table 4-1 to find the percentage to use.

In May 2023, you bought and placed in service a car for $17,500. You used it 40% for your consulting business. Because you didn’t use the car more than 50% for business, you can’t take any section 179 deduction or special depreciation allowance, and you must use the straight line method over a 5-year recovery period to recover the cost of your car.

You deduct $700 in 2023. This is the lesser of:

$700 (($17,500 cost × 40% (0.40) business use) × 10% (0.10) recovery percentage (from column (c) of Table 4-1 )), or

$4,880 ($12,200 maximum limit × 40% (0.40) business use).

If you use your car more than 50% in qualified business use in the tax year it is placed in service but the business use drops to 50% or less in a later year, you can no longer use an accelerated depreciation method for that car.

For the year the business use drops to 50% or less and all later years in the recovery period, you must use the straight line depreciation method over a 5-year recovery period. In addition, for the year your business use drops to 50% or less, you must recapture (include in your gross income) any excess depreciation (discussed later). You also increase the adjusted basis of your car by the same amount.

In June 2020, you purchased a car for exclusive use in your business. You met the more-than-50%-use test for the first 3 years of the recovery period (2020 through 2022) but failed to meet it in the fourth year (2023). You determine your depreciation for 2023 using 20% (from column (c) of Table 4-1 ). You will also have to determine and include in your gross income any excess depreciation, discussed next.

You must include any excess depreciation in your gross income and add it to your car's adjusted basis for the first tax year in which you don’t use the car more than 50% in qualified business use. Use Form 4797, Sales of Business Property, to figure and report the excess depreciation in your gross income.

Excess depreciation is:

The amount of the depreciation deductions allowable for the car (including any section 179 deduction claimed and any special depreciation allowance claimed) for tax years in which you used the car more than 50% in qualified business use, minus

The amount of the depreciation deductions that would have been allowable for those years if you hadn’t used the car more than 50% in qualified business use for the year you placed it in service. This means the amount of depreciation figured using the straight line method.

In September 2019, you bought a car for $20,500 and placed it in service. You didn’t claim the section 179 deduction or the special depreciation allowance. You used the car exclusively in qualified business use for 2019, 2020, 2021, and 2022. For those years, you used the appropriate MACRS Depreciation Chart to figure depreciation deductions totaling $13,185 ($3,160 for 2019, $5,100 for 2020, $3,050 for 2021, and $1,875 for 2022) under the 200% DB method.

During 2023, you used the car 30% for business and 70% for personal purposes. Since you didn’t meet the more-than-50%-use test, you must switch from the 200% DB depreciation method to the straight line depreciation method for 2023, and include in gross income for 2023 your excess depreciation determined as follows.

In 2023, using Form 4797, you figure and report the $2,110 excess depreciation you must include in your gross income. Your adjusted basis in the car is also increased by $2,110. Your 2023 depreciation is $1,230 ($20,500 (unadjusted basis) × 30% (0.30) (business-use percentage) × 20% (0.20) (from column (c) of Table 4-1 on the line for Jan. 1–Sept. 30, 2019)). However, your depreciation deduction is limited to $563 ($1,875 x 30% (0.30) business use).

Leasing a Car

If you lease a car, truck, or van that you use in your business, you can use the standard mileage rate or actual expenses to figure your deductible expense. This section explains how to figure actual expenses for a leased car, truck, or van.

If you choose to use actual expenses, you can deduct the part of each lease payment that is for the use of the vehicle in your business. You can’t deduct any part of a lease payment that is for personal use of the vehicle, such as commuting.

You must spread any advance payments over the entire lease period. You can’t deduct any payments you make to buy a car, truck, or van even if the payments are called “lease payments.”

If you lease a car, truck, or van for 30 days or more, you may have to reduce your lease payment deduction by an “inclusion amount,” explained next.

Inclusion Amounts

If you lease a car, truck, or van that you use in your business for a lease term of 30 days or more, you may have to include an inclusion amount in your income for each tax year you lease the vehicle. To do this, you don’t add an amount to income. Instead, you reduce your deduction for your lease payment. (This reduction has an effect similar to the limit on the depreciation deduction you would have on the vehicle if you owned it.)

The inclusion amount is a percentage of part of the fair market value of the leased vehicle multiplied by the percentage of business and investment use of the vehicle for the tax year. It is prorated for the number of days of the lease term in the tax year.

The inclusion amount applies to each tax year that you lease the vehicle if the fair market value (defined next) when the lease began was more than the amounts shown in the following tables.

All vehicles are subject to a single inclusion amount threshold for passenger automobiles leased and put into service in 2023. You may have an inclusion amount for a passenger automobile if:

Passenger Automobiles (Including Trucks and Vans)

For years prior to 2018, see the inclusion tables below. You may have an inclusion amount for a passenger automobile if:

Cars (Except for Trucks and Vans)

Trucks and Vans

Fair market value is the price at which the property would change hands between a willing buyer and seller, neither having to buy or sell, and both having reasonable knowledge of all the necessary facts. Sales of similar property around the same date may be helpful in figuring the fair market value of the property.

Figure the fair market value on the first day of the lease term. If the capitalized cost of a car is specified in the lease agreement, use that amount as the fair market value.

Inclusion amounts for tax years 2018–2023 are listed in Appendices A-1 through A-6 for passenger vehicles (including trucks and vans). If the fair market value of the vehicle is $100,000 or less, use the appropriate appendix (depending on the year you first placed the vehicle in service) to determine the inclusion amount. If the fair market value is more than $100,000, see the revenue procedure(s) identified in the footnote of that year’s appendix for the inclusion amount.

For each tax year during which you lease the car for business, determine your inclusion amount by following these three steps.

Locate the appendix that applies to you. To find the inclusion amount, do the following.

Find the line that includes the fair market value of the car on the first day of the lease term.

Go across the line to the column for the tax year in which the car is used under the lease to find the dollar amount. For the last tax year of the lease, use the dollar amount for the preceding year.

Prorate the dollar amount from (1b) for the number of days of the lease term included in the tax year.

Multiply the prorated amount from (2) by the percentage of business and investment use for the tax year. This is your inclusion amount.

On January 17, 2023, you leased a car for 3 years and placed it in service for use in your business. The car had a fair market value of $62,500 on the first day of the lease term. You use the car 75% for business and 25% for personal purposes during each year of the lease. Assuming you continue to use the car 75% for business, you use Appendix A-6 to arrive at the following inclusion amounts for each year of the lease. For the last tax year of the lease, 2026, you use the amount for the preceding year.

2024 is a leap year and includes an extra calendar day, February 29, 2024.

For each year of the lease that you deduct lease payments, you must reduce your deduction by the inclusion amount figured for that year.

If you lease a car for business use and, in a later year, change it to personal use, follow the rules explained earlier under Figuring the inclusion amount . For the tax year in which you stop using the car for business, use the dollar amount for the previous tax year. Prorate the dollar amount for the number of days in the lease term that fall within the tax year.

On August 16, 2022, you leased a car with a fair market value of $64,500 for 3 years. You used the car exclusively in your data processing business. On November 6, 2023, you closed your business and went to work for a company where you aren’t required to use a car for business. Using Appendix A-5 , you figured your inclusion amount for 2022 and 2023 as shown in the following table and reduced your deductions for lease payments by those amounts.

If you lease a car for personal use and, in a later year, change it to business use, you must determine the car's fair market value on the date of conversion. Then figure the inclusion amount using the rules explained earlier under Figuring the inclusion amount . Use the fair market value on the date of conversion.

In March 2021, you leased a truck for 4 years for personal use. On June 1, 2023, you started working as a self-employed advertising consultant and started using the leased truck for business purposes. Your records show that your business use for June 1 through December 31 was 60%. To figure your inclusion amount for 2023, you obtained an appraisal from an independent car leasing company that showed the fair market value of your 2021 truck on June 1, 2023, was $62,650. Using Appendix A-6 , you figured your inclusion amount for 2023 as shown in the following table.

For information on reporting inclusion amounts, employees should see Car rentals under Completing Forms 2106 in chapter 6. Sole proprietors should see the Instructions for Schedule C (Form 1040), and farmers should see the Instructions for Schedule F (Form 1040).

Disposition of a Car

If you dispose of your car, you may have a taxable gain or a deductible loss. The portion of any gain that is due to depreciation (including any section 179 deduction, clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), and special depreciation allowance) that you claimed on the car will be treated as ordinary income. However, you may not have to recognize a gain or loss if you dispose of the car because of a casualty or theft.

This section gives some general information about dispositions of cars. For information on how to report the disposition of your car, see Pub. 544.

Like‐kind exchanges completed after December 31, 2017, are generally limited to exchanges of real property not held primarily for sale.

For a casualty or theft, a gain results when you receive insurance or other reimbursement that is more than your adjusted basis in your car. If you then spend all of the proceeds to acquire replacement property (a new car or repairs to the old car) within a specified period of time, you don’t recognize any gain. Your basis in the replacement property is its cost minus any gain that isn’t recognized. See Pub. 547 for more information.

When you trade in an old car for a new one, the transaction is considered a like-kind exchange. Generally, no gain or loss is recognized. (For exceptions, see chapter 1 of Pub. 544.) In a trade-in situation, your basis in the new property is generally your adjusted basis in the old property plus any additional amount you pay. (See Unadjusted basis , earlier.)

If you used the standard mileage rate for the business use of your car, depreciation was included in that rate. The rate of depreciation that was allowed in the standard mileage rate is shown in the Rate of Depreciation Allowed in Standard Mileage Rate table, later. You must reduce your basis in your car (but not below zero) by the amount of this depreciation.

If your basis is reduced to zero (but not below zero) through the use of the standard mileage rate, and you continue to use your car for business, no adjustment (reduction) to the standard mileage rate is necessary. Use the full standard mileage rate (65.5 cents ($0.655) per mile from January 1–December 31 for 2023) for business miles driven.

Rate of Depreciation Allowed in Standard Mileage Rate

In 2018, you bought and placed in service a car for exclusive use in your business. The car cost $25,500. From 2018 through 2023, you used the standard mileage rate to figure your car expense deduction. You drove your car 14,100 miles in 2018, 16,300 miles in 2019, 15,600 miles in 2020, 16,700 miles in 2021, 15,100 miles in 2022, and 14,900 miles in 2023. The depreciation portion of your car expense deduction is figured as follows.

If you deduct actual car expenses and you dispose of your car before the end of the recovery period (years 2 through 5), you are allowed a reduced depreciation deduction in the year of disposition.

Use the depreciation tables in Pub. 946 to figure the reduced depreciation deduction for a car disposed of in 2023.

The depreciation amounts computed using the depreciation tables in Pub. 946 for years 2 through 5 that you own your car are for a full year’s depreciation. Years 1 and 6 apply the half-year or mid-quarter convention to the computation for you. If you dispose of the vehicle in years 2 through 5 and the half-year convention applies, then the full year’s depreciation amount must be divided by 2. If the mid-quarter convention applies, multiply the full year’s depreciation by the percentage from the following table for the quarter that you disposed of the car.

If the car is subject to the Depreciation Limits , discussed earlier, reduce (but do not increase) the computed depreciation to this amount. See Sale or Other Disposition Before the Recovery Period Ends in chapter 4 of Pub. 946 for more information.

5. Recordkeeping

If you deduct travel, gift, or transportation expenses, you must be able to prove (substantiate) certain elements of expense. This chapter discusses the records you need to keep to prove these expenses.

How To Prove Expenses

Table 5-1 is a summary of records you need to prove each expense discussed in this publication. You must be able to prove the elements listed across the top portion of the chart. You prove them by having the information and receipts (where needed) for the expenses listed in the first column.

You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. You must generally prepare a written record for it to be considered adequate. This is because written evidence is more reliable than oral evidence alone. However, if you prepare a record on a computer, it is considered an adequate record.

What Are Adequate Records?

You should keep the proof you need in an account book, diary, log, statement of expense, trip sheets, or similar record. You should also keep documentary evidence that, together with your record, will support each element of an expense.

You must generally have documentary evidence such as receipts, canceled checks, or bills, to support your expenses.

Documentary evidence isn’t needed if any of the following conditions apply.

You have meals or lodging expenses while traveling away from home for which you account to your employer under an accountable plan, and you use a per diem allowance method that includes meals and/or lodging. ( Accountable plans and per diem allowances are discussed in chapter 6.)

Your expense, other than lodging, is less than $75.

You have a transportation expense for which a receipt isn’t readily available.

Documentary evidence will ordinarily be considered adequate if it shows the amount, date, place, and essential character of the expense.

For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information.

The name and location of the hotel.

The dates you stayed there.

Separate amounts for charges such as lodging, meals, and telephone calls.

A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information.

The name and location of the restaurant.

The number of people served.

The date and amount of the expense.

A canceled check, together with a bill from the payee, ordinarily establishes the cost. However, a canceled check by itself doesn’t prove a business expense without other evidence to show that it was for a business purpose.

You don‘t have to record information in your account book or other record that duplicates information shown on a receipt as long as your records and receipts complement each other in an orderly manner.

You don’t have to record amounts your employer pays directly for any ticket or other travel item. However, if you charge these items to your employer, through a credit card or otherwise, you must keep a record of the amounts you spend.

You should record the elements of an expense or of a business use at or near the time of the expense or use and support it with sufficient documentary evidence. A timely kept record has more value than a statement prepared later when there is generally a lack of accurate recall.

You don’t need to write down the elements of every expense on the day of the expense. If you maintain a log on a weekly basis that accounts for use during the week, the log is considered a timely kept record.

If you give your employer, client, or customer an expense account statement, it can also be considered a timely kept record. This is true if you copy it from your account book, diary, log, statement of expense, trip sheets, or similar record.

You must generally provide a written statement of the business purpose of an expense. However, the degree of proof varies according to the circumstances in each case. If the business purpose of an expense is clear from the surrounding circumstances, then you don’t need to give a written explanation.

If you are a sales representative who calls on customers on an established sales route, you don’t have to give a written explanation of the business purpose for traveling that route. You can satisfy the requirements by recording the length of the delivery route once, the date of each trip at or near the time of the trips, and the total miles you drove the car during the tax year. You could also establish the date of each trip with a receipt, record of delivery, or other documentary evidence.

You don’t need to put confidential information relating to an element of a deductible expense (such as the place, business purpose, or business relationship) in your account book, diary, or other record. However, you do have to record the information elsewhere at or near the time of the expense and have it available to fully prove that element of the expense.

What if I Have Incomplete Records?

If you don’t have complete records to prove an element of an expense, then you must prove the element with:

Your own written or oral statement containing specific information about the element, and

Other supporting evidence that is sufficient to establish the element.

If the element is the description of a gift, or the cost, time, place, or date of an expense, the supporting evidence must be either direct evidence or documentary evidence. Direct evidence can be written statements or the oral testimony of your guests or other witnesses setting forth detailed information about the element. Documentary evidence can be receipts, paid bills, or similar evidence.

If the element is either the business relationship of your guests or the business purpose of the amount spent, the supporting evidence can be circumstantial rather than direct. For example, the nature of your work, such as making deliveries, provides circumstantial evidence of the use of your car for business purposes. Invoices of deliveries establish when you used the car for business.

Table 5-1. How To Prove Certain Business Expenses

You can keep an adequate record for parts of a tax year and use that record to prove the amount of business or investment use for the entire year. You must demonstrate by other evidence that the periods for which an adequate record is kept are representative of the use throughout the tax year.

You use your car to visit the offices of clients, meet with suppliers and other subcontractors, and pick up and deliver items to clients. There is no other business use of the car, but you and your family use the car for personal purposes. You keep adequate records during the first week of each month that show that 75% of the use of the car is for business. Invoices and bills show that your business use continues at the same rate during the later weeks of each month. Your weekly records are representative of the use of the car each month and are sufficient evidence to support the percentage of business use for the year.

You can satisfy the substantiation requirements with other evidence if, because of the nature of the situation in which an expense is made, you can’t get a receipt. This applies if all the following are true.

You were unable to obtain evidence for an element of the expense or use that completely satisfies the requirements explained earlier under What Are Adequate Records .

You are unable to obtain evidence for an element that completely satisfies the two rules listed earlier under What if I Have Incomplete Records .

You have presented other evidence for the element that is the best proof possible under the circumstances.

If you can’t produce a receipt because of reasons beyond your control, you can prove a deduction by reconstructing your records or expenses. Reasons beyond your control include fire, flood, and other casualties.

Separating and Combining Expenses

This section explains when expenses must be kept separate and when expenses can be combined.

Each separate payment is generally considered a separate expense. For example, if you entertain a customer or client at dinner and then go to the theater, the dinner expense and the cost of the theater tickets are two separate expenses. You must record them separately in your records.

You can make one daily entry in your record for reasonable categories of expenses. Examples are taxi fares, telephone calls, or other incidental travel costs. Nonentertainment meals should be in a separate category. You can include tips for meal-related services with the costs of the meals.

Expenses of a similar nature occurring during the course of a single event are considered a single expense.

You can account for several uses of your car that can be considered part of a single use, such as a round trip or uninterrupted business use, with a single record. Minimal personal use, such as a stop for lunch on the way between two business stops, isn’t an interruption of business use.

You make deliveries at several different locations on a route that begins and ends at your employer's business premises and that includes a stop at the business premises between two deliveries. You can account for these using a single record of miles driven.

You don’t always have to record the name of each recipient of a gift. A general listing will be enough if it is evident that you aren’t trying to avoid the $25 annual limit on the amount you can deduct for gifts to any one person. For example, if you buy a large number of tickets to local high school basketball games and give one or two tickets to each of many customers, it is usually enough to record a general description of the recipients.

If you can prove the total cost of travel or entertainment but you can’t prove how much it costs for each person who participated in the event, you may have to allocate the total cost among you and your guests on a pro rata basis. To do so, you must establish the number of persons who participated in the event.

If your return is examined, you may have to provide additional information to the IRS. This information could be needed to clarify or to establish the accuracy or reliability of information contained in your records, statements, testimony, or documentary evidence before a deduction is allowed.

How Long To Keep Records and Receipts

You must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep records that support your deduction (or an item of income) for 3 years from the date you file the income tax return on which the deduction is claimed. A return filed early is considered filed on the due date. For a more complete explanation of how long to keep records, see Pub. 583, Starting a Business and Keeping Records.

You must keep records of the business use of your car for each year of the recovery period. See More-than-50%-use test in chapter 4 under Depreciation Deduction.

Employees who give their records and documentation to their employers and are reimbursed for their expenses generally don’t have to keep copies of this information. However, you may have to prove your expenses if any of the following conditions apply.

You claim deductions for expenses that are more than reimbursements.

Your expenses are reimbursed under a nonaccountable plan.

Your employer doesn’t use adequate accounting procedures to verify expense accounts.

You are related to your employer as defined under Per Diem and Car Allowances in chapter 6.

Table 5-2 and Table 5-3 are examples of worksheets that can be used for tracking business expenses.

Table 5-2. Daily Business Mileage and Expense Log

Table 5-3. Weekly Traveling Expense Record

6. How To Report

This chapter explains where and how to report the expenses discussed in this publication. It discusses reimbursements and how to treat them under accountable and nonaccountable plans. It also explains rules for independent contractors and clients, fee-basis officials, certain performing artists, Armed Forces reservists, and certain disabled employees. The chapter ends with illustrations of how to report travel, gift, and car expenses on Forms 2106.

Where To Report

This section provides general information on where to report the expenses discussed in this publication.

You must report your income and expenses on Schedule C (Form 1040) if you are a sole proprietor, or on Schedule F (Form 1040) if you are a farmer. You don’t use Form 2106.

If you claim car or truck expenses, you must provide certain information on the use of your vehicle. You provide this information on Schedule C (Form 1040) or Form 4562.

If you file Schedule C (Form 1040):

Report your travel expenses, except meals, on line 24a;

Report your deductible non-entertainment-related meals (actual cost or standard meal allowance) on line 24b;

Report your gift expenses and transportation expenses, other than car expenses, on line 27a; and

Report your car expenses on line 9. Complete Part IV of the form unless you have to file Form 4562 for depreciation or amortization.

If you file Schedule F (Form 1040), do the following.

Report your car expenses on line 10. Attach Form 4562 and provide information on the use of your car in Part V of Form 4562.

Report all other business expenses discussed in this publication on line 32. You can only include 50% of your non-entertainment-related meals on that line.

If you are both self-employed and an employee, you must keep separate records for each business activity. Report your business expenses for self-employment on Schedule C (Form 1040), or Schedule F (Form 1040), as discussed earlier. Report your business expenses for your work as an employee on Form 2106, as discussed next.

If you are an employee, you must generally complete Form 2106 to deduct your travel and transportation expenses.

You are an employee deducting expenses attributable to your job.

You weren’t reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 aren’t considered reimbursements).

If you claim car expenses, you use the standard mileage rate.

For more information on how to report your expenses on Form 2106, see Completing Form 2106 , later.

If you didn’t receive any reimbursements (or the reimbursements were all included in box 1 of your Form W-2), the only business expense you are claiming is for gifts, and the special rules discussed later don’t apply to you, don’t complete Form 2106.

If you received a Form W-2 and the “Statutory employee” box in box 13 was checked, report your income and expenses related to that income on Schedule C (Form 1040). Don’t complete Form 2106.

Statutory employees include full-time life insurance salespersons, certain agent or commission drivers, traveling salespersons, and certain homeworkers.

If your employer reimburses you for nondeductible personal expenses, such as for vacation trips, your employer must report the reimbursement as wage income in box 1 of your Form W-2. You can’t deduct personal expenses.

If you have travel or transportation expenses related to income-producing property, report your deductible expenses on the form appropriate for that activity.

For example, if you have rental real estate income and expenses, report your expenses on Schedule E (Form 1040), Supplemental Income and Loss. See Pub. 527, Residential Rental Property, for more information on the rental of real estate.

Vehicle Provided by Your Employer

If your employer provides you with a car, you may be able to deduct the actual expenses of operating that car for business purposes. The amount you can deduct depends on the amount that your employer included in your income and the business and personal miles you drove during the year. You can’t use the standard mileage rate.

Your employer can figure and report either the actual value of your personal use of the car or the value of the car as if you used it only for personal purposes (100% income inclusion). Your employer must separately state the amount if 100% of the annual lease value was included in your income. If you are unsure of the amount included on your Form W-2, ask your employer.

You may be able to deduct the value of the business use of an employer-provided car if your employer reported 100% of the value of the car in your income. On your 2023 Form W-2, the amount of the value will be included in box 1, Wages, tips, other compensation; and box 14, Other.

To claim your expenses, complete Form 2106, Part II, Sections A and C. Enter your actual expenses on line 23 of Section C and include the entire value of the employer-provided car on line 25. Complete the rest of the form.

If less than the full annual lease value of the car was included on your Form W-2, this means that your Form W-2 only includes the value of your personal use of the car. Don’t enter this value on your Form 2106 because it isn’t deductible.

If you paid any actual costs (that your employer didn’t provide or reimburse you for) to operate the car, you can deduct the business portion of those costs. Examples of costs that you may have are gas, oil, and repairs. Complete Form 2106, Part II, Sections A and C. Enter your actual costs on line 23 of Section C and leave line 25 blank. Complete the rest of the form.

Reimbursements

This section explains what to do when you receive an advance or are reimbursed for any of the employee business expenses discussed in this publication.

If you received an advance, allowance, or reimbursement for your expenses, how you report this amount and your expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan.

This section explains the two types of plans, how per diem and car allowances simplify proving the amount of your expenses, and the tax treatment of your reimbursements and expenses. It also covers rules for independent contractors.

You aren’t reimbursed or given an allowance for your expenses if you are paid a salary or commission with the understanding that you will pay your own expenses. In this situation, you have no reimbursement or allowance arrangement, and you don’t have to read this section on reimbursements. Instead, see Completing Form 2106 , later, for information on completing your tax return.

A reimbursement or other expense allowance arrangement is a system or plan that an employer uses to pay, substantiate, and recover the expenses, advances, reimbursements, and amounts charged to the employer for employee business expenses. Arrangements include per diem and car allowances.

A per diem allowance is a fixed amount of daily reimbursement your employer gives you for your lodging and M&IE when you are away from home on business. (The term “incidental expenses” is defined in chapter 1 under Standard Meal Allowance. ) A car allowance is an amount your employer gives you for the business use of your car.

Your employer should tell you what method of reimbursement is used and what records you must provide.

If you are an employer and you reimburse employee business expenses, how you treat this reimbursement on your employee's Form W-2 depends in part on whether you have an accountable plan. Reimbursements treated as paid under an accountable plan, as explained next, aren’t reported as pay. Reimbursements treated as paid under nonaccountable plans , as explained later, are reported as pay. See Pub. 15 (Circular E), Employer's Tax Guide, for information on employee pay.

Accountable Plans

To be an accountable plan, your employer's reimbursement or allowance arrangement must include all of the following rules.

Your expenses must have a business connection—that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer.

You must adequately account to your employer for these expenses within a reasonable period of time.

You must return any excess reimbursement or allowance within a reasonable period of time.

Adequate accounting and returning excess reimbursements are discussed later.

An excess reimbursement or allowance is any amount you are paid that is more than the business-related expenses that you adequately accounted for to your employer.

The definition of reasonable period of time depends on the facts and circumstances of your situation. However, regardless of the facts and circumstances of your situation, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time.

You receive an advance within 30 days of the time you have an expense.

You adequately account for your expenses within 60 days after they were paid or incurred.

You return any excess reimbursement within 120 days after the expense was paid or incurred.

You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement.

If you meet the three rules for accountable plans, your employer shouldn’t include any reimbursements in your income in box 1 of your Form W-2. If your expenses equal your reimbursements, you don’t complete Form 2106. You have no deduction since your expenses and reimbursements are equal.

Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules. All reimbursements that fail to meet all three rules for accountable plans are generally treated as having been reimbursed under a nonaccountable plan (discussed later).

If you are reimbursed under an accountable plan, but you fail to return, within a reasonable time, any amounts in excess of the substantiated amounts, the amounts paid in excess of the substantiated expenses are treated as paid under a nonaccountable plan. See Reasonable period of time , earlier, and Returning Excess Reimbursements , later.

You may be reimbursed under your employer's accountable plan for expenses related to that employer's business, some of which would be allowable as employee business expense deductions and some of which would not. The reimbursements you receive for the nondeductible expenses don’t meet rule (1) for accountable plans, and they are treated as paid under a nonaccountable plan.

Your employer's plan reimburses you for travel expenses while away from home on business and also for meals when you work late at the office, even though you aren’t away from home. The part of the arrangement that reimburses you for the nondeductible meals when you work late at the office is treated as paid under a nonaccountable plan.

One of the rules for an accountable plan is that you must adequately account to your employer for your expenses. You adequately account by giving your employer a statement of expense, an account book, a diary, or a similar record in which you entered each expense at or near the time you had it, along with documentary evidence (such as receipts) of your travel, mileage, and other employee business expenses. (See Table 5-1 in chapter 5 for details you need to enter in your record and documents you need to prove certain expenses.) A per diem or car allowance satisfies the adequate accounting requirement under certain conditions. See Per Diem and Car Allowances , later.

You must account for all amounts you received from your employer during the year as advances, reimbursements, or allowances. This includes amounts you charged to your employer by credit card or other method. You must give your employer the same type of records and supporting information that you would have to give to the IRS if the IRS questioned a deduction on your return. You must pay back the amount of any reimbursement or other expense allowance for which you don’t adequately account or that is more than the amount for which you accounted.

Per Diem and Car Allowances

If your employer reimburses you for your expenses using a per diem or a car allowance, you can generally use the allowance as proof for the amount of your expenses. A per diem or car allowance satisfies the adequate accounting requirements for the amount of your expenses only if all the following conditions apply.

Your employer reasonably limits payments of your expenses to those that are ordinary and necessary in the conduct of the trade or business.

The allowance is similar in form to and not more than the federal rate (defined later).

You prove the time (dates), place, and business purpose of your expenses to your employer (as explained in Table 5-1 ) within a reasonable period of time.

You aren’t related to your employer (as defined next). If you are related to your employer, you must be able to prove your expenses to the IRS even if you have already adequately accounted to your employer and returned any excess reimbursement.

You are related to your employer if:

Your employer is your brother or sister, half brother or half sister, spouse, ancestor, or lineal descendant;

Your employer is a corporation in which you own, directly or indirectly, more than 10% in value of the outstanding stock; or

Certain relationships (such as grantor, fiduciary, or beneficiary) exist between you, a trust, and your employer.

The federal rate can be figured using any one of the following methods.

For per diem amounts:

The regular federal per diem rate.

The high-low rate.

For car expenses:

A fixed and variable rate (FAVR).

The regular federal per diem rate is the highest amount that the federal government will pay to its employees for lodging and M&IE (or M&IE only) while they are traveling away from home in a particular area. The rates are different for different localities. Your employer should have these rates available. You can also find federal per diem rates at GSA.gov/travel/plan-book/per-diem-rates .

The standard meal allowance is the federal M&IE rate. For travel in 2023, the rate for most small localities in the United States is $59 per day. Most major cities and many other localities qualify for higher rates. You can find this information at GSA.gov/travel/plan-book/per-diem-rates .

You receive an allowance only for M&IE when your employer does one of the following.

Provides you with lodging (furnishes it in kind).

Reimburses you, based on your receipts, for the actual cost of your lodging.

Pays the hotel, motel, etc., directly for your lodging.

Doesn’t have a reasonable belief that you had (or will have) lodging expenses, such as when you stay with friends or relatives or sleep in the cab of your truck.

Figures the allowance on a basis similar to that used in figuring your compensation, such as number of hours worked or miles traveled.

This is a simplified method of figuring the federal per diem rate for travel within the continental United States. It eliminates the need to keep a current list of the per diem rates for each city.

Under the high-low method, the per diem amount for travel during January through September of 2023 is $297 (which includes $74 for M&IE) for certain high-cost locations. All other areas have a per diem amount of $204 (which includes $64 for M&IE). For more information, see Notice 2022-44, which can be found at IRS.gov/irb/2022-41_IRB#NOT-2022-44 .

Effective October 1, 2023, the per diem rate for certain high-cost locations increased to $309 (which includes $74 for M&IE). The rate for all other locations increased to $214 (which includes $64 for M&IE). For more information, see Notice 2023-68, which can be found at IRS.gov/irb/2023-41_IRB#NOT-2023-68 , and Revenue Procedure 2019-48 at IRS.gov/irb/2019-51_IRB#REV-PROC-2019-48 .

The standard meal allowance is for a full 24-hour day of travel. If you travel for part of a day, such as on the days you depart and return, you must prorate the full-day M&IE rate. This rule also applies if your employer uses the regular federal per diem rate or the high-low rate.

You can use either of the following methods to figure the federal M&IE for that day.

For the day you depart, add 3 / 4 of the standard meal allowance amount for that day.

For the day you return, add 3 / 4 of the standard meal allowance amount for the preceding day.

Method 2: Prorate the standard meal allowance using any method you consistently apply in accordance with reasonable business practice. For example, an employer can treat 2 full days of per diem (that includes M&IE) paid for travel away from home from 9 a.m. of one day to 5 p.m. of the next day as being no more than the federal rate. This is true even though a federal employee would be limited to a reimbursement of M&IE for only 1½ days of the federal M&IE rate.

This is a set rate per mile that you can use to figure your deductible car expenses. For 2023, the standard mileage rate for the cost of operating your car for business use is 65.5 cents ($0.655) per mile.

This is an allowance your employer may use to reimburse your car expenses. Under this method, your employer pays an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your variable operating costs (such as gas, oil, etc.) plus a flat amount to cover your fixed costs (such as depreciation (or lease payments), insurance, etc.). If your employer chooses to use this method, your employer will request the necessary records from you.

If your reimbursement is in the form of an allowance received under an accountable plan, the following facts affect your reporting.

Whether the allowance or your actual expenses were more than the federal rate.

If your allowance is less than or equal to the federal rate, the allowance won’t be included in box 1 of your Form W-2. You don’t need to report the related expenses or the allowance on your return if your expenses are equal to or less than the allowance.

However, if your actual expenses are more than your allowance, you can complete Form 2106. If you are using actual expenses, you must be able to prove to the IRS the total amount of your expenses and reimbursements for the entire year. If you are using the standard meal allowance or the standard mileage rate, you don’t have to prove that amount.

In April, a member of a reserve component of the Armed Forces takes a 2-day business trip to Denver. The federal rate for Denver is $278 ($199 lodging + $79 M&IE) per day. As required by their employer's accountable plan, they account for the time (dates), place, and business purpose of the trip. Their employer reimburses them $278 a day ($556 total) for living expenses. Their living expenses in Denver aren’t more than $278 a day.

Their employer doesn’t include any of the reimbursement on their Form W-2 and they don’t deduct the expenses on their return.

In June, a fee-basis local government official takes a 2-day business trip to Boston. Their employer uses the high-low method to reimburse employees. Because Boston is a high-cost area, they are given an advance of $297 (which includes $74 for M&IE) a day ($594 total) for their lodging and M&IE. Their actual expenses totaled $700.

Since their $700 of expenses are more than their $594 advance, they include the excess expenses when they itemize their deductions. They complete Form 2106 (showing all of their expenses and reimbursements). They must also allocate their reimbursement between their meals and other expenses as discussed later under Completing Form 2106 .

A fee-basis state government official drives 10,000 miles during 2023 for business. Under their employer's accountable plan, they account for the time (dates), place, and business purpose of each trip. Their employer pays them a mileage allowance of 40 cents ($0.40) a mile.

Because their $6,550 expense figured under the standard mileage rate (10,000 miles x 65.5 cents ($0.655) per mile) is more than their $4,000 reimbursement (10,000 miles × 40 cents ($0.40)), they itemize their deductions to claim the excess expense. They complete Form 2106 (showing all their expenses and reimbursements) and enter $2,550 ($6,550 − $4,000) as an itemized deduction.

If your allowance is more than the federal rate, your employer must include the allowance amount up to the federal rate under code L in box 12 of your Form W-2. This amount isn’t taxable. However, the excess allowance will be included in box 1 of your Form W-2. You must report this part of your allowance as if it were wage income.

If your actual expenses are less than or equal to the federal rate, you don’t complete Form 2106 or claim any of your expenses on your return.

However, if your actual expenses are more than the federal rate, you can complete Form 2106 and deduct those excess expenses. You must report on Form 2106 your reimbursements up to the federal rate (as shown under code L in box 12 of your Form W-2) and all your expenses. You should be able to prove these amounts to the IRS.

Sasha, a performing artist, lives and works in Austin. In July, the employer sent Sasha to Albuquerque for 4 days on business. The employer paid the hotel directly for Sasha’s lodging and reimbursed $80 a day ($320 total) for M&IE. Sasha’s actual meal expenses weren’t more than the federal rate for Albuquerque, which is $69 per day.

The employer included the $44 that was more than the federal rate (($80 − $69) × 4) in box 1 of Sasha’s Form W-2. The employer shows $276 ($69 a day × 4) under code L in box 12 of Form W-2. This amount isn’t included in income. Sasha doesn’t have to complete Form 2106; however, Sasha must include the $44 in gross income as wages (by reporting the total amount shown in box 1 of their Form W-2).

Another performing artist, Ari, also lives in Austin and works for the same employer as in Example 1 . In May, the employer sent Ari to San Diego for 4 days and paid the hotel directly for the hotel bill. The employer reimbursed Ari $75 a day for M&IE. The federal rate for San Diego is $74 a day.

Ari can prove that actual non-entertainment-related meal expenses totaled $380. The employer's accountable plan won’t pay more than $75 a day for travel to San Diego, so Ari doesn’t give the employer the records that prove that the amount actually spent was $380. However, Ari does account for the time (dates), place, and business purpose of the trip. This is Ari’s only business trip this year.

Ari was reimbursed $300 ($75 × 4 days), which is $4 more than the federal rate of $296 ($74 × 4 days). The employer includes the $4 as income on the employee’s Form W-2 in box 1. The employer also enters $296 under code L in box 12 of the employee’s Form W-2.

Ari completes Form 2106 to figure deductible expenses and enters the total of actual expenses for the year ($380) on Form 2106. Ari also enters the reimbursements that weren’t included in income ($296). Ari’s total deductible meals and beverages expense, before the 50% limit, is $96. Ari will include $48 as an itemized deduction.

Palmer, a fee-basis state government official, drives 10,000 miles during 2023 for business. Under the employer's accountable plan, Palmer gets reimbursed 70 cents ($0.70) a mile, which is more than the standard mileage rate. The total reimbursement is $7,000.

The employer must include the reimbursement amount up to the standard mileage rate, $6,550 (10,000 miles x 65.5 cents ($0.655) per mile), under code L in box 12 of the employee’s Form W-2. That amount isn’t taxable. The employer must also include $450 ($7,000 − $6,550) in box 1 of the employee's Form W-2. This is the reimbursement that is more than the standard mileage rate.

If the expenses are equal to or less than the standard mileage rate, Palmer wouldn’t complete Form 2106. If the expenses are more than the standard mileage rate, Palmer would complete Form 2106 and report total expenses and reimbursement (shown under code L in box 12 of their Form W-2). Palmer would then claim the excess expenses as an itemized deduction.

Returning Excess Reimbursements

Under an accountable plan, you are required to return any excess reimbursement or other expense allowances for your business expenses to the person paying the reimbursement or allowance. Excess reimbursement means any amount for which you didn’t adequately account within a reasonable period of time. For example, if you received a travel advance and you didn’t spend all the money on business-related expenses or you don’t have proof of all your expenses, you have an excess reimbursement.

Adequate accounting and reasonable period of time were discussed earlier in this chapter.

You receive a travel advance if your employer provides you with an expense allowance before you actually have the expense, and the allowance is reasonably expected to be no more than your expense. Under an accountable plan, you are required to adequately account to your employer for this advance and to return any excess within a reasonable period of time.

If you don’t adequately account for or don't return any excess advance within a reasonable period of time, the amount you don’t account for or return will be treated as having been paid under a nonaccountable plan (discussed later).

If you don’t prove that you actually traveled on each day for which you received a per diem or car allowance (proving the elements described in Table 5-1 ), you must return this unproven amount of the travel advance within a reasonable period of time. If you don’t do this, the unproven amount will be considered paid under a nonaccountable plan (discussed later).

If your employer's accountable plan pays you an allowance that is higher than the federal rate, you don’t have to return the difference between the two rates for the period you can prove business-related travel expenses. However, the difference will be reported as wages on your Form W-2. This excess amount is considered paid under a nonaccountable plan (discussed later).

Your employer sends you on a 5-day business trip to Phoenix in March 2023 and gives you a $400 ($80 × 5 days) advance to cover your M&IE. The federal per diem for M&IE for Phoenix is $69. Your trip lasts only 3 days. Under your employer's accountable plan, you must return the $160 ($80 × 2 days) advance for the 2 days you didn’t travel. For the 3 days you did travel, you don’t have to return the $33 difference between the allowance you received and the federal rate for Phoenix (($80 − $69) × 3 days). However, the $33 will be reported on your Form W-2 as wages.

Nonaccountable Plans

A nonaccountable plan is a reimbursement or expense allowance arrangement that doesn’t meet one or more of the three rules listed earlier under Accountable Plans .

In addition, even if your employer has an accountable plan, the following payments will be treated as being paid under a nonaccountable plan.

Excess reimbursements you fail to return to your employer.

Reimbursement of nondeductible expenses related to your employer's business. See Reimbursement of nondeductible expenses , earlier, under Accountable Plans.

If you aren’t sure if the reimbursement or expense allowance arrangement is an accountable or nonaccountable plan, ask your employer.

Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay. Your employer will report the total in box 1 of your Form W-2.

You must complete Form 2106 and itemize your deductions to deduct your expenses for travel, transportation, or non-entertainment-related meals. Your meal and entertainment expenses will be subject to the 50% Limit discussed in chapter 2.

Your employer gives you $1,000 a month ($12,000 total for the year) for your business expenses. You don’t have to provide any proof of your expenses to your employer, and you can keep any funds that you don’t spend.

You are a performing artist and are being reimbursed under a nonaccountable plan. Your employer will include the $12,000 on your Form W-2 as if it were wages. If you want to deduct your business expenses, you must complete Form 2106 and itemize your deductions.

You are paid $2,000 a month by your employer. On days that you travel away from home on business, your employer designates $50 a day of your salary as paid to reimburse your travel expenses. Because your employer would pay your monthly salary whether or not you were traveling away from home, the arrangement is a nonaccountable plan. No part of the $50 a day designated by your employer is treated as paid under an accountable plan.

Rules for Independent Contractors and Clients

This section provides rules for independent contractors who incur expenses on behalf of a client or customer. The rules cover the reporting and substantiation of certain expenses discussed in this publication, and they affect both independent contractors and their clients or customers.

You are considered an independent contractor if you are self-employed and you perform services for a customer or client.

Accounting to Your Client

If you received a reimbursement or an allowance for travel, or gift expenses that you incurred on behalf of a client, you should provide an adequate accounting of these expenses to your client. If you don’t account to your client for these expenses, you must include any reimbursements or allowances in income. You must keep adequate records of these expenses whether or not you account to your client for these expenses.

If you don’t separately account for and seek reimbursement for meal and entertainment expenses in connection with providing services for a client, you are subject to the 50% limit on those expenses. See 50% Limit in chapter 2.

As a self-employed person, you adequately account by reporting your actual expenses. You should follow the recordkeeping rules in chapter 5 .

For information on how to report expenses on your tax return, see Self-employed at the beginning of this chapter.

Required Records for Clients or Customers

If you are a client or customer, you generally don’t have to keep records to prove the reimbursements or allowances you give, in the course of your business, to an independent contractor for travel or gift expenses incurred on your behalf. However, you must keep records if:

You reimburse the contractor for entertainment expenses incurred on your behalf, and

The contractor adequately accounts to you for these expenses.

If the contractor adequately accounts to you for non-entertainment-related meal expenses, you (the client or customer) must keep records documenting each element of the expense, as explained in chapter 5 . Use your records as proof for a deduction on your tax return. If non-entertainment-related meal expenses are accounted for separately, you are subject to the 50% limit on meals. If the contractor adequately accounts to you for reimbursed amounts, you don’t have to report the amounts on an information return.

If the contractor doesn’t adequately account to you for allowances or reimbursements of non-entertainment-related meal expenses, you don’t have to keep records of these items. You aren’t subject to the 50% limit on meals in this case. You can deduct the reimbursements or allowances as payment for services if they are ordinary and necessary business expenses. However, you must file Form 1099-MISC to report amounts paid to the independent contractor if the total of the reimbursements and any other fees is $600 or more during the calendar year.

How To Use Per Diem Rate Tables

This section contains information about the per diem rate substantiation methods available and the choice of rates you must make for the last 3 months of the year.

The Two Substantiation Methods

IRS Notices list the localities that are treated under the high-low substantiation method as high-cost localities for all or part of the year. Notice 2022-44, available at IRS.gov/irb/2022-41_IRB#NOT-2022-44 , lists the high-cost localities that are eligible for $297 (which includes $74 for meals and incidental expenses (M&IE)) per diem, effective October 1, 2022. For travel on or after October 1, 2022, all other localities within the continental United States (CONUS) are eligible for $204 (which includes $64 for M&IE) per diem under the high-low method.

Notice 2023-68, available at IRS.gov/irb/2023-41_IRB#NOT-2023-68 , lists the high-cost localities that are eligible for $309 (which includes $74 for M&IE) per diem, effective October 1, 2023. For travel on or after October 1, 2023, the per diem for all other localities increased to $214 (which includes $64 for M&IE).

Regular federal per diem rates are published by the General Services Administration (GSA). Both tables include the separate rate for M&IE for each locality. The rates listed for FY2023 at GSA.gov/travel/plan-book/per-diem-rates are effective October 1, 2022, and those listed for FY2024 are effective October 1, 2023. The standard rate for all locations within CONUS not specifically listed for FY2023 is $157 ($98 for lodging and $59 for M&IE). For FY2024, this rate increases to $166 ($107 for lodging and $59 for M&IE).

Transition Rules

The transition period covers the last 3 months of the calendar year, from the time that new rates are effective (generally, October 1) through December 31. During this period, you may generally change to the new rates or finish out the year with the rates you had been using.

If you use the high-low substantiation method, when new rates become effective (generally, October 1), you can either continue with the rates you used for the first part of the year or change to the new rates. However, you must continue using the high-low method for the rest of the calendar year (through December 31). If you are an employer, you must use the same rates for all employees reimbursed under the high-low method during that calendar year.

The new rates and localities for the high-low method are included each year in a notice that is generally published in mid to late September. You can find the notice in the weekly Internal Revenue Bulletin (IRB) at IRS.gov/IRB , or visit IRS.gov and enter “Special Per Diem Rates” in the search box.

New CONUS per diem rates become effective on October 1 of each year and remain in effect through September 30 of the following year. Employees being reimbursed under the per diem rate method during the first 9 months of a year (January 1–September 30) must continue under the same method through the end of that calendar year (December 31). However, for travel by these employees from October 1 through December 31, you can choose to continue using the same per diem rates or use the new rates.

The new federal CONUS per diem rates are published each year, generally early in September. Go to GSA.gov/travel/plan-book/per-diem-rates .

Completing Form 2106

For tax years beginning after 2017, the Form 2106 will be used by Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses. Due to the suspension of miscellaneous itemized deductions subject to the 2% floor under section 67(a), employees who do not fit into one of the listed categories may not use Form 2106.

This section briefly describes how employees complete Forms 2106. Table 6-1 explains what the employer reports on Form W-2 and what the employee reports on Form 2106. The instructions for the forms have more information on completing them.

Table 6-1. Reporting Travel, Nonentertainment Meal, Gift, and Car Expenses and Reimbursements

If you used a car to perform your job as an employee, you may be able to deduct certain car expenses. These are generally figured on Form 2106, Part II, and then claimed on Form 2106, Part I, line 1, column A.

If you claim any deduction for the business use of a car, you must answer certain questions and provide information about the use of the car. The information relates to the following items.

Date placed in service.

Mileage (total, business, commuting, and other personal mileage).

Percentage of business use.

After-work use.

Use of other vehicles.

Whether you have evidence to support the deduction.

Whether or not the evidence is written.

If you claim a deduction based on the standard mileage rate instead of your actual expenses, you must complete Form 2106, Part II, Section B. The amount on line 22 (Section B) is carried to Form 2106, Part I, line 1. In addition, on Part I, line 2, you can deduct parking fees and tolls that apply to the business use of the car. See Standard Mileage Rate in chapter 4 for information on using this rate.

If you claim a deduction based on actual car expenses, you must complete Form 2106, Part II, Section C. In addition, unless you lease your car, you must complete Section D to show your depreciation deduction and any section 179 deduction you claim.

If you are still using a car that is fully depreciated, continue to complete Section C. Since you have no depreciation deduction, enter zero on line 28. In this case, don’t complete Section D.

If you claim car rental expenses on Form 2106, line 24a, you may have to reduce that expense by an inclusion amount , as described in chapter 4. If so, you can show your car expenses and any inclusion amount as follows.

Figure the inclusion amount without taking into account your business-use percentage for the tax year.

Report the inclusion amount from (1) on Form 2106, Part II, line 24b.

Report on line 24c the net amount of car rental expenses (total car rental expenses minus the inclusion amount figured in (1)).

Show your transportation expenses that didn’t involve overnight travel on Form 2106, line 2, column A. Also include on this line business expenses you have for parking fees and tolls. Don’t include expenses of operating your car or expenses of commuting between your home and work.

Show your other employee business expenses on Form 2106, lines 3 and 4, column A. Don’t include expenses for nonentertainment meals on those lines. Line 4 is for expenses such as gifts, educational expenses (tuition and books), office-in-the-home expenses, and trade and professional publications.

Show the full amount of your expenses for nonentertainment business-related meals on Form 2106, line 5, column B. Include meals while away from your tax home overnight and other business meals. Enter 50% of the line 8, column B, meal expenses on line 9, column B.

If you are subject to the Department of Transportation's “hours of service” limits (as explained earlier under Individuals subject to hours of service limits in chapter 2), use 80% instead of 50% for meals while away from your tax home.

Enter on Form 2106, line 7, the amounts your employer (or third party) reimbursed you that weren’t reported to you in box 1 of your Form W-2. This includes any amount reported under code L in box 12 of Form W-2.

If you were reimbursed under an accountable plan and want to deduct excess expenses that weren’t reimbursed, you may have to allocate your reimbursement. This is necessary when your employer pays your reimbursement in the following manner.

Pays you a single amount that covers non-entertainment-related meals and/or entertainment, as well as other business expenses.

Doesn’t clearly identify how much is for deductible non-entertainment-related meals.

Your employer paid you an expense allowance of $12,000 this year under an accountable plan. The $12,000 payment consisted of $5,000 for airfare and $7,000 for non-entertainment-related meals, and car expenses. Your employer didn’t clearly show how much of the $7,000 was for the cost of deductible non-entertainment-related meals. You actually spent $14,000 during the year ($5,500 for airfare, $4,500 for non-entertainment-related meals, and $4,000 for car expenses).

Since the airfare allowance was clearly identified, you know that $5,000 of the payment goes in column A, line 7, of Form 2106. To allocate the remaining $7,000, you use the worksheet from the Instructions for Form 2106. Your completed worksheet follows.

Reimbursement Allocation Worksheet (Keep for your records.)

If you are a government official paid on a fee basis, a performing artist, an Armed Forces reservist, or a disabled employee with impairment-related work expenses, see Special Rules , later.

Your employee business expenses may be subject to either of the limits described next. They are figured in the following order on the specified form.

Certain non-entertainment-related meal expenses are subject to a 50% limit. Generally, entertainment expenses are nondeductible if paid or incurred after December 2017. If you are an employee, you figure this limit on line 9 of Form 2106. (See 50% Limit in chapter 2.)

Limitations on itemized deductions are suspended for tax years beginning after 2017 and before tax year January 2026, per section 68(g).

Special Rules

This section discusses special rules that apply only to Armed Forces reservists, government officials who are paid on a fee basis, performing artists, and disabled employees with impairment-related work expenses. For tax years beginning after 2017, they are the only taxpayers who can use Form 2106.

Armed Forces Reservists Traveling More Than 100 Miles From Home

If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging and M&IE) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. See Per Diem and Car Allowances , earlier, for more information.

You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve; the Army National Guard of the United States; the Air National Guard of the United States; or the Reserve Corps of the Public Health Service.

If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106. Then include your expenses for reserve travel over 100 miles from home, up to the federal rate, from Form 2106, line 10, in the total on Schedule 1 (Form 1040), line 12.

You can’t deduct expenses of travel that doesn’t take you more than 100 miles from home as an adjustment to gross income.

Certain fee-basis officials can claim their employee business expenses on Form 2106.

Fee-basis officials are persons who are employed by a state or local government and who are paid in whole or in part on a fee basis. They can deduct their business expenses in performing services in that job as an adjustment to gross income rather than as a miscellaneous itemized deduction.

If you are a fee-basis official, include your employee business expenses from Form 2106, line 10, in the total on Schedule 1 (Form 1040), line 12.

Expenses of Certain Performing Artists

If you are a performing artist, you may qualify to deduct your employee business expenses as an adjustment to gross income. To qualify, you must meet all of the following requirements.

During the tax year, you perform services in the performing arts as an employee for at least two employers.

You receive at least $200 each from any two of these employers.

Your related performing-arts business expenses are more than 10% of your gross income from the performance of those services.

Your adjusted gross income isn’t more than $16,000 before deducting these business expenses.

If you are married, you must file a joint return unless you lived apart from your spouse at all times during the tax year. If you file a joint return, you must figure requirements (1), (2), and (3) separately for both you and your spouse. However, requirement (4) applies to your and your spouse's combined adjusted gross income.

If you meet all of the above requirements, you should first complete Form 2106. Then you include your performing-arts-related expenses from Form 2106, line 10, in the total on Schedule 1 (Form 1040), line 12.

If you don’t meet all of the above requirements, you don’t qualify to deduct your expenses as an adjustment to gross income.

If you are an employee with a physical or mental disability, your impairment-related work expenses aren’t subject to the 2%-of-adjusted-gross-income limit that applies to most other employee business expenses. After you complete Form 2106, enter your impairment-related work expenses from Form 2106, line 10, on Schedule A (Form 1040), line 16, and identify the type and amount of this expense on the line next to line 16.

Impairment-related work expenses are your allowable expenses for attendant care at your workplace and other expenses in connection with your workplace that are necessary for you to be able to work.

You are disabled if you have:

A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed; or

A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working.

You can deduct impairment-related expenses as business expenses if they are:

Necessary for you to do your work satisfactorily;

For goods and services not required or used, other than incidentally, in your personal activities; and

Not specifically covered under other income tax laws.

You are blind. You must use a reader to do your work. You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. The reader's services are only for your work. You can deduct your expenses for the reader as business expenses.

You are deaf. You must use a sign language interpreter during meetings while you are at work. The interpreter's services are used only for your work. You can deduct your expenses for the interpreter as business expenses.

How To Get Tax Help

If you have questions about a tax issue; need help preparing your tax return; or want to download free publications, forms, or instructions, go to IRS.gov to find resources that can help you right away.

After receiving all your wage and earnings statements (Forms W-2, W-2G, 1099-R, 1099-MISC, 1099-NEC, etc.); unemployment compensation statements (by mail or in a digital format) or other government payment statements (Form 1099-G); and interest, dividend, and retirement statements from banks and investment firms (Forms 1099), you have several options to choose from to prepare and file your tax return. You can prepare the tax return yourself, see if you qualify for free tax preparation, or hire a tax professional to prepare your return.

Your options for preparing and filing your return online or in your local community, if you qualify, include the following.

Free File. This program lets you prepare and file your federal individual income tax return for free using software or Free File Fillable Forms. However, state tax preparation may not be available through Free File. Go to IRS.gov/FreeFile to see if you qualify for free online federal tax preparation, e-filing, and direct deposit or payment options.

VITA. The Volunteer Income Tax Assistance (VITA) program offers free tax help to people with low-to-moderate incomes, persons with disabilities, and limited-English-speaking taxpayers who need help preparing their own tax returns. Go to IRS.gov/VITA , download the free IRS2Go app, or call 800-906-9887 for information on free tax return preparation.

TCE. The Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 years of age and older. TCE volunteers specialize in answering questions about pensions and retirement-related issues unique to seniors. Go to IRS.gov/TCE or download the free IRS2Go app for information on free tax return preparation.

MilTax. Members of the U.S. Armed Forces and qualified veterans may use MilTax, a free tax service offered by the Department of Defense through Military OneSource. For more information, go to MilitaryOneSource ( MilitaryOneSource.mil/MilTax ).

Also, the IRS offers Free Fillable Forms, which can be completed online and then e-filed regardless of income.

Go to IRS.gov/Tools for the following.

The Earned Income Tax Credit Assistant ( IRS.gov/EITCAssistant ) determines if you’re eligible for the earned income credit (EIC).

The Online EIN Application ( IRS.gov/EIN ) helps you get an employer identification number (EIN) at no cost.

The Tax Withholding Estimator ( IRS.gov/W4App ) makes it easier for you to estimate the federal income tax you want your employer to withhold from your paycheck. This is tax withholding. See how your withholding affects your refund, take-home pay, or tax due.

The First Time Homebuyer Credit Account Look-up ( IRS.gov/HomeBuyer ) tool provides information on your repayments and account balance.

The Sales Tax Deduction Calculator ( IRS.gov/SalesTax ) figures the amount you can claim if you itemize deductions on Schedule A (Form 1040).

Go to IRS.gov/Help : A variety of tools to help you get answers to some of the most common tax questions.

Go to IRS.gov/ITA : The Interactive Tax Assistant, a tool that will ask you questions and, based on your input, provide answers on a number of tax topics.

Go to IRS.gov/Forms : Find forms, instructions, and publications. You will find details on the most recent tax changes and interactive links to help you find answers to your questions.

You may also be able to access tax information in your e-filing software.

There are various types of tax return preparers, including enrolled agents, certified public accountants (CPAs), accountants, and many others who don’t have professional credentials. If you choose to have someone prepare your tax return, choose that preparer wisely. A paid tax preparer is:

Primarily responsible for the overall substantive accuracy of your return,

Required to sign the return, and

Required to include their preparer tax identification number (PTIN).

The Social Security Administration (SSA) offers online service at SSA.gov/employer for fast, free, and secure W-2 filing options to CPAs, accountants, enrolled agents, and individuals who process Form W-2, Wage and Tax Statement, and Form W-2c, Corrected Wage and Tax Statement.

Go to IRS.gov/SocialMedia to see the various social media tools the IRS uses to share the latest information on tax changes, scam alerts, initiatives, products, and services. At the IRS, privacy and security are our highest priority. We use these tools to share public information with you. Don’t post your social security number (SSN) or other confidential information on social media sites. Always protect your identity when using any social networking site.

The following IRS YouTube channels provide short, informative videos on various tax-related topics in English, Spanish, and ASL.

Youtube.com/irsvideos .

Youtube.com/irsvideosmultilingua .

Youtube.com/irsvideosASL .

The IRS Video portal ( IRSVideos.gov ) contains video and audio presentations for individuals, small businesses, and tax professionals.

You can find information on IRS.gov/MyLanguage if English isn’t your native language.

The IRS is committed to serving taxpayers with limited-English proficiency (LEP) by offering OPI services. The OPI Service is a federally funded program and is available at Taxpayer Assistance Centers (TACs), most IRS offices, and every VITA/TCE tax return site. The OPI Service is accessible in more than 350 languages.

Taxpayers who need information about accessibility services can call 833-690-0598. The Accessibility Helpline can answer questions related to current and future accessibility products and services available in alternative media formats (for example, braille, large print, audio, etc.). The Accessibility Helpline does not have access to your IRS account. For help with tax law, refunds, or account-related issues, go to IRS.gov/LetUsHelp .

Form 9000, Alternative Media Preference, or Form 9000(SP) allows you to elect to receive certain types of written correspondence in the following formats.

Standard Print.

Large Print.

Audio (MP3).

Plain Text File (TXT).

Braille Ready File (BRF).

Go to IRS.gov/DisasterRelief to review the available disaster tax relief.

Go to IRS.gov/Forms to view, download, or print all the forms, instructions, and publications you may need. Or, you can go to IRS.gov/OrderForms to place an order.

Download and view most tax publications and instructions (including the Instructions for Form 1040) on mobile devices as eBooks at IRS.gov/eBooks .

IRS eBooks have been tested using Apple's iBooks for iPad. Our eBooks haven’t been tested on other dedicated eBook readers, and eBook functionality may not operate as intended.

Go to IRS.gov/Account to securely access information about your federal tax account.

View the amount you owe and a breakdown by tax year.

See payment plan details or apply for a new payment plan.

Make a payment or view 5 years of payment history and any pending or scheduled payments.

Access your tax records, including key data from your most recent tax return, and transcripts.

View digital copies of select notices from the IRS.

Approve or reject authorization requests from tax professionals.

View your address on file or manage your communication preferences.

With an online account, you can access a variety of information to help you during the filing season. You can get a transcript, review your most recently filed tax return, and get your adjusted gross income. Create or access your online account at IRS.gov/Account .

This tool lets your tax professional submit an authorization request to access your individual taxpayer IRS online account. For more information, go to IRS.gov/TaxProAccount .

The safest and easiest way to receive a tax refund is to e-file and choose direct deposit, which securely and electronically transfers your refund directly into your financial account. Direct deposit also avoids the possibility that your check could be lost, stolen, destroyed, or returned undeliverable to the IRS. Eight in 10 taxpayers use direct deposit to receive their refunds. If you don’t have a bank account, go to IRS.gov/DirectDeposit for more information on where to find a bank or credit union that can open an account online.

Tax-related identity theft happens when someone steals your personal information to commit tax fraud. Your taxes can be affected if your SSN is used to file a fraudulent return or to claim a refund or credit.

The IRS doesn’t initiate contact with taxpayers by email, text messages (including shortened links), telephone calls, or social media channels to request or verify personal or financial information. This includes requests for personal identification numbers (PINs), passwords, or similar information for credit cards, banks, or other financial accounts.

Go to IRS.gov/IdentityTheft , the IRS Identity Theft Central webpage, for information on identity theft and data security protection for taxpayers, tax professionals, and businesses. If your SSN has been lost or stolen or you suspect you’re a victim of tax-related identity theft, you can learn what steps you should take.

Get an Identity Protection PIN (IP PIN). IP PINs are six-digit numbers assigned to taxpayers to help prevent the misuse of their SSNs on fraudulent federal income tax returns. When you have an IP PIN, it prevents someone else from filing a tax return with your SSN. To learn more, go to IRS.gov/IPPIN .

Go to IRS.gov/Refunds .

Download the official IRS2Go app to your mobile device to check your refund status.

Call the automated refund hotline at 800-829-1954.

Payments of U.S. tax must be remitted to the IRS in U.S. dollars. Digital assets are not accepted. Go to IRS.gov/Payments for information on how to make a payment using any of the following options.

IRS Direct Pay : Pay your individual tax bill or estimated tax payment directly from your checking or savings account at no cost to you.

Debit Card, Credit Card, or Digital Wallet : Choose an approved payment processor to pay online or by phone.

Electronic Funds Withdrawal : Schedule a payment when filing your federal taxes using tax return preparation software or through a tax professional.

Electronic Federal Tax Payment System : Best option for businesses. Enrollment is required.

Check or Money Order : Mail your payment to the address listed on the notice or instructions.

Cash : You may be able to pay your taxes with cash at a participating retail store.

Same-Day Wire : You may be able to do same-day wire from your financial institution. Contact your financial institution for availability, cost, and time frames.

Note. The IRS uses the latest encryption technology to ensure that the electronic payments you make online, by phone, or from a mobile device using the IRS2Go app are safe and secure. Paying electronically is quick, easy, and faster than mailing in a check or money order.

Go to IRS.gov/Payments for more information about your options.

Apply for an online payment agreement ( IRS.gov/OPA ) to meet your tax obligation in monthly installments if you can’t pay your taxes in full today. Once you complete the online process, you will receive immediate notification of whether your agreement has been approved.

Use the Offer in Compromise Pre-Qualifier to see if you can settle your tax debt for less than the full amount you owe. For more information on the Offer in Compromise program, go to IRS.gov/OIC .

Go to IRS.gov/Form1040X for information and updates.

Go to IRS.gov/WMAR to track the status of Form 1040-X amended returns.

Go to IRS.gov/Notices to find additional information about responding to an IRS notice or letter.

You can now upload responses to all notices and letters using the Document Upload Tool. For notices that require additional action, taxpayers will be redirected appropriately on IRS.gov to take further action. To learn more about the tool, go to IRS.gov/Upload .

You can use Schedule LEP (Form 1040), Request for Change in Language Preference, to state a preference to receive notices, letters, or other written communications from the IRS in an alternative language. You may not immediately receive written communications in the requested language. The IRS’s commitment to LEP taxpayers is part of a multi-year timeline that began providing translations in 2023. You will continue to receive communications, including notices and letters, in English until they are translated to your preferred language.

Keep in mind, many questions can be answered on IRS.gov without visiting a TAC. Go to IRS.gov/LetUsHelp for the topics people ask about most. If you still need help, TACs provide tax help when a tax issue can’t be handled online or by phone. All TACs now provide service by appointment, so you’ll know in advance that you can get the service you need without long wait times. Before you visit, go to IRS.gov/TACLocator to find the nearest TAC and to check hours, available services, and appointment options. Or, on the IRS2Go app, under the Stay Connected tab, choose the Contact Us option and click on “Local Offices.”

The Taxpayer Advocate Service (TAS) Is Here To Help You

TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. TAS strives to ensure that every taxpayer is treated fairly and that you know and understand your rights under the Taxpayer Bill of Rights .

The Taxpayer Bill of Rights describes 10 basic rights that all taxpayers have when dealing with the IRS. Go to TaxpayerAdvocate.IRS.gov to help you understand what these rights mean to you and how they apply. These are your rights. Know them. Use them.

TAS can help you resolve problems that you can’t resolve with the IRS. And their service is free. If you qualify for their assistance, you will be assigned to one advocate who will work with you throughout the process and will do everything possible to resolve your issue. TAS can help you if:

Your problem is causing financial difficulty for you, your family, or your business;

You face (or your business is facing) an immediate threat of adverse action; or

You’ve tried repeatedly to contact the IRS but no one has responded, or the IRS hasn’t responded by the date promised.

TAS has offices in every state, the District of Columbia, and Puerto Rico . To find your advocate’s number:

Go to TaxpayerAdvocate.IRS.gov/Contact-Us ;

Download Pub. 1546, The Taxpayer Advocate Service Is Your Voice at the IRS, available at IRS.gov/pub/irs-pdf/p1546.pdf ;

Call the IRS toll free at 800-TAX-FORM (800-829-3676) to order a copy of Pub. 1546;

Check your local directory; or

Call TAS toll free at 877-777-4778.

TAS works to resolve large-scale problems that affect many taxpayers. If you know of one of these broad issues, report it to TAS at IRS.gov/SAMS . Be sure to not include any personal taxpayer information.

LITCs are independent from the IRS and TAS. LITCs represent individuals whose income is below a certain level and who need to resolve tax problems with the IRS. LITCs can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court. In addition, LITCs can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Services are offered for free or a small fee. For more information or to find an LITC near you, go to the LITC page at TaxpayerAdvocate.IRS.gov/LITC or see IRS Pub. 4134, Low Income Taxpayer Clinic List , at IRS.gov/pub/irs-pdf/p4134.pdf .

Appendices A-1 through A-6 show the lease inclusion amounts that you may need to report if you first leased a passenger automobile (including a truck and van) in 2018 through 2023 for 30 days or more.

If any of these apply to you, use the appendix for the year you first leased the car. (See Leasing a Car in chapter 4.)

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Understanding taxes as a travel nurse

It’s April, which means that tax season is upon us. If you’re like me, filing for taxes has been the last thing on your mind given the impact of the COVID-19 crisis , but fortunately, the IRS has pushed the deadline to file back to July 15. Hopefully this provides some much-needed breathing room for all of you who are focused on other priorities  at the moment. When you are ready to file, this post will offer some useful information, especially for those of you who are new to travel nursing.

Before I get to the advice, I want to note that while I’ll be going over travel nurse tax basics in this article, it’s important to include the disclaimer that I am not a tax professional (just a nurse!).This article is for general educational purposes only. For questions on your unique circumstances, I recommend you reach out to the IRS or a tax professional directly.

One of the most important concepts to familiarize yourself with as a traveler is a tax home. The IRS defines a tax home as “the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home.” For most people, their tax home and their permanent home are the same place, but travelers fall into a small category of people, like professional athletes and truck drivers, who earn money outside of their tax home.

As a travel nurse working outside of your tax home, you are eligible for tax-free stipends, in addition to the hourly wages you earn. It’s also worth really familiarizing yourself with the tax implications of working in a different state, as the wage component of the total compensation package will translate differently as take-home pay from one state to the next.

There are a few different scenarios that will determine where your tax home is, and this guide provides a comprehensive explanation of some of the most common cases. It’s important to note that you run the risk of the IRS considering a new tax home if you spend too much time in any one geographical location. So if you continue to renew a contract in another state, that could eventually become your tax home. To avoid this, a general rule of thumb, though not an explicit rule, is to avoid staying in any one tax region for more than 12 out of every 24 months while ensuring you’re maintaining (or re-assessing) your tax home.

You should also try to return to your permanent residence between contracts, or whenever possible. The IRS isn’t explicit about how much time they expect for you to spend in your permanent residence. Based on a previous ruling, around 30 days a year was found acceptable to maintain a permanent residence.

Tax Advantages 

There are a handful of important tax advantages to be aware of as a travel nurse, primarily in the form of stipends and reimbursements. Reimbursements are business-related expenses that you have paid for out-of-pocket that your employer pays you back for. This is typically done in the form of an expense report. You incur expenses, save all receipts, submit it to your employer, and the money you’re reimbursed is tax-free. Conversely, stipends are lump sums paid to you periodically in order to cover   expenses while on an assignment. For travelers, stipends are tax-free when they are used to cover duplicated expenses, such as lodging and meals, and do not have to be reported as taxable income.

Under the new 2018 tax laws, deductions or write-offs are no longer an option for travel nurses. This means travel nurses can no longer deduct travel-related expenses such as food, mileage, gas, and license fees, and the only way to recuperate this money is either through a stipend from your travel agency or in the form of reimbursements for expenses you actually incurred.

Audits & How To Handle Them

While the chances of any one person being audited are relatively low, it’s always important to be prepared. The best way to do this is to document everything (something that as a nurse, you’re probably already quite good at!). As a traveler, the most important thing to keep track of is proof that you are maintaining a permanent home and duplicating living expenses. Be sure to maintain documents for as many of the following things as possible:

• Mortgage or rent payments
• Gas, electric and cable bills
• Receipts for rental cars, flights, or public transportation to/from assignments
• Mileage logs to and from your assignments
• Copies of all your assignment contracts

To help make this easy, there are several apps and websites for organization in expenses and record keeping. A few that we recommend are Expensify , Genius Scan , Google Drive , and Turbo Tax .

One of the benefits of being a travel nurse is the ability to maximize your income . However, it’s really important to understand the tax implications and filing requirements that come along with it. It can be intimidating at first, but once you get the hang of it, taxes as a traveler can become almost second nature. That said, you should always consult an accountant or other tax professional, especially if it’s your first time filing your taxes as a traveler to be sure that you are doing everything correctly.

Sarah is the Founding Clinician at  Trusted Health , the career platform for the modern nurse. Sarah is a graduate of the University of Pennsylvania’s Nursing School and began her nursing career at UCSF Benioff Children’s Hospital. Prior to moving away from the bedside, she was a Clinical Nurse III and an Evidence Based Practice Fellow, and served on multiple hospital-wide committee boards. At Trusted, she utilizes her clinical insight and passion for innovation to change how nurses manage their careers and solve for inefficiencies within healthcare staffing.

You can connect with Sarah on  Instagram ,  LinkedIn , and  Twitter .

The views and opinions expressed by My Nurse Influencer contributors are those of the author and do not necessarily reflect the opinions or recommendations of the American Nurses Association, the Editorial Advisory Board members, or the Publisher, Editors and staff of American Nurse Journal . These are opinion pieces and are not peer reviewed.

2 Comments . Leave new

First year as a traveler and was consented about the stipend. Thank you and I will have my taxes done by an accountant.

Thanks Sarah this was really beneficial to me as a first time traveler

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Travel Nurse + Allied Health Tax Guide

Navigating the world of taxes when you take your first travel nurse job or allied health assignment can feel like a daunting task. With unique income structures, tax homes, and multi-state tax filing, it's no wonder that tax season can feel overwhelming. 

But don't worry! This comprehensive guide will help you understand the ins and outs of travel nurse taxes, travel nurse stipend rules, travel nurse tax homes and tax deductions, and other tax rules you should be aware of while traveling! Keep in mind that individual circumstances can greatly impact your taxes and stipend eligibility, so be sure to connect with a tax professional for personalized advice!

Let’s get started! 

• Understanding Your Income
• Contract Types
• Qualifying for Stipends
• State Taxes

Lower Taxable Income Considerations

• Audits and Travel Nurse Taxes

Travel Nurse + Allied Health Taxes: Understanding Your Income

Travel nurses and allied health professionals have a unique income structure compared to traditional staff. You can read our blog on how much travel nurses make to learn more details, but we’ll go ahead and provide a quick overview!

Travelers receive a portion of their pay that is taxed and “per diems”, or stipend payments, that are not taxed.  Stipends can be a huge advantage of travel nursing because if the full amount is not used on your travel and living expenses, that leftover ends up as extra cash in your pocket!  You can think of stipends as an allowance for lodging, meals, and incidental expenses while you’re working away from home.  It’s important to remember, though, that you must meet certain criteria to be eligible for stipends and avoid any issues with the IRS! We’ll get into those details soon.

Contract Types: Travel vs Local Contracts

It’s also important to understand that you don’t have to qualify for stipends, or choose to receive stipends, in order to take travel assignments .  There are some circumstances in which someone may prefer for their income to be fully taxed.  This may be because they don’t qualify for stipends due to location or because they’re anticipating a loan, social security, or anything else that is based on taxable income.  In these cases, you can still take a travel assignment, but choose to take a contract where your hourly rate is higher and your pay is fully taxed.  This is referred to as a local contract .  If this is the case for you, be sure to let your Nurse Advocate know! 

Travel Nurse + Allied Health Stipend Rules: Qualifying for Non-Taxable Income

To qualify for tax-free stipend payments, you need to be able to show the IRS that you have a "tax home".  The IRS defines a tax home as “the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home. ”  This may sound a little bit confusing, so let’s break it down.

You can qualify for a tax home in two main ways:

• Your primary area of residence is also your main area of income.   This typically does not apply to travel nurses, but would be applicable for a staff nurse who is working at their local hospital because they are living within the same geographical area where they are making most of their money throughout the year. 
• You visit your primary residence at least once every 12 months and can prove that you are paying for expenses to maintain your primary home.  This is more common for travel nurses and allied health professionals. Generally this is where you have lived and have worked a staff job that has been your “main place of business”.  You should be able to show that you still regularly return to this location and incur expenses such as a rent or mortgage, even while you’re working on a travel assignment.

In general, travel nurses and allied health professionals can take these steps to maintain a tax home: 

• Keep proof of payments that show that you’re incurring expenses at this location.  This may include invoices for a house sitter, mortgage, rent, utilities, etc. 
• Maintain your driver’s license and car registration in your home state. 
• Keep a per-diem job, if possible, in your home state. 
• Return to your home at least once a year for about 30 days. 
• File a residence tax return with your home state. 

It’s important that you’re able to show that you’re duplicating expenses by traveling, meaning you’re paying for the same types of expenses at your tax home and while on assignment in your new location.  This means that if you rent out your home while you’re gone, you cannot classify it as a tax home, because you’re not duplicating your expenses. 

Travel Nurse + Allied Health Tax Rules: State Taxes

It’s important to know that as a travel nurse or allied health professional, you need to file taxes in every state you work in, as well as the state that serves as your permanent tax home.  Keep in mind that working a travel assignment (under 12 months in one location) does not mean that you have moved your primary state of residence in the eyes of the IRS.  Instead, you’re just away from your home temporarily, which is the important distinction noted above in regard to maintaining a tax home. 

In 2022, tax reform laws did away with many deductions at the federal level, but some states do still allow you to deduct job expenses on your state tax return.  It’s a good idea to keep receipts for things like: 

• Housing and lodging expenses while traveling 
• Mileage to and from assignment and to and from work while on assignment
• Uniform and scrub expenses 
• Work-related expenses such as CEU’s or certifications 
• Meals while on assignment 

Keeping record of these expenses can help make tax preparation easier.  It’s a great idea to snap a picture of these on your phone or use a document scanner app to keep these organized as PDF files, ready to submit with your taxes.

One of the appeals of travel nursing is that you have the potential to make a high income, especially through non-taxed stipends if you qualify. However, because the additional stipends you receive as a travel nurse are not taxed, they are not considered income, and will not be reflected in your annual income.

So what does that mean, exactly?  If you’re anticipating that you may need to get a loan or mortgage, or nearing the age when you’ll collect social security, you may want to consider taking a fully-taxed pay package.  All of these items are calculated based on your taxable income. The lower your taxable income, the lower the loan amount you will qualify for.  Similarly, the lower your taxable income, the less you are contributing to Social Security, and the less you’ll be able to collect when you’re ready to retire. 

You still have options in these cases, though.  Some lenders are familiar with working with travel nurse pay structures and can be helpful in planning for your loan or mortgage.  Another option is to declare that you are not eligible for stipends, or do not have a tax home, and receive your full pay as taxable income.  You should speak with your personal tax consultant to see what will be best for your situation. 

Because of the low taxable income you receive in addition to stipends, the travel nursing industry tends to be scrutinized closely by the IRS.  As a travel nurse or allied health professional, you may be more at risk for an audit if you're displaying high expenses and low income. 

We say this not to worry you, only to highlight the importance of working with a trusted tax professional. You can reduce your risk of an audit, or increase your chances of getting through an audit favorably, by always making sure to work with a certified tax professional who is familiar with traveling healthcare professionals. 

How do I receive stipends? 

As long as you indicate that you are eligible for stipends when you sign your contract, you will automatically receive stipends as part of your paycheck each week. They're considered expense reimbursements that cover expenses like meals, housing, and work-related costs, but you do not need to submit receipts in order to receive the payment.  Be sure to read the section above and check in with your tax consultant for eligibility!

Do I need to file taxes in every state I work in?

Yes, you'll likely need to file a non-resident tax return in every state you've worked in within the past year, as well as the state that you consider your permanent tax home.

What happens if I work in a state with no income tax?

If you work in a state with no income tax, you won't owe state income tax for that state. However, you may still owe income tax to your home state, unless your home state also has no income tax.

Am I more likely to get audited as a travel nurse?

The travel nursing industry tends to be scrutinized closely by the IRS, so you may be more at risk for an audit. Working with a certified tax professional can help you navigate this risk.

What happens if I extend in one location for greater than 12 months? 

It's best to consult your tax professional as to how you handle your contract as you approach the one year mark!  The answer to this question will depend on your unique circumstances.  We do offer local (fully taxed) contracts, or some nurses choose to take some time off between contracts, then extend.  Since everyone's situation is different, your tax advisor would be the best person to consult.  Once you do so, let your Nurse Advocate know how we can help! 

Can I handle my taxes myself, or should I hire a professional?

While you can handle your taxes yourself, it's often beneficial to work with a tax professional who is familiar with the unique tax situation of travel nurses. They can help ensure you're meeting all tax obligations and taking advantage of any potential deductions.

Are there specific tax deductions for traveling healthcare professionals?

Travel nurses and allied health pros can take advantage of numerous tax breaks and deductions related to their assignments. Tax deductions reduce your taxable income to help you save money on your tax bill. Read more on this topic in our blog on tax deductions for traveling healthcare professionals .

What records should I keep for tax purposes?

You should keep records of all your income, including your pay stubs and W-2 or 1099 forms, as well as receipts for any tax-deductible expenses. This can include receipts for travel, housing, meals, uniforms, continuing education, and any expenses related to maintaining your tax home. You’ll also want to make sure that you save a copy of each assignment you take, showing your contract dates and pay breakdown. 

Final Thoughts

Stay informed, stay prepared, and you'll be able to focus on what you do best - providing exceptional care to those who need it most. Remember, this guide is meant to provide general information and should not be considered tax advice. Always consult with a tax professional to ensure you're meeting all tax obligations and taking advantage of any potential deductions.

At Trusted Health, we're here to support you every step of the way. From finding the perfect assignment to helping you navigate the complexities of travel nurse taxes, we're committed to making your travel nursing journey as smooth and rewarding as possible.

Sign up with Trusted Health today and join a community of healthcare professionals who are transforming the future of healthcare. Let's navigate this journey together!

Let's start building the life you want.

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Career Advice > Professional Development > Pay and Benefits > Guide to Travel Nurse Taxes: Overview and FAQ

Guide to Travel Nurse Taxes: Overview and FAQ

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Filing season can be a stressful time if you’re not sure how to do your travel nurse taxes. For example, exactly what is a tax home and how can you prove you have one? Which expenses are deductible and which aren’t? The intricacies of tax law might not be a thrilling subject, but it’s worth doing your due diligence so you can file with confidence.

There are a few main reasons that taxes for travel nurses are more complex than taxes for traditional nursing roles:

• Travel nurses may collect income in multiple states.
• Travel nurses often qualify for tax-free stipends, as long as they can show proof of a tax home.
• Travel nurses may have several 1099s and/or W2s to file in a single year.

For these reasons, you may want to consult a tax professional — like a certified public accountant (CPA) — especially if this is your first time filing taxes as a travel nurse. Another benefit of working with a CPA is that they can support you if you get audited. Here’s an overview of the terms you should be aware of and how to file your taxes as a traveler.

Taxable and Non-Taxable Income for Travel Nurses

To file correctly, you’ll need to understand what parts of your travel nursing income are taxed and which aren’t:

• Taxed income includes your paychecks, overtime pay, and bonuses or completion pay. These may be taxed by your agency before you receive them, depending on whether you’re hired as a W2 employee or a 1099 worker .
• Non-taxed stipends can include travel and housing payouts that you receive because you’re living and working away from your tax home. In certain situations, these may not be counted as income, and won’t count towards your Social Security benefit. In those situations, they also wouldn’t go towards your yearly earnings, so they couldn’t help you qualify for a home loan.

Tax Homes for Travel Nurses

What is a tax home ? Travel nursing is dependent on you moving from one place to go work in another place. A tax home is a permanent residence that you maintain while you take on travel assignments in other locations — the IRS calls it your primary place of business . Thus, your travel nurse contracts are considered temporary leaves, and you incur expenses in both locations.

To maintain a tax home, you’ll generally need to:

• Keep records of mortgage or rent payments in your primary residence.
• Keep your voter registration in your home state.
• Maintain a driver’s license and car registration in your home state.
• Return to your tax home at least once a year.
• File a tax return in your home state.
• Not work in a facility away from your tax home for more than a year.

You won’t need to submit all of this proof of a tax home when you file, but you’ll need to have a record in the case of an audit. Also, your agency will likely have you sign an attestation of tax home eligibility when you onboard with them.

Travel Nurse Tax Reimbursements

Why maintain a tax home? Establishing a tax home lets you take advantage of reimbursements for travel , which will be paid back to you by your employer. These are expenses that you’ve incurred because you’re working away from your tax home, so the money you get back for these expenses is tax-free. These are different from stipends for housing or other living expenses, which are paid out according to your contract.

Potential reimbursements include:

• Gas and mileage expenses from traveling to your assignment
• Malpractice insurance
• RN and LPN licensing fees
• Continuing education expenses
• Shipping necessities to your travel assignment

To qualify for deductions, keep records of all of your expenses. Maintain a file or take photos of your receipts, and compile them into categories for tax season. The IRS recommends keeping these records for three years or more .

How to File Taxes as a Travel Nurse

Looking for guidance as tax season approaches? Follow these steps to file your travel nurse taxes with confidence.

• Gather your documents, which can include any W2s or 1099s you’ve received for the previous year, documentation for additional income, such as investment dividends or rent paid to you, and receipts from deductible expenses.
• Understand your tax home, and whether you qualify to have one. Gather proof of mortgage payments and residency documents to prove your home base. If you worked a local travel contract , you likely won’t qualify for travel deductions for that period.
• Determine your taxable and non-taxable income. Your travel stipends may be reported on your W2 or 1099 forms, but be sure you’re reporting both types of income.
• File your federal and state taxes. You’ll need to file a non-resident tax return in each state you’ve worked in outside of your tax home. For federal taxes, you can file for free directly to the IRS . Working with a tax professional may be a good investment, especially if this is your first year traveling or you’re confused about filing requirements.

Tools for Tracking Expenses

You might be missing out on reimbursements and tax benefits if you don’t have an organized system for expenses and receipts. If you’re working with a CPA, ask if they have preferred programs for expense tracking. Here are some of the programs available:

Travel Nurse Taxes FAQ

Do travel nurses pay state taxes .

Yes, travel nurses generally file state taxes in each of the states they worked in during a given tax year. Keep in mind that states have varying tax requirements, so it’s best to check your state’s requirements or connect with a tax professional.

Do travel nurses pay taxes in both states ?

This depends on your tax home and where you work throughout the year. At the end of the year, you’ll file federal taxes, as well as state taxes for your home state and each of the states you worked in that year. But each state’s tax laws are different — some have reciprocity tax laws, which mean that you’ll be taxed in one state only.

Some states, like Alaska and Florida, don’t even collect state income tax. But the majority do, and your filing will depend on your state tax home. If you’re not sure whether you need to file in a state, consulting a tax expert is the best move to gain peace of mind and avoid mistakes.

What is a tax home for travel nurses ?

A travel nurse tax home is a place that serves as your home base, tax-wise. You may qualify for tax-free stipends and reimbursements if you have a main place of business or work and have to travel away from it to complete a nursing assignment.

When do travel nurses pay taxes ?

Travel nurses generally pay taxes with each paycheck from their agency if they are W2 employees. If you’re a 1099 worker or expect to owe money at the end of the year, filing estimated quarterly taxes is the best way to avoid underpayment penalties . Either way, you’ll still need to file your taxes annually.

Can I be audited by the IRS as a travel nurse?

Yes. Travel nurses may be audited because their tax situation is more complicated than that of other professionals. Also, if your agency is audited, you will be as well. Because of this, it’s worth keeping thorough documentation of your tax home, deductible expenses, and tax forms.

Find Your Next Nursing Role

On the hunt for a fresh opportunity? Now that you know how to file travel nurse taxes, you may be ready for something new. Check out the latest travel nurse jobs in a range of specialties.

Legal Disclaimer: This article contains general legal information, but it is not intended to constitute professional legal advice for any particular situation and should not be relied on as professional legal advice. Any references to the law may not be current as laws regularly change through updates in legislation, regulation, and case law at the federal and state level. Nothing in this article should be interpreted as creating an attorney-client relationship. If you have legal questions, you should seek the advice of an attorney licensed to practice in your jurisdiction.

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5 tax deductions for travel nurses you should know.

Travel nursing presents valuable opportunities and challenges while working in and exploring new areas, but navigating your taxes can also present a few challenges. Although travel nurses often qualify for stipends and tax deductions, it takes some understanding and strategizing to maximize your savings and income.

To get the most from your tax filing as a travel nurse, check out FreshBooks’ guide to travel tax deductions and tax home rules as well as tips for filing.

Key Takeaways:

• Travel nurses are eligible for tax deductions, reimbursements, and stipends for expenses necessary for their profession.
• To claim stipends and reimbursements, travel nurses must work outside of their validated tax home and demonstrate eligible expenses.
• Rules for state taxes vary, but you may have to file and pay taxes for multiple states.

Table of Contents :

5 Travel Nurse Tax Deductions

What is a travel nurse tax home, travel nurse tax rules for state taxes, 6 tax tips for travel nurses.

• Frequently Asked Questions

Travel nurses have plenty of stressful responsibilities but can take advantage of a number of handy tax breaks and deductions.

1. Travel Reimbursements

As a travel nurse who leaves their home for temporary nursing contracts, you can claim your related out-of-pocket travel expenses for tax-free reimbursements. This can include transportation, such as planes and car rentals, as well as lodging expenses and meals. If you’re driving, make sure to meticulously keep track of your mileage to get fuel cost reimbursements later on.

2. Professional Expenses

When you file your travel nurse taxes, you can deduct certain professional expenses from your taxable income under the condition that they’re common and necessary for performing your job duties, making these expenses crucial tax deductions for nurses .

These expenses may include:

• Nursing malpractice insurance to protect you from lawsuits
• Membership fees or dues for professional nursing organizations and associations
• Office supplies for work, such as pens, binders, staplers, or anything else you may need
• Costs for nursing uniforms that are required on the job, as well as dry cleaning expenses

3. Medical Supplies and Equipment

Many travel nurses are expected to purchase and supply their own equipment while on the job. If your employer or contract doesn’t reimburse those expenses, you can deduct costs for medical supplies and equipment from your taxes.

Common tax-deductible medical supplies and equipment include:

• Stethoscopes
• Nursing shoes
• Thermometers
• Personal protective equipment
• Medical watches
• Nursing scissors and tape

4. Stipends for Housing, Meals, and Incidentals

Many nurses can take advantage of travel nurse stipends, which is tax-free money meant to cover travel nurse living expenses. These stipends cover living expenses, such as transportation, housing, and meals while working away from your regular tax home or a place of residence. That means that you’re paying housing expenses at your permanent home while also paying expenses wherever your contract is based.

5. Education and Licensing Fees

Education and licensing for travel nurses is an ongoing responsibility, and you can claim these expenses each year on your taxes. You can deduct state-mandated continuing education programs, including related tuition, books, and supplies if they’re required to maintain or upgrade your current nursing qualification.

Other forms of continuing education and professional development may also qualify for tax breaks, such as conferences, in-person or online classes, and self-directed study materials. Travel nurses do some of the toughest work out there, but filing taxes shouldn’t be your most complicated task. Check out the video below to learn how FreshBooks can make tax preparation a stress-free process.

The IRS defines a travel nurse tax home as the general area of your main place of business or employment, regardless of where your permanent home is. Having a primary place of residence in your declared tax home is necessary if you want to take advantage of travel nurse tax deductions.

To qualify for a tax home, you can demonstrate that you visit your primary residence once every 12 months and you maintain its expenses. To provide evidence that you haven’t abandoned your residence in your tax home, you can:

• Keep proof of rent, utility bills, and mortgage payments
• Maintain a driver’s license in your tax home state
• Return for at least 30 days every 12 months

One of the major benefits of working as a travel nurse is the opportunity to spend extended periods living and working away from your home state. However, working in multiple states can mean you’re subject to multiple state tax rules, and you’ll usually have to file a state return for each state you worked in as well as the state of your tax home.

In this case, you’ll usually have to file a non-resident return for the states you work in. Certain states offer residents credits to offset taxes paid to other states.

If you stayed in a state for 183 days, the state considers you a resident, even if you maintain a residence in your home state. There are a few ways to avoid being taxed on your total income across multiple states, such as establishing another domicile or taking advantage of reciprocity agreements between states.

Certain states don’t have an income tax, which helps avoid paying taxes in multiple states if you can establish a nursing contract there. These states include:

• New Hampshire
• South Dakota

1. Hire a Tax Professional

Tax preparation for travel nurses can quickly get complicated, and it’s important to manage your tax obligations to maximize your deductions and earnings. A tax professional who is experienced working with travel nurses can provide authoritative and expert tax advice.

2. Consult Prior to Signing

If you’re working with a tax professional, get their opinion on each contract before you sign. They can help evaluate tax implications and deductions and suggest negotiated contract terms.

3. Understand Your Contract

Read and analyze your contract from top to bottom, and clarify any questions or concerns you may have with your recruiter. Don’t accept verbal promises as confirmed contract agreements—always get them in writing.

4. Maintaining Proper Documentation

The IRS is stringent about claiming tax deductions and stipends, and as such requires proof of duplicated expenses, income, and receipts. Keeping your documents current and organized and help you with tax preparation and audits. A designated bank account for your expenses can make it easier to itemize deductions.

5. Limit Contracts to 12 Months

Don’t work in one location for more than 12 months over a 24-month period, and make sure to return to your tax home once per year for at least 30 days. Make sure your contracts allow you to manage your time in each location to maintain your tax home.

6. State-Specific Considerations

If you’re working in different states, research each tax code and understand how they affect your tax circumstances and obligations.

Make Your Tax Preparation Easier with FreshBooks

Travel nurses can take advantage of tax breaks, stipends, and other benefits that come with a rewarding and exciting career, and getting the most from your tax filing just takes a little strategization and organization.

With FreshBooks accounting software , travel nurses can feel at ease with their tax returns as they do with taking their patients’ vitals. FreshBooks can help you track and categorize all your professional and travel expenses, enabling you to maximize your tax deductions, savings, and income as a travel nurse. Even when tax season seems far away, it’s never too early to get your finances and documents organized. Try FreshBooks free to get started.

FAQs About Tax Deductions for Travel Nurses

Whether you’re new to working as a travel nurse or have already worked in and traveled to many places, tax deductions always prompt a few common questions.

Can a travel nurse write off a camper?

To qualify for reimbursements or stipends for housing, you must have a tax home housing expense and a duplicate expense for where you work. If you live in an RV or camper, you won’t write off the camper but instead the spot you rent for it.

Do travel nurses get audited by the IRS?

The IRS is more likely to audit travel nurses over regular workers. This is largely to verify the amount of reimbursed expenses and stipends that nurses claim in their return. Demonstrating high expenses and low income can prompt an audit.

How do travel nurses reduce their taxes?

Travel nurses can qualify for stipends, which are a type of non-taxable income. Tax deductions and working in a state with no income tax can also help lower your tax bill.

Do travel nurses get W-2s or 1099?

Travel nurses receive a W-2 if they’re an employee of a healthcare staffing company, or they receive a 1099 if they work as an independent contractor.

Do you get taxed twice as a travel nurse?

If you work in multiple states as a travel nurse, your entire income may be subject to multiple state taxes.

Can you write off your car as a travel nurse?

If you have to drive for work, such as to see patients or pick up supplies, you can write off car-related expenses incurred for business purposes.

Are travel nurses eligible for tax credits?

Travel nurses are eligible for certain tax deductions, but they don’t receive tax credits for their profession.

More Useful Resources

Explore our diverse tax deduction guides catering to various niches. From small businesses to real estate agents, find valuable insights to optimize your tax savings.

Sandra Habiger, CPA

About the author

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.

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Travel Nurse Taxes: Preparing for Tax Season

• Travel nurses have unique tax situations that require special consideration.
• Travel nurses are strongly encouraged to use a tax professional with experience.
• There are concrete steps you can take to make tax season easier for yourself as a travel nurse.

Travel nursing is a unique form of employment with many different tax considerations. Travel nurses are paid a premium to be available on short notice and jump into work virtually without orientation.

Traveling reached all-time popularity during the COVID-19 pandemic, with many nurses leaving their staff positions for better pay and more control over their schedule. According to AMN Healthcare, one of America’s largest staffing agencies, 95% of U.S. hospitals reported using travel nurses during the pandemic.

Though those numbers have decreased, travel nursing remains an excellent option for staff nurses looking to increase their income, expand their skill set, or experience a new location. If you’re considering making the switch, know the basics of tax preparation, tips to maximize your deductions, and mistakes to avoid.

Avoid Making These 4 Mistakes When Preparing for Tax Season

As the name implies, one of the biggest draws of travel nursing is the opportunity to work in many locations throughout the country. However, while the big paychecks and exotic travel are huge draws, the complex reality of multistate tax preparation can be daunting. Misinformation is everywhere, and it’s essential that you know your rights and responsibilities to avoid costly tax mistakes.

We spoke with Sarah Gaines, MSN, RNC-OB, an experienced travel nurse and the founder of the Six Figure Travel Nurse LLC, who shared her tax prep tips for travel nurses.

When asked her number one piece of advice for new travelers, Gaines says, “I’ve learned throughout the years never to take tax advice from your recruiter. You may assume they’re the expert — and often, they’re very confident giving that advice. But only take tax advice from tax professionals.”

And, because we aren’t tax professionals, we spoke to financial pros to get their advice. Avoid these four tax mistakes as a travel nurse.

Neglecting to Research

Before you jump into your first travel nursing assignment, it’s crucial that you do your research. The thrill of a new contract can be dizzying, but make sure you’re adequately prepared.

Answer the following questions before you sign on the dotted line:

• What is the cost of living in the area you’re considering?
• Is that cost factored into your nontaxable stipend?
• Do you meet the IRS requirements for duplicating expenses?
• Are you classified as a W2 employee or an independent contractor?

Underestimating Costs

While travel nursing does pay significantly more than most nursing jobs when factoring in your tax-free stipend, it’s not without costs. The cost of moving, travel, and continuing education are all things travel nurses often pay upfront and need to be accounted for in your budget.

Missing State-Specific Requirements

From a tax perspective, the most complex aspect of travel nursing is accounting for the different taxes, rules, and regulations of each state you work in. If you travel in two or more states throughout the year, popular tax preparation software may not be able to meet your needs adequately.

It’s recommended that you reach out to a tax professional who has experience in tax prep for multistate submissions.

Believing the Myths

Travel nursing myths abound. One myth is that you must only live 50 miles from the facility to qualify for the nontaxable living stipend. Gaines says this is false and a mistake that could cost you.

She says, “The IRS doesn’t care that you live 50 miles away. They care that you can prove you’ve duplicated expenses. However, many agencies have rules like this. That’s where the myth came from, a misunderstanding between agency and IRS requirements.”

You must prove you reside in your home state and are duplicating expenses to qualify for that tax-free stipend. This means being able to produce records, such as a mortgage, lease, or utility bill.

Gaines also warns against accepting legal advice from social media influencers or recruiters for the same reason. For example, many recruiters may advise investing in a P.O. Box as a workaround, but this is tax fraud.

6 Tax Prep Tips for Travel Nurses

Now that you know things to avoid during tax preparation, let’s dive into the best tips to keep you organized and maximize your tax benefits.

Use an Experienced Tax Professional

Every financial professional and travel nurse we spoke to strongly recommends using an experienced tax professional, specifically one who has worked with travel nurses, if possible.

While self-service tax software may have been a convenient choice as a staff nurse, travel nurse tax preparation can get complicated quickly, and the stakes are high.

Consult Before Signing

If you choose to use a tax professional to prepare your taxes, send them your contract before signing. Don’t be afraid to ask a tax professional to evaluate your contracts. They may be able to help you negotiate your terms by understanding your deductions and the tax implications of overtime.

Build an Emergency Fund

Because things can change on a dime, it’s vital to have an emergency fund before you start traveling. If possible, maintain savings for 3-6 months’ worth of living expenses. This covers you in case unexpected costs arise or your facility cuts your contract (which happens sometimes).

Know Your Contract

The most critical step in accepting your travel assignment is reading your contract thoroughly before signing. Contact your recruiter first if you find something in your contract that you don’t understand or object to.

But be wary of verbal promises. Make sure you get everything in writing in the contract itself. Legally speaking, if it isn’t written, it isn’t binding.

Document Everything

Just like at your bedside nursing job, documentation is key for tax preparation. The IRS requires proof of duplicated expenses, receipts, and proof of income in case of an audit. You’ll want to keep careful records of all your contracts, income from per diem roles in your home state, and expenses.

William O’Donnell, a certified financial fiduciary and president of Heartland Financial Solutions LLC, recommends using technology to streamline this process.

O’Donnell says, “Try using an expense tracking app that lets you record expenses and records copies of receipts. Having good records is crucial to maximizing your tax deductions.”

Use a Separate Account

A good accounting tip to keep you organized throughout the year and minimize headaches during tax season is to open a separate account where all your travel nursing transactions occur.

Maintaining separate bank accounts and records will make it much easier to itemize deductions and spot potential issues for your tax preparer.

Travel Nurse Tax Write-Offs

There are many expenses that travel nurses can write off, but make sure you don’t double-dip. An example of double-dipping would be writing off a cardiopulmonary resuscitation course when you’ve already been reimbursed for that by your agency.

Each tax write-off is different; some things require calculations. Again, consult a tax professional if you need more clarification.

Here is a noncomprehensive list of travel nursing tax write-offs:

• Continuing education for nurses
• Car expenses, such as repairs or registration
• Nursing uniforms
• Travel expenses, including tolls
• Malpractice insurance for nurses

Consult a tax professional if possible and keep meticulous records of all expenses and income to avoid common tax pitfalls. Now that you know these mistakes to avoid and tips to use, you’re ready for tax season as a travel nurse.

Meet Our Contributors

Sarah Gaines, MSN, RNC-OB

Sarah Gaines is a travel nurse expert, online educator, and mentor helping nurses seek out, secure, and leverage premium contracts so that they can escape bedside burnout, accelerate their career, and retire early. Over the years, she’s cultivated a growing community that connects thousands of Six Figure Travel Nurses from across the globe! Gaines uses the power of social media to share insightful travel nurse tips, a behind-the-scenes look into her life as a full-time digital nomad, and the wisdom she’s gained as a retired RN turned entrepreneur who continues to build wealth while traveling the world.

William ODonnell, CFF

William O’Donnell is a financial advisor and certified financial fiduciary with a master’s degree in healthcare administration. He is the president and wealth manager at Heartland Financial Solutions . He has been serving financial advisory clients for more than 30 years.

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Disclaimer: This article is for informational purposes only and should not be taken as professional tax advice. Always consult your own CPA or tax preparer for tax advice. 

Tax season is in full swing, and although it’s a time of year that many people dread, the truth is, you don’t have to be afraid of filing your tax return. If you take time to prepare your paperwork ahead of time, work with a Certified Public Accountant (CPA) that you can trust and have a good line of communication with, and stay updated with tax tips for nurses, you may just find yourself pleasantly surprised come tax-time. 

>> Click here to see available high-paying travel nurse opportunities!

So while you deliberate how you’re going to spend that tax refund, you can brush up on some of the tax tips that nurses and travel nurses need to know about.

One of the most important things you can do is find a professional CPA or tax preparation professional who is familiar with working with Registered Nurses. It can be helpful to ask your coworkers for recommendations or do a quick online search for CPAs who specialize in working with nurses. 

1.) Save all documentation

If you are a travel nurse, who is taxed as an independent contractor (1099), the tax rules will be different than nurses who are W-2 employees. Not all travel nurses are independent contractors. But, if you are, you should keep receipts of everything you pay for as a travel nurse, including: 

• Internet and phone fees
• Rent (or your housing stipend costs)
• Travel, including mileage and vehicle upkeep expenses

“Documentation is KEY to start at the beginning of the year for travel nurses or nurse contractors,” says Tracie Jackson RN, BSN, a tax professional with Tax Savvy Nurse . “This will help make sure you can get all deductions owed to you. Keep records in a binder or expense tracking app such as all travel contracts, distance to travel to and from assignments, meal receipts, etc.” 

2.) Report all income 

If you happen to do any side work as a nurse (such as writing or consulting,) always remember, even if a company or client that you have worked with fails to send you a 1099 or W2, it is still your duty to report that income and pay any applicable taxes on it, so keep careful records of all income you receive, no matter how small it is. 

3.) Max out retirement contributions

 “If you are a nurse with little to no deductions, consider maxing out contribution to pre-taxed retirement accounts such as an IRA,” she suggests. 

4.) Start a small business

“If you're able to, start a small business so you can not only generate additional income, but in many cases can allow them to start taking advantage of tax deductions as a business owner rather than just an employee,” she says. “ I help nurses do this every day.”

5.) Consider if a 1099 can give you more deductions

“Sometimes nurses who are working in home health, contractors, or who work from home can ask if they can be paid via a 1099 so they can be allowed more tax deductions,” Jackson explains. 

However, she warns that you have to be cautious with this strategy, because choosing to be paid via a 1099 means that you are also responsible for sending your tax payments in to prevent from having a big tax bill at the end of year. “You will want a tax professional to help you execute this plan,” she says. 

6.) Beef up agency expenses

“Travelers may be able to ask for higher reimbursement for travel and other associated expenses from their agency,” she says. 

You’ll want to speak with your tax professional to determine if it’s better for you to take a standard deduction or to itemize your expenses. If you do itemize, you can usually write off any expenses related to your job as a nurse, such as:

• Uniforms, including scrubs, medical shoes, and scrub coats
• Equipment, such as your stethoscope, pen lights, scissors, etc.
• Licensing fees, i.e. anything you pay to keep your nursing license, or any state registrations
• Continuing education costs, including the fees, meals, and travel to conferences or CE courses
• Expenses related to staying educated in your profession, such as journal access fees, subscriptions to publications in your field, and professional organization membership dues

As a nursing student, how your taxes will be done depends on your filing status and if you are still listed as a dependent or if you’re filing independently of your parents. “Communicate with your parent(s) before you file if you are in college to see if they will be claiming you,” says Jackson. 

Can your parents claim you as a dependent? 

Your parents can claim you as a dependent if you meet the following criteria, 

• You are under the age of 24
• You are a full-time student
• Your parents support you 

Tax credits for students

If your parents do not claim you as a dependent, however, you can  deduct the typical student credits,

• American Opportunity Credit
• Lifetime Learning Credit
• Tuition and fees and student loan Interest 

Most of the time, you can only choose one type of tax credit for your education, so you should work with a tax professional who can make sure that you are getting the maximum amount for your own filing status. Jackson adds that if your parents are going to claim you, they will need your 1098-T form when you receive it at the end of year.  

It’s important to note that there is also a new tax and education deduction that was brought back for 2020. If you qualify for the American Opportunity Tax Credit or the Lifetime Learning Credit, you’ll probably get more out of claiming those, but if not, you might benefit from claiming the tax and education deduction. 

With this deduction, you may be eligible to deduct up to $2,000 of tuition and fees if your income is under $80,000. There is a higher income limit on this particular deduction, which is why the other education credits are usually prefered, but it does have the benefit of not requiring itemization. 

Chaunie Brusie , BSN, RN is a nurse-turned-writer with experience in critical care, long-term care, and labor and delivery. Her work has appeared everywhere from Glamor to The New York Times to The Washington Post. Chaunie lives with her husband and five kids in the middle of a hay field in Michigan and you can find more of her work here . 

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Answers to the Most Asked Travel Nurse Tax Questions

• June 14, 2022

Navigating taxes can be slightly different for travel nurses compared to traditional nursing staff. In the travel nursing industry, travelers are paid differently than staff nurses because they receive both a taxed base hourly pay and additional “payments” that are non-taxed to make up their “total” pay. When you agree to commit to a travel nurse position, you’ll receive a pay package, which will detail all of the different aspects of what will make up your actual compensation.

To ensure you receive the most out of travel nursing and combat a combination of anxiety, confusion, and any lack of resources, we’ll cover a few tax topics to answer the questions you may have below. Taxes are tricky enough to maneuver through, especially travel nurse state taxes , so we’re here to make it easier. If you still have questions about where to start, remember that you can always talk to a tax professional.

Tax Homes vs. Permanent Homes

They say home is where the heart is, but the IRS needs a little more than that. To benefit from tax-free income from your travel nurse assignments , you must establish a tax home, which usually differs from your permanent residence. For most people, their tax home and permanent home are the same places, but travel nurses fall into a small category, like professional athletes and truck drivers, who earn money outside their homes.

A general rule for travel nurses is not to stay at one travel nurse assignment for more than 12 months to maintain eligibility for tax-free stipends. To ensure you qualify for a tax home in the eyes of the IRS:

• Keep proof of any payments you make to show that someone else maintains your primary residence. (I.e., receipts for a house sitter, mortgage, rent, utilities, or home maintenance expenses).
• Maintain your driver’s license and voter registration in your home state.
• Keep your car registered in your home state.
• Return to your permanent home between every contract.
• File a Residence Tax Return with your home state.

Tax Advantages

There are a handful of significant tax advantages to be aware of as a travel nurse, primarily stipends and reimbursements.

Reimbursements are business-related expenses that you have paid for out-of-pocket that your employer pays you back for. You incur expenses, save all receipts, submit them to your employer, and the money you’re reimbursed is tax-free. This is typically done in the form of an expense report. Conversely, stipends are fixed amounts of money (lump sums) paid periodically to cover expenses. For travel nurses, stipends are tax-free when they are used to cover duplicated costs. They do not have to be reported as taxable income if you can prove this duplication of living expenses.

Under the new 2018 tax laws, travel nurse tax deductions or write-offs are no longer an option. This means travel nurses can no longer deduct travel-related expenses—food, mileage, gas, and license fees—and the only way to recover these funds is either through a stipend from your travel nurse agency or in the form of reimbursements for expenses you actually sustained.

While the chances of any one person being audited are relatively low, it’s always important to be prepared and have documentation for everything. In travel nursing, it is essential to keep a paper trail of permanent home maintenance and duplicating living expenses—documentation is everything. If you claim shared expenses, always have proof of the gas, electric, cable bills, etc., under your name.

As a travel nurse, you may be more at risk for an audit if you display high expenses and low income. For instance, if your mortgage is $10,000 a month, but your overall income with your base pay as a travel nurse is only $20,000 annually, the IRS may have a few questions about how you’re actually affording your lifestyle. To get through or avoid an audit altogether, find a certified tax professional familiar with traveling healthcare professionals and do not solely rely on your travel nurse advocate or travel nursing agency for tax advice.

One of the benefits of being a travel nurse is maximizing your income. It can be intimidating at first, but travel nurse taxes can almost become second nature once you get the hang of it. If you have more questions about the travel nursing industry, take a look at our blog . If you’re ready to begin your journey check out our job board for the latest travel nurse jobs !

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A Travel Nurse's Guide to Filing Taxes: Tips and Tricks

Jul 14, 2023

As a travel nurse, you have very different taxes than a stationary nurse, and the filing process can be complicated. You might not know where to start working in different areas with varying amounts of taxes and rules.

So, we created a travel nurse’s guide to filing taxes with helpful tips that can make the process much easier. 

This guide will cover per diems, state taxes, the importance of your address, and more. After reading this, you will feel more prepared to file your taxes as a traveling nurse.

Key Takeaways

As a travel nurse, you can qualify for non-taxable payments that you will receive from your agency to cover additional living expenses you incur while working. To claim them, you must prove you are paying duplicate expenses and claim a legal “tax home.”

File a tax return for all the different states you worked in and follow each state’s specified rules and guidelines. When using tax software, read all instructions carefully to ensure you correctly fill out your multi-state return.

You can consult with a tax advisor for professional help along the tax process. A tax advisor can help you navigate the complicated process and help you in gathering all the necessary information for your returns. 

1. Qualify For All Non-Taxed Incomes

As a travel nurse, you may spend a lot on hotels and food when on the job. If you are also paying for your original house, you end up paying double the living expenses. To help you with the extra cost of these duplicated expenses, most agencies will offer per diems.

Per diems are non-taxable payments that act as a bonus to your base pay. You want to qualify for as many payments as possible to get the most back from your extra expenses. The qualifications are as follows:

You can prove you are duplicating your expenses at home and work.

You can prove you have a tax home. 

The IRS classifies a tax home as “the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home.” To qualify your home as a tax home, you must prove you are still paying for its maintenance and visit it at least once a year. 

Keep necessary receipts that can show you still pay the expenses of the home. You should also register your license, car, and voter registration in the state the home is in. 

If you meet both requirements, you can qualify for per diem payments from your agency. These non-taxable payments will help you cover the double living expenses you face as a traveling nurse. 

2. Pay Your State Taxes

As a traveling nurse, you may work in multiple states. In this case, you must file a non-resident tax return in every state you have worked in. In addition, to claim a tax home, you should file a resident tax return in the state of your permanent home. 

The national tax deadline is April 15th, so you should plan to complete your taxes before then. 

However, you may be able to receive an extension, given the numerous returns you must file as a traveling nurse. Each state will have different rules for its returns, so it is essential to know the exact amounts and percentages each state has in place for each return. 

3. Writeoff Expenses

As a travel nurse, you may be eligible for write-off expenses that you can deduct from your taxable income. Your specific eligibility will depend on the type of employment you have with your agency, but travel nurses can typically write off the following:

Car mileage

Rental Cars

Uniforms and equipment

Continuing education

Licensing fees

Travel expenses

A portion of meal expenses

Retirement/insurance contributions

Cost of Internet/phone providers

4. Be Careful With Your Tax Software

Even when using the best software, filing your tax return will be more complicated if you have performed work in multiple states. There are complexities that you must understand and input correctly when filling out your return. 

Be sure to read all instructions carefully and ensure you input the correct information for each state. A multi-state tax return will also have certain specifications that you must provide. 

5. Keep Your Address The Same

If you file tax returns for multiple states, keep your permanent address the same and ensure your temporary and permanent addresses are distinguishable. It can be helpful to think of your travel as a vacation. 

You always keep your permanent address on vacation. A consistent, permanent address is essential to claim a tax home and qualify for per diems. 

6. Keep All Documents Stored In One Place

It is crucial to maintain all of your documents in a safe place . With these documents, you can clearly record your travel and any expenses incurred. A great way to keep all your files in one place is through digital software, like Trustworthy , an operating system where you can store and manage your important tax documents. 

The most important documents to keep for a travel nurse are: 

All contracts

A record of all mileage from traveling

Most receipts (except food, groceries, and gas) 

These documents should be kept for six years to be prepared for an IRS tax audit if it ever comes.

7. Consult A Tax Advisor

We highly recommend consulting a tax advisor to any traveling nurse. Tax advisors can help you clarify your contracts and can contact necessary agencies or offices to gather information. If the process seems too complicated, a tax advisor can help you through the process and ensure you complete everything correctly. 

Wealth advisors can also help you plan your finances and set aside money for your taxes and other savings. 

8. Be Prepared For An Audit

As a travel nurse, you are more likely to claim high expenses and a low income on your return. The IRS might be suspicious about how you afford the expenses and request an audit. 

To prepare for an audit, we recommend maintaining close records of your contracts and expenses. Enlisting the help of a tax advisor can also help ensure you pass the audit legally and that your taxes are filed correctly.

Frequently Asked Questions

How much do travel nurses get taxed.

Travel nurses' income gets taxed at the same rate as any other profession. Due to the nature of their work, travel nurses end up paying much higher expenses for essentially two lives. 

Your agency will most likely refund the money spent on the extra costs of traveling through non-taxable per diems, however. 

Do travel nurses get taxed a lot?

Travel nurses get taxed only for their base income. The additional expenses they incur through traveling are partially funded back to them by their agency. These payments are not taxable or considered part of their tax return. 

Do travel nurses get double-taxed?

While travel nurses pay duplicate expenses for their life at home and traveling, they are only taxed for their life at home. The expenses they incur while traveling are not considered in calculating their taxes. 

Can I write off my car as a travel nurse?

As a travel nurse, you likely cannot write off your car itself as a deductible. However, you can write off your mileage, insurance, or gas expenses and deduct them from your taxable income. For this reason, keeping a close record of these additional expenses while traveling is essential. 

What if I don't have a tax home as a travel nurse?

If you do not have a legally recognized tax home as a travel nurse, you cannot receive any tax deductions specific to travel nurses. You also will not be able to receive any per diems or non-taxable payments from your agency. All expenses incurred while traveling may be taxable. 

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Travel nurse taxes: 9 things to know before filing this year.

Travel nurse taxes can be especially tricky. You’re often filing in multiple states and dealing with uncommon concepts like per diems. To help you navigate your travel nurse taxes this year, we spoke with Joseph Smith, tax guru and president of TravelTax . The following nine tips can make filing your travel nurse taxes easier, save you money, and help you avoid future tax liability.

1. Make sure you qualify for all non-taxed per diems

Everyone has to have somewhere to live and something to eat, but since that financial burden may be double for traveling workers, the cost is alleviated through per diems paid to you by your agency on a tax-free basis. However, you can only take advantage of this benefit if you can prove you are duplicating expenses at home and at your work assignment or have a regular job that you return to annually in the same area. Be sure you qualify for tax-free per diems before accepting them as part of your compensation package.

2. Be careful when using tax software

If you’re filing travel nurse taxes in two or more states, everything gets more complicated. Smith warns, “Even with a professional-level software, for multi-state taxes there are overrides that have to be done and you have to know where those overrides are.” This means it’s easy to misread instructions and make mistakes when using programs like TurboTax for filing in multiple states. “Tax software is only as good as the person inputting the numbers,” he says.

3. Keep your contracts (and read them)

Simply enough, Smith says he wishes more travelers would keep their work contracts and read them, because that’s where to find so many answers for your taxes. “When you’ve got a question about how you’re paid, it’s right there,” he says. “If it’s not being done as written then you want to say something, because it has tax implications as well as affecting your paycheck.”

4. Don’t change your address when you travel

If you’ll be filing taxes in multiple states, things can get messy if one of your temporary residences looks like your permanent residence. To keep everything straight, Smith recommends thinking of your work assignments as vacations: “You are not moving, you’re just on a vacation. You don’t change your address when you’re on a vacation — even though it’s a working vacation.”

5. Know what defines a tax home

To qualify for tax-free per diems and deductions, your tax home must meet two out of three of these qualifications:

• Have regular employment in that area
• Have a permanent residence in that area that you are financially responsible for the upkeep of when you’re away
• Plan to return and spend at least 30 days there per year

6. Don’t be surprised if a state wants more information

“States can track things pretty well now, and they’re out for revenue,” says Smith. This means if you’re getting a notice, the government may ask questions to verify your permanent residence or tax home.

7. Keep all your documents together

Smith says a common mistake he finds with travel nurses is that they don’t save their documents. If you’re wondering which documents to keep track of, here’s a handy list. (Note: these should be saved for six years in case of an IRS audit)

• Copies of all contracts
• Mileage log
• Receipts (except grocery/food receipts and gas receipts)

8. Subscribe to a tax newsletter

Smith says that tax laws are always changing, so it’s important to keep up-to-date on tax reforms. For example, the tax regulations on remote work (such as working for a telehealth provider) are evolving and may add complexity to state taxes. He recommends subscribing to a newsletter or the TravelTax blog to stay up to date on the latest tax developments that might affect you.

9. Consider using a tax advisor

A tax advisor can be helpful in filing travel nurse taxes with everything from understanding the original contract to calling payroll offices and agencies. Smith says, “If there’s a problem, I get results whereas if people try to call themselves, they won’t get results.” So if you feel overwhelmed by your taxes, don’t forget that there are professionals who can help.

Following these nine tips will help you in your tax preparation, however, this is not an exhaustive list and every tax situation is unique. So be sure to consult with a tax professional for answers to specific questions about your travel nurse taxes.

RNnetwork creates custom pay packages for every travel nurse job . Give us a call at 800.866.0407 to discuss optimizing your pay to better suit your individual circumstances.

The information contained herein is general in nature and is subject to change. Tax information contained in this document is not intended to be used, and cannot be used, by any person as a basis for avoiding tax penalties that may be imposed by the IRS or any state. We recommend each taxpayer seek advice based on their circumstances from an independent tax advisor.

Last updated 01/31/22

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About the author

Melinda Fox

Melinda Fox is a writer and content strategist who’s created content for clients like NBC and the United Nations. When she’s not getting caught up on her personal journal writing, Melinda loves listening to podcasts and trying new things. She'd love to hear from you at melindafox.com.

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• Jun 30, 2021

Travel Nurse Tax-Free Stipend and the IRS One-Year Rule

Updated: Nov 13, 2021

"I have been working as a travel AND staff nurse in the same metropolitan area for almost a year. Even though I have taken over 2 months of work off in between travel contracts my company is saying my stipends will now be taxed due to staying in the same area for so long. Can anyone clarify this? (My taxable home is in the same area however I am duplicating expenses while traveling)"

Travel nurses know that the best part of being a travel nurse is receiving a tax-free stipend as part of your compensation. Depending on how you structure your living expenses, it can really make the difference with the amount of income you get to take home.

Unfortunately, maintaining a qualified status to receive the stipend is riddled with unofficial rules of thumbs and just some plain old bad peer-to-peer advice from other travel nurses.

But failing to understand how to not only qualify, but maintain your qualification for the tax-free stipend, can land you in some hot water with the IRS.

You might hear other nurses say, “oh don’t worry about it”. “I’ve been doing it like this and I haven’t been audited yet” or “I’ll deal with it when it’s a problem”.

Here’s the truth.

When you’re standing in front of “the man” because you didn’t pay attention, none of these other nurses will be standing there with you or will be there to help you if things go south. Get the facts and follow the law.

As a refresher, let’s establish what a tax home is.

The IRS 2020 Publication 463 states your Tax Home as generally being “your regular place of business or post of duty, regardless of where you maintain your family home. It includes the entire city or general area in which your business or work is located.”

As travel nurse, it can be difficult to determine what your “main place of duty” is, especially if you’ve had 3-4 assignments in any given year. For reasons just like this, the IRS created a three-part test to determine tax home status:

You perform part of your business in the area of your main home and use that home for lodging while doing business in the area.

You have living expenses at your main home that you duplicate because your business requires you to be away from that home.

You haven’t abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging.

If you satisfy two out of three items in the test, you generally will be eligible to receive a tax-free stipend as part of your travel assignment compensation.

Here’s the kicker.

After establishing eligibility for your tax-free stipend, you can subsequently lose that eligibility if you no longer can show that you have a “main place of duty” at your claimed tax home location.

The IRS makes it clear that a work assignment that lasts more than 1 year is no longer considered “temporary”, even if you “take time off”.

It does not matter if the months are sequential or not.

Think about it this way. If you’ve worked a travel assignment for 12 months and then take two months off, and then return to the location of your previous assignment for another 13 weeks. That is still a full 15 months of work at that location. In that case, it is apparent that your main place of duty is the location of that travel assignment.

You would not be eligible for the tax-free stipend.

I worked with a nurse with this same question. She came to me because she was confused about all the tax-home rules, as well as concerned that her fellow traveler’s advice was less than accurate.

After meeting with her, I helped her not only straighten out her taxes, but also helped her create a comprehensive action plan for her finances that included, retirement planning and investment management.

Now, she not only knows that she’s on the right side of the IRS, she’s also confident that her travel pay will go to work for her and create the life she wants to live.

Everyday we’re talking to nurses like yourself who are tired of missing out on the opportunity to transform their financial lives. Schedule your complimentary Explore call today.

Marlon is a licensed financial advisor at weshfinancial.com and is known as " The Travel Nurse Financial Advisor ". Marlon specializes in helping travel nurses crush their financial goals by helping them optimize taxes, accelerate retirement savings, and maximize their investments.

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This content has been reviewed by an Enrolled Agent (EA) with the IRS — the highest credential awarded by the agency. Enrolled Agents are empowered to represent all taxpayers before the IRS, on all types of tax-related matters. Accountants who earn this certification have passed a comprehensive three-part exam on individual and business tax returns. To maintain EA status, they must stay up to date in the field by completing 72 hours of continuing education every three years.

Your NAICS business code is a six-digit string of numbers that shows the type of work your business does. (NAICS stands for North American Industry Classification System.) When you do your taxes, you’ll enter it in Box B of your Schedule C.

We get it, nurses have enough on their plate — especially these days. After spending all day in an understaffed health care facility, who has time to think about something like taxes? For travel nurses, especially, the stress is even higher.

Luckily, it’s easier than ever to find work on platforms like Nursa , CareRev , and ShiftKey — and to claim all the tax breaks you're due as a travel nurse, because we've gathered them together for you. So get on these savings, STAT, before you overpay on your next tax bill!

Schedule C, Box 18

Deduct anything you buy for your office, like pens, binders, folders, printer ink, or a whiteboard.

Schedule C, Box 27a

Any uniforms you're required to wear on the job are considered tax-deductible.

Schedule C, Box 15

These policies protect you from malpractice lawsuits — you need them for work. That makes them tax-deductible.

Subscribe to journals like The International Journal of Nursing Studies or The Journal of American Nursing? Consider that a work-related education write-off.

Track and claim every eligible deduction with Keeper

Keeper is the top-rated all-in-one business expense tracker, tax filing service, and personal accountant.

Don't forget to write off car-related expenses if you drive for work. This might include driving to patient meetings, local conferences, or even to pick up medical or office supplies.

Parking for a meeting downtown, or any other work trip, is tax-deductible!

A toll while driving to or from a work destination is tax-deductible!

Schedule C, Box 13

If you buy a new car, you can write off part of the cost every year for five years.

Schedule C, Box 22

Flashlights, tire iron, duct tape, and other tools you may need in your vehicle are deductible.

Car insurance monthly fees, registration, even roadside assistance are partially deductible.

Schedule C, Box 9

Oil changes, repairs, and regular checkups are all tax-deductible if you drive for work.

Grabbing food or drinks with mentors, patients, or fellow healthcare workers to talk about work is considered a business meal and can be written off your taxes.

What's more, you don't need to hold on to your physical receipts to claim your business meal expenses (unless you spent over $75 in cash). For the IRS, bank and credit card statements are good enough!

Schedule C, Box 24b

If you discuss work with a coworker, mentor, client, or prospective client, it's a write-off!

As a travel nurse, you can claim all the out-of-pocket expenses you incur during short-term contracts, as long as you're there for less than a year and you maintain a tax home.

Your tax home is essentially a regular base of operations at your permanent address, where you're still paying rent or a mortgage — even if you're often working in a totally different state. You keep most of your stuff there, and your partner or family may still live there. It's also where you're registered to vote, and where your tax documents get sent.

If you have a tax home, you can write off any unreimbursed costs you're forced to pay when you're on a contract — including that furnished apartment you rent. (Again, that's assuming you don't get a stipend or reimbursement.)

You can also write off travel expenses if you head to another city where you aren't even working for a nursing conference or workshop. That's also considered business travel, so you can claim expenses like your hotel and lodging.

Schedule C, Box 24a

Planes, trains, and car rentals are all work-related travel costs that can be written off.

When you travel for work, lodging expenses such as hotel rooms or Airbnb are write offs.

When you're traveling for work, all meals are tax-deductible. Even takeout!

This one's less common for travel nurses. But say you accept a contract in your home city. If you regularly do some of your work from a dedicated workstation in your home, you'll eligible to write off home office expenses for the months you live in your home city.

A desk, chairs, lamps, and other home office necessities are all tax write-offs.

Schedule C, Box 21

You can write off up to $2,500 for individual repairs to your property.

Gotta keep the lights on in your home office! A portion of your electricity bill counts.

Whether it's rental or homeowners insurance, you can write off a portion through your home office deduction.

It'd be hard to work in an office without running water, huh? You water bill counts.

Schedule C, Box 25

Your Comcast bill is a tax write-off. You need internet to do your job!

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Taxes for Travel Nurses

At Universal Tax Professionals, we specialize in taxes for travel nurses and other traveling  medical professionals . Traveling can cause tricky federal and state tax issues and our goal is to make sure you pay as little federal and state taxes as possible. We offer a personalized approach that maximizes legitimate deductions and avoids ones that you’re not legally entitled to. The result is accurate returns, maximum saving and peace of mind.

Working as a travel nurse is an exciting possibility for nurses, offering the prospect of traveling and working wherever they wish, while receiving  tax-free stipends  to cover their expenses of travel, meals and housing.

But it’s crucial for nurses considering travel nursing to understand that certain IRS tax rules must be followed, in order to qualify for tax-free treatment of their travel, meals and housing expenses. Adding to the complexity when working in different states is the tangled web of state tax rules: with the exception of 9 states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming), each state taxes wages according to its own set of tax rules, and as a travel nurse, you may need to file a nonresident state tax return in each state you work in, as well as in your home state.

How Travel Nurses Are Typically Paid

Travel nurse income is usually structured as a pay package by the travel nursing agency, combining a modest base pay, paid at an hourly rate, together with stipend payments for travel, housing, meals and other essential work expenses. It’s important to note that stipend payments are essentially expense reimbursements for the travel and living expenses necessarily incurred while working as a travel nurse, which is why they aren’t considered income and are non-taxable – provided that the IRS rules for tax-free treatment (which we will get to in the next section) are carefully followed.

Travel Nurses Must Have a “Tax Home” To Qualify for Tax-Free Treatment by the IRS

For a travel nurse’s stipends reimbursing travel and living expenses to qualify as tax-free under IRS rules, the nurse must establish what is known as a “tax home” – which is generally the city or area in which a taxpayer’s main place of work or business is located and where he or she earns the most income.  

A tax home is not always the same as a taxpayer’s legal residence – the key issue is the location where most work is performed.  For a travel nurse who is traveling and working far from home for long periods of time, being able to maintain a tax home while traveling and working elsewhere is critically important, to be able to qualify for IRS tax-free treatment of stipends. If a taxpayer does not have a main place of work or business – the situation a travel nurse would find herself or himself in, due to extensive travel for work purposes – then under IRS rules, the tax home is then where the taxpayer maintains an abode or residence.  But a taxpayer has to proactively maintain the tax home in this scenario – ties have to be maintained while away from home for an extended period, it cannot just be abandoned.  Also, the taxpayer must incur duplicate living costs while working away from his or her main tax home – paying for a hotel or renting some other type of lodging for an extended period, and for meals, transportation and other work expenses incurred while on a work assignment away from home.

Table of Contents

3 things a travel nurse must do to maintain a tax home and keep “away from home” expenses tax-free, 1. be sure to visit your home state while you travel, and keep your ties there strong.

Based on IRS guidelines, best practice for taxpayers temporarily away from home,  such as travel nurses , is to return home for at 30 days during the year – and it’s even better if the 30 days is spread out over several trips home, rather than returning home for the year-end holidays.

It’s also very important to be able for a taxpayer to demonstrate that strong ties have been maintained with his or her tax home while away from home temporarily.  Ties to a tax home can include:

• Continuing to make payments for a main home while away – mortgage payments, rent, utilities, home insurance, etc.
• Paying another person to watch the home while the taxpayer is away
• Maintaining and keeping current a driver’s license, auto registration, auto insurance and voter’s card in the taxpayer’s home state
• Using credit cards when returning to the home state for a visit
• Filing as a resident taxpayer in the home state

2. Travel Far Enough Away from Home So That You Are Duplicating Living Expenses

While there is no strict mileage requirement, in terms of far away the temporary work location is from a travel nurse’s main residence, it must be far enough away that duplicate expenses would need to be incurred, paying for a hotel or short-term rental to sleep in, and paying for meals – in other words, far enough away from home that it would be completely unreasonable, if not impossible, to commute on a daily basis from the nurse’s main home to the new work location.

3. Don’t Take a Work Assignment in One Place for More Than a Year

Travel nurses should take care not to stay working away from home in one place for too long – if a taxpayer’s principal place of work or business remains in a single location for longer than 1 year, the IRS would consider it to be the taxpayer’s new tax home.  Best practice for a travel nurse would be to return to his or her main home well before the 1-year mark in the other work location is hit, before heading off to another work location – in addition to ensuring that a new tax home is not established, it reinforces, in the eyes of the IRS, that the travel nurse is keeping up strong ties with the nurse’s home state.

State Taxes for Travel Nurses: Resident State and Non-Resident States

Travel nurses should bear in mind that they must file  non-resident tax returns  in every state they have worked in, as their wage income will be subject to tax in every state in which they perform services (with the exception of the states noted above, with no income tax on wage income).  As for the state in which they maintain a home residence, travel nurses will continue to be tax residents of their home states, responsible for paying state income tax there on their income earned everywhere.

Travel Nurses Working in Multiple States - Don’t Forget to Claim Tax Credits on Your Home State Tax Return, to Avoid Getting Taxed Twice!

Usually, a taxpayer resident in one state who works in another state is taxed on that wage income twice – once by his or her resident state in which the main home is located, and a second time by the state in which the services were performed.  Travel nurses should ensure that they take available tax credits on their resident state tax return against their home state income, equal to the tax they paid in the other state, to avoid this potential double taxation situation.

Working as a Travel Nurse Employee? Make Sure Your Employer Reimburses Your Business Expenses, If Possible

Travel nurses who are employees should be aware that since the  Tax Cuts and Jobs Act of 2017  was enacted, employees’ unreimbursed business expenses can no longer be deducted as  itemized deductions  on Schedule A. Employer reimbursement of a travel nurse’s travel, housing, meal and other work-related expenses via per diem allowance or other type of stipend will prevent the nurse from being out of pocket for any expenses incurred while traveling – with the added benefit of being tax-free, as long as the “away from home” tax rules outlined above are followed.

Keep In Mind: Accurate Record-Keeping Is Critical

In case of an IRS (or state) audit, a travel nurse should be sure to keep accurate and complete records of all of their travel, housing, meals and work-related expenses while working on extended periods away from home, to be able to substantiate that the per diem allowances or other stipends paid to them qualified as tax-free.

Both paper and digital receipts should be retained for:

• Rental housing, hotel or other lodging expenses incurred while traveling
• Utilities paid for rental housing or other lodging
• Airfare and car rental expenses (if applicable)
• Auto expenses (gas, tolls, parking, etc.)
• Meals incurred while traveling
• Work-related expenses (including professional certifications, continuing education courses, nurse scrubs or uniforms)

Another useful tool for travel nurses to substantiate their business travel is to maintain mileage logs for their travel by auto.

Do you have questions about taxes for travel nurses? We’re here to help.  Contact us today  and one of our tax professionals will reach out at their earliest convenience.

1 (800) 321-8190 1 (216) 430-0338

Universaltaxprofessionals, [email protected].

8584 Washington St #2096 Chagrin Falls, OH 44023-5369

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Travel Nursing Pay – The 50 Mile Myth for Tax Free Stipends

The “50 Mile Rule” is one of the most common fallacies pertaining to tax-free reimbursements for travel nurses. It’s prominent among both travel nurses and travel nursing recruiters . Purveyors of this “rule” claim that it allows travel nurses to accept tax-free reimbursements as long as the travel assignment is 50 miles or more from the travel nurse’s tax home. This is incorrect. The IRS makes no such determination. In this article, we’ll thoroughly review this topic so travel nurses can approach it with confidence.

What does the IRS say about the “50 Mile Rule”?

IRS Publication 463 states that you can accept tax-free reimbursements if “you need to sleep or rest to meet the demands of your work while away from home.” The IRS does not define a specific distance that would constitute your need to sleep or rest.

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Can Travel Nurses Accept Tax-Free Reimbursements Without Incurring Expenses?

Moreover, the IRS requires that you actually incur expenses in order to accept tax-free reimbursements for those expenses. Therefore, the scenario where a travel nurse drives 100+ miles to work a shift and then drives home without incurring expenses for lodging does not qualify for a tax-free lodging reimbursement.

How do Travel Nurses Qualify for Tax-Free Reimbursements?

We covered how travel nurses qualify for tax-free reimbursements in our extensive 4-part series of articles on this topic. We encourage you to review those articles by selecting this link .

In this article, we want to stay focused on the “50-mile rule.” Specifically, we want to thoroughly debunk all the arguments that commonly support this myth. These arguments can be convincing and we want you to be confident in rejecting them so you don’t fall pray.

Where Does the 50-Mile Rule Come From?

So, where does the 50-mile rule come from? Joseph Smith, a tax consultant specializing in taxes for mobile professionals, provided 3 possible origins .

First, some states have a 50-mile rule for state legislators to qualify for the tax-free reimbursements the states pay to legislators while conducting state business. Obviously, travel nurses are not state legislators and states don’t pay travel nurses. Therefore, these rules do not apply.

The ultimate travel nursing pay calculator.

Second, the IRS requires that a taxpayer’s new commute to a new workplace be more than 50 miles farther than their old commute in order for the taxpayer to write off expenses related to moving for work. This rule does not apply to the lodging and meal reimbursements that travel nurses receive. Therefore, it does not apply to travel nurses.

Third, many travel nursing companies utilize their own 50-mile rules as an internal policy to help them determine if a travel nurse qualifies for tax-free reimbursements. As a result, many in the industry have come to conflate these internal rules with IRS rules.

Why do travel nursing companies have such a rule?

You might be wondering why agencies maintain such rules. First, such rules serve as potential safeguards in case the IRS audits an agency. While the IRS does not officially recognize such a rule, consistently enforcing such a rule does, nonetheless, give the impression that an agency is attempting to ensure compliance with the spirit of IRS regulations. Whether or not the IRS views it favorably in an audit is another story.

Second, some agencies prefer to maintain one concrete rule to demarcate between  PRN, local contracts, and travel nursing contracts . This is because different hospitals have different rules for how nurses qualify for the hospitals’ PRN, local contracts, and travel contracts. Therefore, it’s more efficient for the agency to have one rule that meets the requirements of all the facilities they work with than it is to check the requirements of each facility every time they submit a candidate for a job.

Some Hospitals Have 50-mile Rules

Another reason that the myth of the 50-mile rule persists is that many hospitals have their own distance rules for travel nurses. I’ve seen hospitals with distance requirements of 50, 75, and 100 miles for travel nurses.

Why hospital admin wants them

Hospitals enforce such policies for several reasons. First, this is a cost issue for hospitals. PRN bill rates are almost always lower than bill rates for travel nursing jobs . Sometimes, that difference is enough to cover the cost of housing and travel, so it can be significant.

Create your free Travel Healthcare Resume on BluePipes!

In addition, hospitals do not guarantee PRN shifts. However, they often must guarantee shifts for travel nursing jobs . Therefore, PRN shifts give the hospital flexibility to cancel shifts which can also save them money.

A hospital will typically try to fill its staffing needs at the lowest possible cost. Therefore, they prefer anyone within a 50-, 75-, or 100-mile radius to sign up for PRN shifts.

Why hospital staff wants them

Second, the hospital’s staff also has a stake in ensuring that travel nurses are not actually local. And, hospitals have a vested interest in keeping their staffs happy.

The issue is that travel nurses often have guaranteed hours. Moreover, travel nursing contracts are typically for 13 weeks.

As a result, if a hospital needs to cancel a shift, then they may call off staff members before calling off a travel nurse. This doesn’t happen very often, but it can and does happen. That’s because the hospital might have to pay the travel nurse even if they call them off.

Free eBook: How To Negotiate Travel Nursing Pay

Therefore, it’s in the best interest of the staff to have local health care professionals signed up for more flexible PRN shifts. That way, the PRN worker would get called off before the permanent staff worker.

No matter the reason that the 50-mile myth exists, or the explanation given to justify it, it’s important that you not put any faith in to it. Again, at its worst, purveyors claim the myth allows travel nurses to accept tax-free stipends as long as the travel nurse’s tax home is more than 50 miles from the facility. This claim can get people into a lot of trouble. To learn how to  legitimately qualify for tax free money as a travel nurse see our series on the subject .

Related posts:

• Travel Nursing Pay – Qualifying for Tax-Free Stipends and Tax Deductions: Part 2: Maintaining Temporary Status In our previous blog post we laid out the criteria under...
• Travel Nursing Pay – Qualifying for Tax-Free Stipends: Part 3: The 3 Factor Threshold Test Now that we have made the distinction between indefinite work...
• 6 Things Travel Nurses Should Know About GSA Rates Understandably, there is a lot of confusion about GSA rates...

So, it would appear that the article has been corrected and now cites the correct tax rules. However, I would like to point out there seems to be a lot of anger directed toward nurses in this post. Have any of you bothered to look at who wrote the article? If you had you would notice that it was not written by a nurse. Now I could take the same low road that many appear to be taking here and make assumptions related to intelligence, and ability to read, but I’m not going to. I would like to point out the person who wrote this article is not a nurse. Click on the authors profile…I wouldn’t want you to take the word of a nurse given your apparent disdain for us. To the nurses who responded before me…please don’t allow yourself to be provoked and respond nasty comments with nasty comments…you are representing our profession and have done nothing here to help us prove our professionalism. I’m not saying “take crap”, I’m just saying either announce yourself as a nurse and act professional, or leave off the credentials and then sling mud. We all lose our composure, but I ask that you represent our profession with dignity in the eyes of the public. Anything less will not help us gain the respect and recognition we truly deserve. To the CPA slinging insults above, I’m going to assume that you can read and just didn’t take the time to look at the credentials of the author of this article (who is not a nurse). You have certainly done little here to promote your profession. It is unfortunate that the person who typed this article hit a couple of wrong keys and referenced the wrong IRS publication which appears to have been corrected. Your message however, remains as written, and certainly does not promote your profession favorably. I think I’ll stick to doing my own taxes thank you, as I prefer to trust my finances to someone who reads things thoroughly before rushing forward with insults, and as it would appear, either their own miskeyed entry or mistaken. To the author of the article, thank you for taking the time to write it. I enjoyed the read! Very informative and just the information I was looking for. Now…I have spent way more time here than I planned…I have much to do, and very little of it might I point out, is peeling bandaids. That, by the way, is not taught in nursing school.

Sorry but you’re wrong. IRS publication 455 states “The distance test: Your new workplace must be at least 50 miles farther from your old home than your old job location was from your old home. If you had no previous workplace, your new job location must be at least 50 miles from your old home. ”

This is why nurses should stick to peeling band-aid wrappers for doctors and emptying bed pans (the maids of hospitals)….. Pay for an accountant people.

You are sorely mistaken. IRS publication 455 relates only to Moving Expenses. Travel nurses are not “Moving”. They are working away from their tax homes temporarily. Publication 455 does not pertain to their circumstances. Publication 463 is the pertinent document for them.

This is why you should stick with Accountants who specialize in taxes for travel professionals like the folks at traveltax.com. Otherwise, you may find yourself with a CPA who seemingly got their credentials out of a Cracker Jack Box like this fool.

Nice comment back!!!!

Seems like you don’t think very highly of nurses. Hope you never get sick and end up in a hospital. You will soon find that nurses do much more and you rarely see doctors. Show more respect for nurses.

CPA – (Idiot),

FYI – Most Nurses have bachelors degrees In science which has been recently claimed as the toughest degree to get by Guinness World Book of record. Most hospitals require a bachelor’s degree to be hired in their hospital. therefore your associate’s degree in accounting and your CPA certificate doesn’t mean a whole lot. Anybody can read an IRS publication and follow the directions. Try putting in a NG Tube , IV or working a code to save life of some ungrateful asshole like yourself.

HOSPITAL MAID with a BSN.

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That home office tax deduction may not apply to you. Here's who qualifies

If you took advantage of your company's flexible work from home policy last year, don't be surprised if all those receipts you diligently kept all through the year for tax deductions end up in the bin.

That's because wage employees who choose to work from home take on the full weight of their related expenses, tax experts say. And some of those expenses can add up. A survey by credit card comparison site creditcards.com in 2020 said people working from home spent an average of $108 more per month , led by higher expenses for food and utilities.

The 2017 Tax Cuts and Jobs Act eliminated unreimbursed itemized deductions for employees, and Congress never brought them back despite a surge in people working from home. The rule runs through 2025, said Eric Scaringe, principal at certified public accounting firm UHY.

Need to know: When is Tax Day 2024? Deadlines for filing tax returns, extensions and what you need to know

Among those who have a workplace outside of their home, 35% said they never enter their offices, down from 43% in January 2022 and 55% in October 2020 but up from only 7% before the pandemic, according to Pew Research Center . Forty-one percent split their time between home and office, up from 35% in January 2022, it said. Despite all that work at home, most of them likely aren't eligible for any home office deductions. 

Home office deductions only apply to small business owners who are self-employed. If you do freelance work unrelated to your regular job at home, you might qualify. The rules are strict, though, and calculating your deductions can be complicated.

Here’s a step-by-step guide for figuring out if you qualify for deductions and if so, what to consider in your calculations :

Who qualifies for home office deductions? 

Generally, if you receive a W-2 wages tax document, you’re not eligible unless you also have a side gig that you do from home - at least on the federal level.

"Some states might allow you to take some deductions," said Mark Jaeger, vice president of tax operations at preparer TaxAct.]

Pennsylvania and New York, for example, allow employees to deduct some unreimbursed expenses. Check your state's rules.

Self-employed: If you're self-employed and use your home office exclusively and regularly for that work, you may be able to deduct from your federal taxes a portion of home-related expenses, such as mortgage interest, property taxes, homeowners' insurance, and utilities.  

But be mindful of details, experts say.

“If you work on your dining table, you can't deduct that because it’s not used exclusively for work,” said Therese Tippie, EP Wealth Advisors’ tax manager and financial planner. “But you could purchase a desk and have it in a corner of your house and if that’s used exclusively and regularly for work, you can deduct that space.” 

There are two ways to take a deduction for your home office space: simplified or regular.

Simplified home office deduction

You can deduct $5 per square foot, up to $1,500 or 300 square feet, a year for your exclusive home office space -- if it's used for the full year. If you only use that space part of the time, then you prorate that amount, Tippie said. 

Regular direct home office deduction 

This could result in a larger deduction. However, it requires you to track all your home office expenses, including any costs for repairing and maintaining the space.

“If you have a spare bedroom and made repairs to turn it into an office -- added built-in shelving, painted it to get it ready for Zoom meetings ... all that can be counted toward home office expenses,” Tippie said. 

You can also claim deductions for a portion of other expenses such as rent or property taxes, home depreciation, and utilities -- based on the proportion of the space to the rest of your house.

For example, if your office is 250 square feet and your home is 1,000 square feet, you'd deduct 25% of your allowable expenses (250/1,000 = 0.25). If you had $10,000 in eligible home-related expenses, you could claim up to $2,500 in deductions. There isn’t a limit on how much you can deduct. 

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Can I deduct supplies? 

Yes, if they are both common to your industry and necessary to help your business -- and you have receipts. 

Items you might deduct include cell phones, laptops, printers, and other office supplies.  

“Given the value of these items, you can just write off the entire amount and expense it,” Tippie said. “You don't need to capitalize it. It would go on Schedule C as office or supplies expense in the other expense section.” 

Remember, though, if you also use any of these items for personal things, only the proportion used for work should be deducted. For example, if you buy a $2,500 laptop but use it 40% of the time for work, you can write off $1,000. 

Who files returns: Who has to file a tax return:  It's not necessary for everyone. Here are the rules.

Side gigs: Higher inflation means more work. More Americans take on multiple jobs to make ends meet

Business lunch tax deduction reverts to half

As of Jan. 1, 2023, companies had to go Dutch. The business lunch deduction reverted to the pre-pandemic 50% in 2023.  The Taxpayer Certainty and Disaster Relief Act of 2020 temporarily boosted the business deduction for food and beverages to 100%, including tax and tip, for 2021 and 2022.

Note, entertainment expenses are not deductible and haven’t been since the Tax Cuts and Jobs Act in 2017, the IRS said. If you take someone to an establishment that offers entertainment and food, you must separate the food from the entertainment cost and only deduct that portion.  

Working cars: Tax season 2023: What exactly is the mileage rate? There's more than one.

Get out of my business: Who needs to know? Small businesses object as feds infringe on Americans' privacy.

Is there any way for W-2 wage workers to get some money back for business expenses? 

Not through your taxes, but you might be able to ask your employer. 

"You can try to get your company to pay for it if they require you to work from home,” Tippie said. "They can reimburse you and deduct it, but then, some might just require employees to come to the office.” 

More of your 2024 tax season questions answered:

IRS announces new tax brackets for 2024. What does that mean for you?

Flush with new funding, the IRS zeroes in on the taxes of uber-wealthy Americans

Need a new tax strategy? These money-saving tips taken by Dec 31 may help pad your pockets

Your single largest payday may be a 2023 tax filing away. File early to get a refund sooner

Is it better to pay someone to do your taxes or do them yourself? We'll help you decide.

New IRS tax brackets and standard deductions for 2024: See how much they were raised

IRS delays 1099-K rules for ticket sales, announces new $5,000 threshold for 2024

IRS to offer pandemic-related relief on some penalties to nearly 5 million taxpayers

Driving for work will pay more next year after IRS boosts 2024 mileage rate

What is OASDI tax on my paycheck? Here's why you and your employer pay this federal tax.

A 30% national sales tax? Abolishing the IRS? Here's what the FairTax Act of 2023 would do

These 8 states don’t have an income tax. Does yours make the list?

What is net pay? How it works, how to calculate it and its difference from gross pay

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.

Published: April 4, 2024   |   Last Updated: April 5, 2024

Filing and paying taxes for u.s. citizens or residents living abroad.

I previously described the dizzying tax compliance challenges encountered by U.S. citizens and residents living abroad . Now, I will describe the basics of filing and paying U.S. taxes for U.S. citizens and residents living abroad.

Who Must File

The United States taxes its citizens and residents on worldwide income, regardless of where they live. This means that a U.S. citizen or resident must file a U.S. income tax return reporting all income, even if the individual lives and works in a foreign country. This is the case even if the U.S. citizen or resident doesn’t have any income from a source within the United States.

Read my previous blog  about tax compliance challenges for a more in-depth discussion of who qualifies as a “U.S. citizen or resident,” including so-called “accidental Americans” – individuals who are considered U.S. citizens, sometimes without realizing it.

When to File

You are allowed an automatic 2-month extension of time to file your income tax return and pay income tax if you are a U.S. citizen or resident, and on the regular due date of your return 1) you are living outside the United States and Puerto Rico and your main place of business or post of duty is outside the United States or Puerto Rico, or 2) you are on military or naval service outside the United States and Puerto Rico. This means that if you meet the criteria, and your return is normally due on April 15, 2024, you are allowed until June 17, 2024 (since June 15 is a Saturday) to file. To take advantage of the automatic two-month extension, you must attach a statement to your return explaining which of the two situations apply to you. Note that you still must pay interest on any tax not paid by the regular due date of your return even if you qualify for the extension.

You can also file Form 4868 to request an automatic six-month extension of time to file your return. This six-month extension runs concurrently with the automatic two-month extension. Therefore, if you qualify for the automatic two-month extension, you will only receive an additional four months for a total of six months. To qualify for the six-month extension, you can either file the request by the original due date of your return or, if you qualify for the automatic two-month extension, by the extended due date. You also may be able to request an additional two-month extension to December 15, which is discretionary and must be approved by the IRS. These extensions are not an extension of time to pay your tax. Therefore, you owe interest on any unpaid tax and may owe penalties.

There is one other extension that might be available. If you expect to meet the residency tests to qualify for the foreign earned income exclusion or the foreign housing exclusion/deduction but not until after your return is due, you may qualify for an extension that is generally 30 days beyond the date on which you can reasonably expect to qualify.

How to File

You always have the option to mail your return to the IRS. A tax return mailed from a foreign country will be accepted as timely filed if it bears an official postmark dated on or before midnight of the due date, including any extension of time for such filing. If you choose to use a private delivery service, you must similarly give your return to a designated international private delivery service before midnight on the due date, including any extensions of time.

Your ability to file a return electronically will depend on the form and other circumstances. For example, if you are applying for an Individual Taxpayer Identification Number (ITIN), which is used by individuals who do not have and are not eligible for SSNs, your return accompanying the ITIN application must be filed on paper. Some other forms, including international information returns, must also be filed on paper. Your ability to use the Free File program , where taxpayers file their returns for free via certain software providers, will depend on the software provider and the form you are filing. This filing season, the IRS is implementing a Direct File pilot program , which will allow taxpayers to file for free directly with the IRS, but it is not available to taxpayers abroad.

If you file your return electronically, be aware that it will need to be e-filed through an electronic return transmitter before midnight of the due date, including any extensions of time, to be considered timely. An electronic return transmitter is a preparer, software, or platform that has received approval to submit returns electronically to the IRS on behalf of taxpayers. Further, if the IRS rejects an e-filed tax return before processing, it will not be considered timely filed if it is subsequently accepted after the filing deadline. This can cause challenges for taxpayers who file at or near the due date for their return. Since there is a disparity in the IRS’s treatment of paper-filed and e-filed returns and other documents that results in incongruous and inequitable results, I have recommended to Congress that it amend the law to treat electronically submitted tax payments and documents as timely if they are submitted on or before the applicable deadline.

How to Pay Tax or Receive a Refund

If you live abroad and owe U.S. tax, you can mail a paper check to the IRS or pay with a credit card. Options to make electronic payments are limited. The IRS cannot currently accept e-payments from foreign bank accounts, so you can only make an e-payment through a U.S. financial institution or corresponding bank . Similarly, international wire transfers , which can be expensive, can only be made from certain banks. The good news is that the IRS is planning to allow taxpayers to make payments to the IRS directly from foreign bank accounts in the future.

If you are entitled to a refund, that refund will almost certainly be paid by a paper check that is mailed to you. Currently, the only existing option for international direct deposit of refunds is a manual refund issued through the International Treasury Service, which is only available for refunds over $1,000,000 or for TAS hardship situations.

Be Aware of International Information Reporting Requirements

Separate from your income tax filing obligations, you may have to file an information return if you receive money from abroad (including a non-taxable gift) or have certain foreign financial interests and cross-border business activities. For example, taxpayers with foreign financial accounts exceeding a certain amount must attach Form 8938 to their Form 1040. These reporting requirements surprise many taxpayers living abroad. It is critical that you take steps to determine if you need to file as these requirements come with significant penalty exposure when a filing is late, incomplete, or inaccurate. Many of the forms take significant time and records to prepare and can only be filed on paper. For more information, see the IRS’s website on international information reporting penalties .

U.S. citizens and residents who live abroad are subject to filing requirements, many of which are complicated and some of which taxpayers may not even be aware. Access to IRS assistance is limited, further burdening these taxpayers. I have recommended that the IRS improve services for taxpayers abroad , including providing in-person services, such as Taxpayer Assistance Centers, outside the United States; providing a toll-free international telephone line or other alternative free service; and providing greater accessibility to online accounts to taxpayers abroad who have problems verifying their identity.

This blog provides an overview of information that taxpayers abroad need to know to successfully meet their obligations for this filing season. Of course, there are many other forms, publications, regulations, and statutes that might be applicable to your U.S. tax situation. For more information, a good starting point is Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad . If you are a member of the military serving overseas, additional tax preparation resources may be available and there are special provisions which might be relevant, including a deadline extension if serving in a combat zone. For more information, see the TAS webpage on Resources for Military Personnel and Their Families .

Read the past NTA Blogs

The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.

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