Local Assignments and Tax-Free Lodging during COVID


During the COVID crisis, several healthcare providers are taking local assignments to help with the surge of affected patients. They have valid concerns about exposing their family or those they share a home with to the virus.

Can they receive tax free housing even though they are working locally?

The answer is yes.  Tucked away in the Regulations (Section 1.162-32(a)) is a little-known provision for local lodging primary designed to accommodate local business meetings, conferences, training and other related activity. In addition to these situations, it also allows the lodging to be provided when the facts and circumstances of a situation require local lodging. The current COVID pandemic is such an event that would fit those limitations.

There are a few items to note.

  • The lodging should be a dwelling that the employer/agency/hospital provides in kind. In other words, they pay for the lodging directly. That can be a hotel, house or apartment.
  • The lodging must be a necessity rather than a personal preference
  • The lodging cannot be lavish or extravagant
  • There cannot be a greater social or personal benefit beyond the provision of a place to stay to fulfill one’s duties at the care facility.
  • These limitations do not allow giving a per diem in place of directly paying the lodging provider or paying by receipt. Agencies are required to track their non-taxable lodging and meal reimbursements

Reference: https://www.law.cornell.edu/cfr/text/26/1.162-32

Article in WSJ: https://www.wsj.com/articles/after-fighting-coronavirus-new-yorks-health-care-workers-sleep-away-from-home-11586895678?shareToken=st121eaf18385849a282c7e5712da35085

For Those Of You Too Afraid To Ask…. If The 50 Mile Myth is Nonsense, What Is The Rule?

Okay- Don’t be afraid to ask questions ….. Since the first post on this topic, I have heard from a few people who want to know the accepted rule but don’t want to ask publically. Ok, that’s fine 🙂
The benchmark for deductible lodging expenses –  OR better, in tax jargon as it applies to per diems for lodging –  the benchmark for determining if the housing/lodging reimbursement is excluded from your reported wages is …… guess what? ……….. an overnight stay where you have to pay for lodging!!! Pretty logical huh? Our tax code does make sense at times.
Why should you receive a tax free reimbursement for lodging unless you have an expense to reimburse? As I said earlier, a trucker who sleeps in their cab cannot receive a tax free lodging per diem and they are traveling how far away from home? I guess the “50 mile rule” has that covered…..
Now, you cant just waltz 25 miles down the road and decide you don’t like your main home and stay in an apartment OR for those of you that are more honest: you don’t like your stick house that you masquerade as a residence to get tax free money because the in-laws live there …….. Its a bit “unreasonable” (another one of those terms of art in the tax code) to need a second home such a short distance away.
The next time a recruiter tries to sell you on the 50 MILE RULE, send them here and let them ask why! 🙂

What are you looking at!? This is my tax home and its more than 50 miles away from my assignment!! My recruiter told me so!!
What are you looking at!? This is my tax home and its more than 50 miles away from my assignment!! My recruiter told me so!!

50 Mile Rule Nonsense

I have been preparing tax returns for travelers for almost 20 years and one thing that never seems to die is the urban myth of a  50 Mile Rule that recruiters and travelers talk about with religious conviction. The tale goes like this: as long as you drive over 50 miles to get to your assignment, you can get tax free housing allowances. You can even use someone else’s address on your tax forms to get the money, since all the IRS cares about is your permanent residence address.
Really? Wow. If it is really this easy, everyone should live 51 miles a way from their job.
The logic and facts: Why should you get tax free housing allowances without having a lodging expense to reimburse? A trucker who sleeps in their cab can’t get it and we all know long distance truckers are far, far away from home.
It really defies common sense that the IRS could have that much confidence in a mileage benchmark to give up so much tax revenue.
Yet the myth continues to emerge just like a game of Whac a Mole………

I feel like this sometimes
I feel like this sometimes