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If you have a permanent tax home and qualify for temporary living expense deductions, you may either receive travel reimbursements from your employer tax-free, or deduct travel expenses on your tax return (to the extent that all of your un-reimbursed employee expenses exceed the standard deduction for you filing status).
Travel expenses such as airline tickets are reimburseable dollar for dollar tax-free from your employer, or fully deductible on your tax return. If you receive a flat rate travel payment (which seems to be the norm), then you must report the payment as income, and deduct your actual expenses to offset the income, or deduct the excess. Business airline travel paid for with frequent flyer mileage is not deductible, since you didn’t pay for it. The good news is that so far, IRS has decided that the value of the frequent flyer tickets is not income (yet).
Business mileage, such as driving from assignment to assignment, is a deductible expense, to the extent that it exceeds any payments from your employer. Personal mileage is not deductible. Daily commuting is considered a personal expense, and therefore not deductible. Is driving back and forth to work on a temporary assignment commuting or a temporary business expense? While I have not argued the point with the IRS, I believe they would still consider it commuting, so I don’t deduct it.
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