If you are an employer who needs to send employees to another city for an assignment, working with a corporate lodging company for temporary housing can create a significant tax benefit for you. In fact, by working directly with the company, your business is better able to track the accounting without having to deal with employee reimbursements, etc. Let’s take a quick look at how the tax laws affect employers who cover their employee’s living expenses for extended stays.
What Qualifies as Tax Deductible?
The government allows businesses to write off temporary employee housing as non-taxable business expenses. To qualify for this write-off, the situation basically must meet three criteria:
- The housing must be outside of the employee’s “tax home” — in other words, outside the city where he/she lives.
- The housing must be for business-related purposes. (In other words, you can’t send an employee to corporate housing on vacation and count it as a business expense. Also, it must be necessary to have the employee in close proximity to the business location for the work to be done.)
- The intended time frame for the temporary stay must be one year or less.
What Business Expenses May Be Deducted?
Any expenses you pay on behalf of the employee as necessary to doing business may be considered a valid deduction, the same as if you were a sole proprietor deducting those expenses for your own business travel. These may include:
- The full cost of living expenses, including lodging and cost of utilities. (In the case of a corporate lodging agency, the utilities are frequently included with the cost of the unit.)
- Transportation expenses — the cost of getting the employee to and from the work site.
- One-half the cost of meals while the employee is away from home.
An Important Note
How and where you report these expenses on your company tax returns depends on how you cover the employee’s costs. If you pay for the cost of temporary housing directly on behalf your employees, you deduct it as a business expense. If the employee pays out-of-pocket and you reimburse him/her, you must include that amount as income on the employee’s W-2 form (which means he/she will also pay taxes on it).
To learn more about how working with TP Corporate Lodging can provide safe, temporary housing for your employees and significant tax benefits for your company, give us a call at 800.428.9997.