2million - My Journey to Financial Freedom

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Wednesday, August 02, 2006

Temporary Assignment Tax Deductions

One of the hidden gems of my temporary assignment is I may be able to deduct many of my expenses from the temporary assignment on my income taxes. While this is a sizable opportunity to reduce my income taxes, there is little chance for me to come out ahead since these are tax deductions and not tax credits. My hope is to identify all the areas of opportunity so that I can maximize the value of these deductions to reduce the net costs of the temporary assignment.

So far here are some of the expenses it looks like I will be able to deduct:
1.) Housing expenses including rent, furniture rental, and utilities for my housing in NY.
2.) 50% of dining/food expenses. I can basically take these deductions like any worker can for unreimbursed business trips. Most likely I will just use the established per diem rates rather that tracking all my food/dining expenses.
3.) Car mileage while in NY, tolls, parking, and other transportation expenses. I could rent a car and deduct all the expenses, but I took my car to NY with me. I can take the standard mileage rate of $0.445/mile for all the miles I put on my car while away and also deduct any additional transportation expenses I occur while away.
4.) Trip expenses to go back and forth to NC. This is of great benefit because I can deduct my airfare for each roundtrip trip back to NC.

Each of these items should add up to a sizable deduction for me. I will follow up with greater details and my plans to maximize the potential value of each of these areas for tax deductions. In the end this should help me dilute the impact of the unreimbursed expenses while on the assignment.

39 Comments:

  • Wow that is some good information....

    By Blogger pyroracing85, at 12:10 PM  

  • I think you mean "opportunity".

    By Anonymous Anonymous, at 11:20 PM  

  • You may also want to look into forming a company because many more deductions are available to you as a business. For instance, your blog could be your business even if it is only part-time. You may want to set up an LLC; it'll still flow through to your personal tax but offer some additional deductions like start up costs, expensing legitimate business items, etc.

    Brion
    http://www.financialfitnesspro.com/blog

    By Blogger Chief Financial Fitness Pro, at 6:27 PM  

  • anon,
    thanks - fixed the typo

    Brion,
    Are you saying that there would be additional temporary tax deductions available via a business structure? I agree, setting up a side business allows me to deduct business expenses, but I not sure how that would affect deduction from a temporary assignment form my employer.

    By Blogger 2million, at 11:20 AM  

  • Yes, I would look into it. There may be additional areas you can recoup for tax deductions that are not normally available to employees or temps.

    You should consult with a tax professional and determine if this would appropriate for your situation.

    By Anonymous Brion, at 3:58 PM  

  • even if there aren't any additional deductions[although there probably are], your chances of an audit drop if your expenses aren't listed on your schedule C. plus you might be able to recatagorize your income from earned to a combination of earned and dividend income via an S corp.

    note: i'm not a CPA and this info might be wrong!

    By Blogger Empty Spaces Inc., at 3:50 AM  

  • I don't think the business structure idea is the right choice for me. I work for a large employer and trying to get reclassified as a "contractor" would be foolish from a career perspective not to mention loss of 401k benefits, contributions to pension etc. However, that doesn't mean it wouldn't make sense for others - thanks for the tip!

    By Blogger 2million, at 3:35 PM  

  • you need to itemize your deduction if you do that, right? i was looking into that, but unfortunatelly, it doesn't work for me cuz I dont have a mortgage so itemized deduction don't work me.

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