@boatsNhoes wrote:
I am a W-2 employee. My company owns a house at the location that I will be staying in free of charge. The per diem is a flat rate weekly amount for food only.
Your per diem is fully taxable from day 1 and should be included in your W-2 as wages.
On housing:
Generally speaking, anything of value provided by your employer in return for your services must be included as taxable income. The value of free housing must be taxable unless it meets these three tests:
- The housing is provided on the property owned by the business or employer
- The housing is provided for the convenience of the employer. The employer must have a "substantial business reason" for this, such as a remote work location.
- The employee must accept housing as a condition of employment. A condition of employment is an agreement at the beginning of employment by both employer and employee.
As your housing seems to meet this requirement, and there is no time limit, the housing will be non-taxable no matter how long your contract lasts.
On the food per diem:
This will be fully taxable as ordinary income (included in your wages and on your W-2) from day 1. You can't deduct any expenses against it to reduce the tax impact.
The employer can reimburse for meals while you are away from home traveling for work, under an accountable plan or a non-accountable plan.
With an accountable plan, you must save your receipts and prove the amount of your expenses, and your reimbursement can't be more than your actual expenses. You could get a per diem, but there must be provisions for timely reconciliation (such as monthly) where you turn over your receipts and return any excess amount that was more than your provable meal expenses. Reimbursements under an accountable plan are tax free. It is possible that the employer would not be allowed to reimburse your expenses under an accountable plan if your assignment lasted more than one year, but you don''t have an accountable plan so I don't have to research that.
If you are provided a per diem and do not have to prove your expenses and return any amount in excess of your expenses, then the employer is using a non-accountable plan. Under a non-accountable plan, all amounts paid to you must be included in your taxable wages. As a W-2 employee, the tax reform act of 2018 eliminated your ability to claim a business expense deduction for meals taken while traveling away from home. There may be a state tax deduction, and Turbotax will offer to allow you to enter your meal expenses in case they flow downhill to your state tax return, but it would only maybe reduce your state income tax a bit.
Regarding the rules on deductibility of meals: The old rule is that you could deduct meal expenses while traveling away from home temporarily. Temporarily means that the assignment is expected to last, and actually does last, one year or less. If the assignment has no end date, then it is indefinite and the expenses are not deductible even if the time period is less than one year. And, if in the middle of the year, you and your employer agree to extend the contract beyond 1 year, the assignment becomes indifinite at that point and the deductibility ended, even if the 1 year was not over yet. If you are on a temporary assignment, you could deduct 50% of your actual meal expenses, or 50% of the federal meal and entertainment per diem rate for the city you were working in. While this deduction has been suspended for federal taxes, it may still exist on state income tax forms and, if so, will follow the same rules about temporary vs. indefinite.
