- The IRS defines your tax home as the general area in which you normally work. The IRS includes not only the actual city, but its immediate vicinity, such as its suburbs. Your temporary location must be far enough from your tax home that a daily commute would deprive you of the sleep you need to function at your job. Therefore, even if your temporary location is in a different city 30 miles away from your tax home, the IRS is likely to rule that you could commute to your home on a daily basis.
- Your lodging expenses must duplicate living expenses in your tax home. This means that you should maintain a residence in your tax home. Your family may remain in your tax home, or you may use it for personal reasons, such as receiving your mail or for lodging when you are not working. If you meet all other requirements, the IRS may waive the duplicate expense requirement if you are forced to relocate due to a disaster.
- You must not realistically expect the assignment to last more than one year, and the duration cannot be indefinite. If expectations change and it becomes obvious that the assignment will last more than one year, you may not deduct lodging expenses once you realize the duration will last longer than you initially expected. Intermittent assignments do not apply to the one-year rule, as long as no single assignment lasts for more than 12 months.
- To be fully deductible, your temporary lodging must be for business reasons. If you mix business with pleasure, such as staying over to visit the local attractions, you may deduct only the part of the expenses that directly relate to business. You must also prorate the expenses if you bring your spouse or another non-employee with you who is not there for a bona fide work-related reason. If you or your employer must relocate temporarily as a result of a disaster, you may usually deduct lodging expenses if the distance and duration tests are met.
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