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If you have a permanent tax home and qualify for temporary living expense deductions, you may either receive a meal per diem from your employer tax-free, or deduct meal expenses on your tax return (to the extent that all of your un-reimbursed employee expenses exceed the standard deduction for your filing status).
The allowable per diem deduction or payment is based on the federal domestic meal and incidental expense (MIE) per diem tables, which change from year to year (IRS publication 1542). The current standard rate is $30 per day. The amount allowed can vary according to the location. Many metropolitan areas qualify as a high expense area and have a their own, higher rate (San Francisco is currently $46 per day). If your temporary assignment city is not found on the list of high expense areas, it only qualifies for the standard rate.
You may receive a meal stipend tax-free up to the maximum MIE per diem rate for the location, for every day there, whether working or not. For amounts paid on an hourly basis (which most seem to be), I calculate the total weekly amount received, and compare it to 7 times the daily table rate. Any amount received over the allowable rate is taxable and should be reported as taxable. Beware if your employer is paying in excess of the allowable rate and not reporting the excess as taxable – you will be held liable for any tax due if reviewed by the IRS.
If you do not receive a per diem, you may deduct 50% of the MIE rate on your return – whether you spent that much or not, and without the need to have or keep receipts!
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