Seizing the Per Diem Tax Break

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Per Diem is one of your largest tax deductions as a professional driver but what is it exactly? In its simplest terms, the Per Diem deduction is a tax deduction that the IRS allows for travel incidental expenses. In this article I will discuss the specific rules around using this significant tax deduction.

The IRS allows people who travel for business to deduct their meal expenses from their income. The Per Diem rate is set by the Department of Transportation. The current rate is $59 per day in the Continental US and $65 per day while in Canada. You may have heard the amount of the deduction quoted as $47.20. That is because the IRS only allows you to deduct 80% of that rate. Non-CDL riders who are performing other duties (bookkeeping, dispatching, assisting loading, and unloading) may deduct a slightly lower rate of $46 per day, or, rather, 80% of $46 which comes out to $36.80.

In order to qualify for these deductions, IRS publication 463 states that you are traveling from home if:
  1. Your duties require you to be away from the general area of your tax home substantially longer than an ordinary day's work, AND
  2. You need to sleep or rest to meet the demands of your work while away from home.   
It further states that taking a nap does not satisfy the requirement. However, “you do not need to be away from home for a whole day as long as your relief from duty is long enough to get necessary sleep or rest.”
What does this mean to a driver? If you are an over-the-road driver, the rule is simple. You get to claim the tax deduction for each day that you are away from your “tax home”. On the days that you depart and the days that you arrive at home, you must claim a partial day allowance. That is ¾ of the standard allowance.

Things become a little more complicated if you are a local driver. Are you gone from home long hours? Local and regional drivers are frequently away from their home much longer than an average eight-hour workday. Therefore, fulfilling the first part of the requirements is simple. Yet, notice the “AND” between the two requirements? This means that you must meet both conditions in order to claim the deduction.

Hours of Service (HOS) regulations state that you “may not drive beyond the 14th consecutive hour after coming on duty, following 10 consecutive hours off duty.” Therefore, the combination of HOS regulations and IRS regulations make it so that you, effectively, have to be away from home for 24 hours in order for the Per Diem deduction to apply.

Furthermore, IRS publication 463 states that you must have a “tax home”.  There are three tests to determine your tax home. In order to meet the requirements, you must satisfy two of the three following tests:

A. You perform part of your business in the area of your main home and use that home for lodging while doing business in the area.
B. You have living expenses at your main home that you duplicate because your business requires you to be away from that home.
C. You have not abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging.

So what does this all mean? In a nutshell:
  1. You must be away from home for 24 hours.
  2. You must have a home from which to be away.
  3. If you meet requirements A and B, you can deduct $47.20 for each full day away from home as a driver and $36.80 as a non-CDL rider. You can deduct $35.40 per partial day as a driver and $27.60 as a non-CDL rider.
At ATBS, we recommend keeping a Per Diem calendar, putting an ‘X’ on full days away, and a ‘/’ on partial days. That way you can count up exactly how many days of Per Diem you have for your tax preparer come tax season. I hope this article helped make an often-confusing issue easier to understand. If you have more questions on Per Diem, put them in the comments section below or you can contact ATBS at 866-920-2827. 
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By
Luis Alvarez

Business Consultant at ATBS

RATE IT+50 miles

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COMMENTS +300 miles

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Ofelia Alcantara
Hello Luis,
am runing from Austin to Dallas to San Antonio and back to Austin. My home town is Ausitn. Can I claim the the ful per diem for this run?
3/3/2014 8:47:04 PM

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Marcus Dooley
Sorry for the bubble post.
1/21/2014 6:21:13 PM

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Marcus Dooley
This states non-cdl rider. What if they are a cdl holding rider?
1/21/2014 5:40:52 PM

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Marcus Dooley
This states non-cdl rider. What if they are a cdl holding rider?
1/21/2014 5:40:36 PM

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Jimmy Nevarez
Being a short-haul driver, I sure do miss my Per Diem! It was such a leg up when I would run over-the-road and should be tracked by every OTR driver to maximize the benefit!
1/18/2014 7:47:04 AM

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Allen Smith
Good Article !
1/16/2014 2:10:04 PM

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Rick Meckstroth
Luis, great article!
1/16/2014 2:00:12 PM

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Rick Meckstroth
Luis, great article!
1/16/2014 2:00:07 PM

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Craig McCue
Very well written Luis. Thank you for boiling down the IRS jargon into simple to understand concepts and language.
1/15/2014 1:45:54 PM

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Linda Caffee
This is a huge deduction for a team and I one that I am very careful to keep track of. We are on electronic logs and I save a copy of our logs from the server to my computer. As I look through each log I count the full days away from as well as the partial days from home and then I add those days to the file name; January Linda 25_5 is an example. At the end of the year I add up the days and I am done.
1/14/2014 3:55:45 PM

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