Flight Crew Per Diem Deduction
Did you know that most flight attendants and pilots spend approximately 150 to 400 hours traveling away from home each month? If you work for an airline as a pilot or flight attendant you might qualify to claim various tax deductions. And the flight crew per diem deduction is one of them.
As a flight crew member, you want to make sure that you are not missing per diem deductions while filing your tax returns. As ignoring it can deprive you of the money you can save on your taxes.
What is a per diem deduction for a flight crew?
You are well aware that, being a pilot or flight attendant you need to spend many hours away from the base. And you are bound to incur many expenses while you are traveling. It includes meals and other incidental expenses. These expenses need to be ordinary and necessary for the performance of the tasks you are assigned with.
The airline pays you for the meals and incidental expenses incurred, on per hour or day basis (i.e. airline per diem), during your layovers.
So are these per diems taxable? For tax purposes per diem payment is not considered to be a part of your salary unless they are equal to or less than the IRS per diem rates. Any payments that exceed the per diem rate are taxable.
It will usually be an hourly allowance that is computed at the month-end and collected in the mid of every month.
You also have to submit an expense report. If you do not submit an expense report the payments will become taxable. You can deduct these per diem expenses to reduce your taxable income. It may result in reducing your tax liability or make you eligible to get a tax refund.
What can pilots and flight attendants deduct from taxes?
Pilots and flight attendants, like any other individual employed by a company, are allowed to deduct multiple expenses while computing their taxes. To determine whether or not an expense qualifies for deductions, you need to consider if an expense is ordinary and necessary. According to Internal Revenue Service (IRS):
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“An ordinary expense is one that is common and accepted in your field of trade, business, or profession.
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A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be required to be considered necessary.”
Expenses incurred during the performance of your duty are written off by using employee business expenses Form 2016. For the sake of simplicity let us divide your deductions into two parts.
- M&IE expense qualifies for a deduction when the trips you take have overnight layovers. These expenses include what you spent on food and other smaller expenses such as dry cleaning, room service, laundry, tips to porters and waiters, etc.
- It includes expenses such as union dues, the business portion of your cellphone, uniform expenses, etc. And if these expenses pass the deductibility test prescribed by the IRS you will be able to deduct them.
How is per diem calculated for pilots and flight attendants?
For computing meal and incidental per diem deduction, you do not have to keep track of the receipts from all the eateries you have been to. You can use IRS per diem rates. They are for the places you stayed while being away from home discharging your duty.
No receipts are required instead you only need to know when and where your layovers occurred during the tax year. Imagine you are on a 3-day trip and you spent $55 on your meals. You can use Federal per diem rates in place of what you spent on your meals and incidental expenses. The rate varies for different cities and it changes with time.
Before the advent of the per diem calculators, it took hours for the tax prepares to compute the flight crew taxes. With the help of per diem calculators, the flight crew per diem deduction can be calculated in less than 30 minutes.
The per diem calculators have made an effort to link most airports around the globe with their respective CONUS or OCONUS per diem rates. It has made the calculation of per diem deduction fast and easy.
There are two ways to compute per diem deduction.
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Special per diem rates for transportation workers: In this method, you assign the prescribed value for domestic and international layovers.
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City by city rates: This method uses local rates for each city and the time of the year that the layover occurs.
Generally, the second method is widely used since it gives the greater amount. However, if the layovers often occur in cities that pay less, then the first method will probably result in a higher amount.
It is noteworthy that those meal and incidental expenses that are reimbursed will reduce the amount that qualifies for a tax deduction. Consider an example, you have been away for about 150 days, and you have spent approximately $8000 on your meal and incidental expenses. The airline reimbursed $6000 to you. The 75% of the remaining amount i.e. $1500 (2000*75%) will be allowable per diem deduction on your IRS tax form 2106.
Your deduction might result in refunds. You should keep in mind that per diem deduction is only allowed when flight crew trips involve a layover. According to IRS Publication 463, if there is no rest period on a day trip the meal and incidental expenses will not qualify for the deduction.
The per diem deduction that is considered deductible while computing meals and incidental expenses are the stops with the layover. Discuss with your tax preparer and make sure that you are getting all the legitimate deductions that you are entitled to.