How You as a Pilot Can Benefit From per Diem Tax Rules

Editorial team of TFX

• 29.11.21 • 5 min read

Do you work as a pilot or flight attendant for an airline? Is there a tax on your earnings? You may be overlooking the per diem tax rules deduction, which is a valuable airline pilot per diem deduction.

Per diem tax calculation: What does it mean?

Per diem is the most common method of payment for airline pilots, flight attendants, and corporate flight crews. Regardless of where you are, your company will pay you a specified amount. There are, however, per diem rates set by the government depending on what city you're in. You are entitled to a tax deduction for the difference between these rates and your take-home pay.

The issue of food and travel expenses is less discussed, but it is still a critical factor of a career that involves travel. Working people usually refer to this as per diem.

Employees whose occupations don't involve flying receive per diem allowances each day, which typically cover their food and lodging expenses. Travel expense reports are submitted at the end of a trip, and once they have been verified by the accounting department, the employee will be reimbursed.

Per diem tax rules: How do they work?

In the airline industry, things are done differently. Per diem rate payments start with the official time of report for the trip and are paid by the hour. Once the pilot has completed the trip, regardless of how long it was, whether it was one, two, three, or even 15 days, the trip ends. In other words, if a pilot reports in the afternoon on the first day of a trip and returns in the afternoon on the fifth day, he will have logged 120 hours of time away from base (TAFB). Using the airline's $2 per hour per diem rate (assuming), he would receive $240 in per diem expenses, which should cover the cost of meals and incidental expenses; the hotel is covered by the company.

A slightly higher rate is almost always charged for international trips because food costs are typically higher in those locations. Most per diems are paid on the second check of the following month. This allows the accounts department to review its records with diligence.

Pilots who travel for one day are taxable as regular income if they collect a per diem under the tax law. There is no tax on the per diem if the trip includes any overnight stays. Because of this, pilots and flight attendants at the regionals often carry a lot of food on trips, allowing them to pocket per diem as if it were additional income.

Airline per diem rates are always the same, which has the disadvantage of being prohibitively expensive. A pilot or flight attendant would use the IRS meal and incidental expense (M&IE) tables to figure out how much cash they were entitled to for a particular city, and their accountant or tax software would calculate how much difference a pilot or flight attendant would be entitled to. 

Who gets the per diem benefits?

The more nontaxable per diem an airline pilot or flight attendant earns the less tax deduction the airline pilot or flight attendant receives, and the more often the airline pilot or flight attendant flies to higher-paying cities the greater the tax deduction the airline pilot or flight attendant receives. Using this information, you can probably determine that international flight attendants would be the group that would benefit the most since they travel to the highest paying cities but do not receive the same amount of per diem reimbursement as airline pilots, which results in a higher per diem deduction. 

Although there are too many variables involved to say conclusively that one group will always benefit while another group does not, there is at least one group that will NOT benefit: those who do not itemize their deductions in tax returns. This is because it is only one component of the employee business expenses of the pilot or flight attendant, which are figured with other deductions. The per diem deduction should not be discarded simply because you assume it will not help you or because someone informed you that you will likely not benefit from it.

If my airline pilot per diem is listed in Box 12 with code L, can I claim DOT regulations on my tax return?

Per diem reimbursements paid to pilots by their employers up to the federal per diem rate prior to the Tax Cuts and Jobs Act of 2017 (TCJA) were not taxable. A pilot who itemized his/her deductions could also deduct actual business travel expenses which exceeded any per diem reimbursement he/she received. 

The taxable income of employees is not increased by the TCJA due to the exclusion of per diem reimbursements from taxable income. Therefore, employers can still pay per diem reimbursements up to the federal rate without them being subject to income tax. The pilot cannot, however, deduct the difference between the per diem reimbursement amount and the business travel expenses incurred, the rule that took effect on Jan. 1, 2018.

In the event that I did not receive reimbursement from my employer, how should I claim a per diem tax deduction for my travel?

Using the per diem rates to determine your lodging and meal expenses you may qualify as an employee for a per diem tax deduction. Visit www.irs.gov for information about per diem rates. Submit Form 2106 for lodging, meal, and entertainment taxes.

Your actual costs do not need to be documented. To prove the purpose of your trip, you should keep a record of the date, location, and time of your trip. Utilize Form 2106 to claim employee business expenses that are not reimbursed. The total expenses must be sufficient to allow itemization.