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Who is most likely to benefit from the per diem deduction?
You are likely to benefit if:
You don’t earn a huge amount of money (Generally Everyone but the highest paid Major Airline Captains)
You Itemize (You have a mortgage)
You have other employee deductions (flight cases, Jepp. Binders, uniform, etc.)
Your per diem reimbursement isn’t excessively high (lower per diem equals a bigger per diem deduction)
You occasionally overnight in several big cities or international cities (OCONUS is usually higher than CONUS
First, you have to itemize to benefit. If you take the standard deduction for your taxes, the per diem deduction will not increase your refund. Generally, if you pay mortgage interest, you are someone who itemizes. In that case, the per diem deduction may increase your refund.
If you itemize, the second test to determine whether you will benefit is called the 2% limit. The 2% limit refers to all of your employee business expenses. It basically says that your employee business expenses must be more than 2% of your adjusted gross income in order to benefit. The per diem deduction is one component of your employee business expenses. Other employee business expenses may include a roller bag, flashlight, unreimbursed uniform expenses, etc. If these deductions exceed 2% of your AGI, you may benefit from the per diem deduction.
The third test is the amount you are reimbursed from your company. If your company pays you a lot of per diem, you are less likely to benefit. That is because the per diem deduction is to allow you to recover the difference between what the government allows you and what your company reimbursed you. If you were fully reimbursed, then you would get no benefit from this deduction. If were only partially reimbursed, you get a deduction based on the difference.
The fourth and final consideration is determined by the cities you overnighted in during the tax year. International trips and trips to high-cost cities such as New York will yield a higher deduction than trips to overnights like Victoria, Texas or similar small cities.
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