There are new proposed regulations from the Internal Revenue Service concerning local lodging expenses.They will cover lodging expenses when not travelling away from the home for business.

Historically, any lodging expenses were not allowed as a deduction when the employee was not travelling. The proposed change allows an expense to be deducted if it is appropriate and helpful for the development of a business. It is not allowed if the primary benefit is the personal or social one and only secondarily as a benefit to the business.

Some examples of lodging that would not apply are: 1) lodging as a part of a benefit or compensation (weekend stay at a luxury hotel as a bonus). 2) Allowing an employee to avoid a long distance commute. 3) Because the employee is required to work overtime. 4) Lodging for a relocated employee as they look for a permanent residence. 5) If the employee will be using the lodging indefinitely.

An example of what may apply is requiring employees to stay at a local hotel to improve training or team building.

Under the proposed rule the employer could deduct the expense as a business expense or the employee could deduct it from their income if the cost were paid by the employee.

The tax code is an ever evolving set of rules. We highlight some of the changes here that may apply to you. But there is no way we can get to them all. When you are filing your taxes there is no solution better than hiring a tax professional. They have the annual training to help you out.