PilotWombat

I used to have a pretty good handle on per diem tax laws pre-TCJA, but I've been off on leave for several years and now that I back on an international category, I am noticing that a chunk of my per diem payments are listed as taxable. I tried reading through Pub 463, and now I'm more confused than before. It appears our setup is a Nonaccountable plan, which further down says:

It used to be that it wasn't included in Box 1 but was listed in box 12 with code L. The way I read this, it means that ALL of our per diem is taxable, and there's not exception. The fact that on my paycheck some is taxable and some non-taxable means that there's some basis for it not ALL being taxable; what is it? I can't find a source.

tennisguru

Any per diem earned on a multi-day trip is tax free. Per diem is taxable for a rotation if you do not spend a night away from home. So 1 day trips generate taxable per diem.

PilotWombat

Right, that's what I thought. But my timecard shows both domestic and international taxable and non-taxable per diem for a continuous 6 day trip. Before I go complaining to the company that they did it wrong, I want to make sure I understand it correctly. Hence why I looked up the Pub 463, which seems to say that ALL our per diem is taxable. So...that's why I'm confused and asking if anyone has a source for what you just said.

HelloNewnan

This is only true up to a limit, which I understand our new per diem rules is bumping up against.

Planetrain

Edit: Reformatted

Per diem when away on overnights has always been tax free because the employer is paying for your meal expenses. Day-trip per diem is taxable per IRS rules because you are not considered “away from home”.

Form 2106 allowed us to deduct 80% the difference between government rates and the lesser amount Delta paid us. The notes in the instructions for form 2106 explain that this “deduction” has been suspended for most workers (including pilots) because of the Trump era tax cuts (67a). While the tax deduction for the difference is gone, the tax free nature of those per diem payments remains.

To explain further, per diem in excess of our actual expenses has always been taxable. In lieu of substantiating receipts for actual expenses, we are allowed the government rates (as outlined in pub 463) and it is deemed substantiated. (I would be quite surprised if you are being paid more than the government rates for M+I). Your per diem will still be listed on your W2 under box code L.

I won’t copy&paste it all, but read under “accountable plans” in the reimbursement section of Pub 463 and you can see how the IRS gives tax free status to per diem. We don’t have to provide receipts for per diem so long as our payments from DL stay under the government rates. (Payments above government rates will be listed as income, box 1 W2). You do need to technically keep a record of your overnights - a logbook, icrew schedule printouts, etc suffice.

I too see the new taxable per diem line on my November icrew pay statement, but I don’t have any values listed for it. Maybe you’ve got more TAFB than me?

iahflyr

Exactly this. Day trip per diem is taxable, but per diem on overnight trips is tax exempt. That has always been the case.

What has changed is we used to be able to write off 80% of the difference between the higher government M&IE rate and what we got paid. So if govt per diem in DC is $79/day, and we got paid $2.50/hr per diem ($60/day), we could have written off the $19 difference. Unfortunately that is one of the many deductions we lost with TCJA under Trump.

Under TCJA, you can also no longer write off union dues, unreimbursed employment expenses, moving expenses, tax prep expenses, state income tax and property tax of 10k a year or more, and mortgage interest over 750k (neither of these limits increase with inflation).

TCJA was the largest tax increase of my life. Good riddance when TCJA expires in 2 years and 15 days (Yes I have been counting since late 2017).

Gone Flying

good thing our current domestic per diem is pretty close to the max government rate. I doubt this would be a useful write off under our current domestic diem rules. It would help for those that fly Long haul international.

While I Can agree they should adjust with inflation, the housing was lowered from $1 million, not unlimited.

and we can disagree on if this is a good thing this all day, but it lowered taxes on those who do not itemize, which seemed to be the goal. When it went into effect my taxes went down( I was at the regionals and making what would be considered my most to be a middle class income), and based on some numbers I have run when it expires my taxes will either go up substantially if I take the standard deduction like I have been or still go up but by less and force me to itemize (more work at tax time)

bugman61

Not to go down a rabbit hole, but it’s surprising that you had your taxes go up under TCJA, as it was a very narrow group of people that would happen to. For me it was a huge decrease. Removal of the “marriage penalty” and adjusting the AMT made my actual taxes go down significantly. Under the previous code many of my deductions were already useless due to the AMT. TCJA eliminated much of my SALT deductions and all the job expenses, but my effective rate still went way, way down.

HelloNewnan

The AMT obliterated me year after year, for several years. It wasn't indexed in any meaningful way, and made all the small deductions irrelevant. I personally saw a significant decrease.

Planetrain

Same here. Reindexing AMT has lowered taxes for me tremendously.

If we revert to the old AMT threshold, a lot of you better be ready to pay 28% with little deductions.