A question we often hear is, “How far away from home should my assignment be in order to qualify for the tax-free housing stipend?“
Tax-free stipends are only available if 1) you have a permanent tax home and 2) you are working far enough away from your tax home that you need to get a second residence (hotel, apartment, long-term stay, etc.) and 3) are duplicating expenses. If you go to work and then drive home to sleep at your tax home every night, you do not qualify for the stipend.
A common myth is that your tax home must be 50 miles or further from your travel contract facility. It doesn’t matter if it’s 5 miles away or 55 miles. You can still get the housing stipend if you are not duplicating expenses, however, it would ALL be taxed. There is a lot of misinformation about a so-called “50-Mile Rule,” but in reality, there is no such thing.
The bottom line with eligibility for the tax-free stipends is that your travel contract location is “beyond a reasonable commute” from your tax home and those duplicated expenses. What might qualify as “beyond a reasonable commute” is a drive so long you would need to stop and rest an extended period of time (i.e. sleep). Another example could be geography or traffic conditions, like a work location that is technically only 25 miles away, but the time it takes to complete the commute between home and work takes perhaps four hours, for example.
Tax home rules can feel very subjective, and we advise our travelers to work with experienced tax professionals. There is more information available on this through a trusted source, TravelTax.