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Question for the Money Doctors

Question submitted on Feb 12, 2011.

Question

I took a 6-month position this year as a W-2 contractor and temporarily relocated to another state. Can I claim business expenses on schedule C for the travel to and from the location (MA to NM).

Answer

Travel expenses paid or incurred in connection with a temporary work assignment away from home are deductible. However, travel expenses paid in connection with an indefinite work assignment are not deductible. Any work assignment in excess of one year is considered indefinite. Also, you may not deduct travel expenses at a work location if it is realistically expected that you will work there for more than one year, whether or not you actually work there that long. If you realistically expect to work at a temporary location for less than one year, and the expectation changes so that at some point you realistically expect to work there for more than one year, travel expenses become nondeductible when your expectation changes.

If it was not your expectation to work at the temporary location for more than one year, and since you actually worked there for less than one year, the travel expenses related to this temporary assignment should be deductible. As an employee, you would report these expenses on Form 2106 and then as itemized deductions on Schedule A.  The deductible amount is limited by 2% of your adjusted gross income. 


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