Finance

Is the Crew House Stay Tax Deductible?

2 August 2021By Tom Andrews
iStock/aleksey-martynyuk

Written by

Tom Andrews

This tax advice is not intended, and cannot be used, to avoid any penalties as a result of taking any position from this column. Thomas Andrews is a CPA and a principal of AvMar Accounting Services. +1 954 764 0404; www.avmaraccounting.com

It’s not uncommon for yacht crew to stay in temporary housing while traveling. Sometimes these stays are mandated by the owner, or the crewmember is in between jobs and needs crew housing until the next job begins.

Many crewmembers mistakenly believe that the crew house is tax deductible regardless of the circumstances. Ultimately, the deductibility of the crew home will be determined on a case-by-case basis and the most important factor is whether or not the crewmember is traveling away from their “tax home.”

The tax home doesn’t change when taxpayers are on a temporary assignment or job away from their main place of work. 

Generally speaking, travel expenses are only deductible when crewmembers travel away from their tax home to conduct trade or business. The tax home is an individual’s regular place of business, regardless of where the taxpayer’s business is located. If there is more than one regular place of business, the tax home is the main place of business; the tax home may be the place where the taxpayer regularly lives.

Taxpayers who do not have a regular place of business and who maintain no fixed home are considered itinerants. Their tax home is wherever they work. Thus, they cannot deduct travel expenses away from home. For example, if you are a crewmember and normally live with your parents rent-free when not traveling on the yacht, your travel expenses might not be deductible because your tax home becomes the yacht. And since you’re not traveling away from your “tax home,” your expenses are not considered deductible. If, however, you are keeping a home along with the expenses of maintaining that home, the duplicative housing or travel expenses you incur might be deductible.

The tax home doesn’t change when taxpayers are on a temporary assignment or job away from their main place of work. However, if the taxpayer is indefinitely assigned to a location other than the main workplace, the location of the assignment becomes the new tax home. Then, taxpayers cannot deduct travel expenses between their main residence  and workplace.

Generally speaking, travel expenses are only deductible when crewmembers travel away from their tax home to conduct trade or business. 

Taxpayers in this situation must include any amounts received from their employer for living expenses in income. This rule applies even if the amount is called a travel allowance and the employee accounts to the employer for it. Whether an assignment is temporary or indefinite must be determined when the work begins. If the taxpayer reasonably expects an assignment or job to last for one year or less, it’s temporary unless there are facts and circumstances that indicate otherwise.

If you’re a crewmember that is not incurring duplicative living expenses, chances are the deductibility of your crew home will be denied. It is also important for you to understand whether you’re being classified as an employee or a contractor. This determination will affect how potential travel expenses will be expensed on the personal tax return.

This article originally ran in the July 2021 issue of Dockwalk.

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