United States Company Tax Site: Housing

Introduction The US Tax Code excludes nine types of fringe benefit expense from taxable income.

Business Travel Expenses that are "lavish or extravagant", says the IRS, are not tax deductible.

Qualified Tuition Reduction A qualified tuition reduction is tax-free.

Housing Most types of job-related housing cost are deductible.

Pensions Tax-privileged retirement plans: ERISA, ESOPS, IRAs etc.

Company Cars Personal use of a company car is usually a taxable non-cash fringe benefit.

Medical Expenses Benefits received from health-care plans are generally taxable; the current regime will be substantially changed by President Obama's health-care law.

NOTE: The tax regime applying to all fringe benefits is highly complex, and professional advice should be taken before planning any scheme designed to minimise taxation. These notes are intended simply to give a general overview and should not be relied upon as a basis for action in any particular case.

Housing

Employees can be reimbursed directly or indirectly (including services furnished in kind) for moving expenses. Deductible moving expenses include only the reasonable expenses of moving household goods and personal effects from the former home to the new home, and travelling (including lodging) from the former home to the new home.

Employees can be given lodging by an employer if it is furnished on the business premises, if it is furnished for the employer's convenience and if the employee accepts it as a condition of employment.

In July 2004, The American Institute of Certified Public Accountants urged Congress to reject a proposal contained in Senate tax legislation which aimed to restrict employer-provided housing benefit for workers based overseas.

In a letter to House and Senate tax writers, the AICPA argued that the measure, which was included in the Senate ‘JOBS’ bill, "will reverse long-standing tax policy and result in the loss of American jobs and exports".

Overseas workers had been permitted to exclude up to $80,000 from American income taxes, and where employers pay for housing costs, individuals can exclude costs that are considered not to be “lavish or extravagant”.

However, under proposals advanced by Sen. Mary Landrieu (D-La), the employer-paid housing costs would have been included in the $80,000 limit as part of a plan intended to help firms who continue to pay the salaries of National Guard and Reservists on active duty.

The AICPA expressed concern that if the proposal became law, it would lead to many foreign-based American workers losing their jobs, as firms would hire foreign employees in their place. The Institute was therefore delighted to learn that the provision did not pass with the rest of the JOBS Act. For 2010, housing costs are based on location up to a maximum of $114,300.

For 2010, the maximum foreign earned income exclusion was up to $91,500 per qualifying person, for 2011 it will be $92,900.