Hi everyone, My friend works for a movie company preparing sets like Terminator. He gets send to different locations for months at a time. His home is in Albuquerque, NM. He was send to Ruidoso for several month among other assignments. He does not get reimbursed for things like food or traveling. He bought a RV and he pulls it to the towns he works in so he does not have to stay at an hotel. How does he treat the purchase of the RV which was $31,000; he paid cash for the purchase on his tax return? Can he take depreciation? He does uses the RV for three weeks during the year to go to Mexico on vacation. Like always thank you for all your inputs, Marion
Sounds like he is an independent contractor. So he probably files a
1040 with Schedule C. Is this so?
State law requires that he file a state tax return in every state that he does business (though there might be reciprocal agreements). I started a thread about this "State tax issues" recently.
The RV is an asset and has to be depreciated. The official source is IRS publication 946 at
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An RV is probably 5 year property.
Federal law has section 179 deductions, which basically allow you to write off the cost, or most of the cost, in one year. There are limitations. An important one is that the business use must be more than 50%.
To determine business use you may divide the business miles by the total miles (business + commuting + personal miles here, though commuting miles from your home to your central office, which is probably your home, is zero).
There is also bonus depreciation, in case the 179 deduction is not enough or you elect to not use it.
States have their own laws for depreciation. They may not allow section 179 or bonus or accelerated depreciation, or may allow them in part.
What do you mean by "in lieu of personal living expenses"? He still has a primary home in Albuquerque, NM. If he travelled the movie- shoot sites and took an airplane and stayed in a hotel, the costs would have been deductible as a business expense (or employee business expense if he is a W2 employee). An RV is probably cheaper and allows him to haul lots of boxes of equipment. Even the gas he spends on the RV ought to be deductible.
My reply did mention that he has to allocate between personal and business use, probably by dividing the number of miles driven for each activity. And the massive depreciation options only apply if business use is more than 50%.
Residence is not the same as "tax home," so it doesn't matter where he has his residence. He is a TRANSIENT worker, so he is NEVER away from home - by definition. "If he travelled [to] the movie-shoot sites and took an airplane and stayed in a hotel, the costs ..." ARE NOT DEDUCTIBLE AT ALL.
There is no deduction here. He has no regular place of employment.
Maybe we don't have all the facts. If he does have a home office, say for accounting, scheduling, replying to emails, talking on the phone to clients, then that would be his tax home, and his RV expenses would be deductible.
This is a GREAT example of what happens when either a civilian tries to do their own return or someone who holds themselves out as a tax pro overreaches their qualifications - with all due respect to those involved.
There is a BIG difference between your TAX HOME and your place of residence. They are NOT synonymous, they have very different meanings.
Your residence is where you maintain the home you intend to return to at the end of the day (week, month, project - whatever).
Your tax home is where you work to make your money.
Take an airline pilot who lives in Atlanta because he loves Atlanta but whose airline has his base of operations at La Guardia. He maintains a small apartment near La Guardia where he stays when he has flights close together. BUT he goes home to Atlanta whenever he has 2 or more days off. This person has a Georgia residence and a NY tax home.
Hence, not ONLY are none of his living expenses in NY deductible, but for tax purposes he needs to file a NY tax return and pay tax to NY. He also has to file a Georgia return and pay tax to Georgia - Georgia should allow him some credit for the taxes he pays to NY, but likely not for ALL of those taxes.
When you have a person who has no fixed tax home then they can NEVER have deductible expenses for traveling away from home, even on a temporary assignment.
Now the issue is whether this client of your's is actually a transient worker with no tax home or whether they have a tax home that may also be their residential home. FWIW, you are NOT going to get a solid answer on this forum, there are too many things that we'd need to know to answer the question authoritatively. I'd suggest you retain a local pro, outline the issues and follow their advice.
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