Corporate Housing BlogShort Term Rental › How Is Corporate Housing Taxed? Is It Tax-Deductible?

If you need short-term lodging, corporate housing can save you money up front over the cost of a hotel. But what about after the stay when you’re filing your taxes? In this article, we’ll discuss the tax implications of corporate housing.

[What is Corporate Housing? Who Uses It?]

Safe Harbor vs. Facts and Circumstances

You may have heard of the safe harbor test. That’s an IRS rule that applies to business-related local lodging expenses. But that test only considers lodging not away from home – such as for business meetings, conferences and training – and for less than five days.

To evaluate longer stays, one must use the facts and circumstances test. The exceptions we’ll discuss in the following section all come from that IRS test.

Is Corporate Housing Taxable or Tax-Deductible?

Question mark icon, to illustrate corporate housing tax article.

As a general rule, the IRS considers employer-provided housing to be a fringe benefit, and fringe benefits count as taxable income for an employee. 

An exception is granted if the lodging is for the convenience of the employer, is on the business’s premises, and is provided as a condition of employment. This most often applies to workers in civil service, government, education, or construction or maintenance. An example would be a building superintendent who occupies an apartment within the complex that he or she manages. So this exception, allowing lodging to be excluded from wages, generally would not apply to a business traveler.

The exception that is more relevant for business travel allows a business to deduct the cost of a corporate apartment if the housing is for a work-related, temporary relocation.

A significant portion of corporate housing falls in this category. As long as the assignment lasts for one year or less, and takes place away from the employee’s tax home (the metro area where he or she works), the housing allowance may be excluded from the employee’s taxable income assessment. It then can be considered a business expense for the employer.

How Are Corporate Housing Allowances Taxed?

Apartment building exterior, to illustrate corporate housing tax article.

The above section discusses corporate apartments, but what about housing allowances?

Well, the same rules apply in this situation. The housing allowance is considered a business expense for the employer, and a taxable fringe benefit for the employee, unless the employee is:

  • Living on the business’s premises
  • Housed for the employer’s convenience, or
  • Given quarters as a bonafide condition of employment.

How Do You Deduct Corporate Housing on Your Taxes?

Man doing his taxes, to illustrate corporate housing tax article.

If you’re an employer who pays for corporate housing that is not subject to any of the above exceptions, you can deduct the actual cost of providing the housing.

If you’re an employee who receives housing assistance from your employer, unless the previously mentioned conditions are met, the IRS will consider your corporate housing to be a fringe benefit. Therefore, it is part of your taxable income.

[How Much Does Corporate Housing Cost? Who Pays?]

Corporate Housing Is Beneficial for Employees and Employers

For employees, corporate housing may be considered taxable compensation, but it’s still a great perk. You just may have to pay taxes for the privilege.

For employers, the cost of providing corporate housing can result in a substantial tax write-off. And when it comes to saving money on corporate taxes, every credit and deduction helps.

Need More Help?

The following IRS publications, while a bit dense, provide lots of guidance and examples straight from the tax horse’s mouth:

Publication 463 (2016), Travel, Entertainment, Gift, and Car Expenses

Publication 15-B (2017), Employer’s Tax Guide to Fringe Benefits

IRS Fringe Benefit Guide

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About Mark Edelen:

Welcome. I’m Mark, the organic SEO analyst for CorporateHousing.com, After55.com and ForRentUniversity.com. I’m here to share tips for business travelers from our partners at ForRent.com. You’ll find me on Twitter, tweeting about search and digital media trends, @MarkEdelen.

Comments

  1. Richard Thornburgh says:

    I moved to Houston from California and lived in corporate housing for 6 months.
    I had cancer and was being treated at Mdanderson in Houston.
    Are my rental expenses deductible as a medical expense related item?

  2. I have a potential tenant who is looking to stay at one of my rentals via corporate housing. What are their expectations via utilities, Internet, and having the house furnished? How do corporations pay the landlords. My place is easily going for 2600 and it’s advertised without utilities and without furnishings is it reasonable for me to ask for 3200 with utilities and furnishings included? How do I accept form of payment and what’s the benefit of having a corporate housed tenant vs a standard family?

  3. Hi Mark,
    If we hire an employee who lives 4 hours away from the office, and we pay for his hotel stay from Monday to Thursday to work at the office, is this a fringe benefit and therefore income taxed? or can this be a company expense. I was pretty sure from your write up it could be considered a company expense if it was for less than a year.
    Ryan

    • That’s an interesting question, Ryan. I’m afraid only a tax professional – and ultimately, the IRS – could answer it definitively, however.

      If you haven’t, you might want to read the IRS’ Fringe Benefit Guide – https://www.irs.gov/pub/irs-pdf/p5137.pdf – particularly Section 9 dealing with travel expenses and Section 12 dealing with meals and lodging. Section 9’s definition of the employee’s “tax home” seems particularly relevant.

      – Mark, CorporateHousing.com

  4. Nina Knox says:

    Mark, hi, can you please share any good corporate housing contract samples? Just curious what to expect. Thank you, Nina

  5. Benjamin Perkus says:

    Hi mark we are from New York and are setting up an office in California. We have a property that has a building that will serve as an office for our corporation and it has a house on the grounds that we will be living in for the year while we run the company from the office. Is the entire rent of the property considered a business expense since it is the location we are doing business from and we need to live there while we work there? We still have our home in New York that we will go to from time to time.

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