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> For a remote w2 contract job in which per diem would come out of the
> hourly rate, is it always best to get the most per diem possible?
>
> I have been running comparisons of per diem vs no per diem (just
> itemized expenses) on various length hypothetical remote contract
jobs,
> and it appears that it is always best (take home pay wise) to get max
> per diem. However, my hypothetical cases have not been exhaustive.
Richard:
I'm neither a lawyer nor an accountant, everyone's tax situation is
unique, etc.
The advantage of per-diem income is that it can be tax-exempt, since the
government treats the per-diem amount as a substantiated business
expense without requiring you to actually substantiate the expense with
receipts or other documentation.
To qualify for that treatment, though, the per-diem amount must be less
than a certain amount (which was recently $141/day for most places in
the US, $226/day for "high-cost" localities -- these numbers might not
be accurate anymore). There are other requirements, as well; if a
substantial amount of money is involved, you should probably chat for a
few minutes with a tax lawyer or a CPA to make sure that what you're
getting will qualify as a per-diem allowance under the IRS's rules.
The per-diem allowance is most favorable to you if the entire amount is
tax-exempt and your federal income-tax rate is high. If your tax rate
is low, or if some or all of the per-diem amount is taxable, the benefit
to you is less. Worst-case (no tax advantage at all), the per-diem
amount would be treated as ordinary income.
-Andrew
=== Andrew Warren - awarren -at- synaptics -dot- com
=== Synaptics, Inc - Santa Clara, CA
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