# Tax exempt relocation flight one-way or return?



## pericolo (Jul 29, 2013)

Hi,

When relocating (Australia to Texas) on an L1 visa your company can give you money for a one-way airfare and it's tax exempt

Does somebody know if the tax authorities in the US will also accept a return flight as tax exempt if I can show them that it's cheaper than a one-way flight?

I know that common sense would say yes, but unfortunately common sense doesn't work some times with tax authorities 

If you say it's accepted can you please let me know where have you found that in some official document? I can't find anything anywhere that says that this would be accepted
And I need to see it somewhere 'official' to have a meaninful discussion with my HR
Thanks


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## BBCWatcher (Dec 28, 2012)

Where are you finding the one-way limitation in the U.S. tax code? The L-1 is a nonimmigrant visa, so (absent a status change) an L-1 holder must return.


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## Bevdeforges (Nov 16, 2007)

pericolo said:


> Hi,
> 
> When relocating (Australia to Texas) on an L1 visa your company can give you money for a one-way airfare and it's tax exempt


Not really - the ticket (one way or round trip) counts as income - at least for US tax purposes. You then deduct the price of the ticket as part of your moving expenses, so net-net you don't pay tax on it. But the ticket is definitely not tax exempt.

The way most round trip tickets work these days, you can't collect the "unused" portion if you decide not to use the return flight part. If you do get a refundable round trip ticket, it's the same approach: declare the full value of the ticket and deduct your moving costs against it. If you cash in the return part, it's taxable income all the same.
Cheers,
Bev


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## pericolo (Jul 29, 2013)

Bevdeforges said:


> Not really - the ticket (one way or round trip) counts as income - at least for US tax purposes. You then deduct the price of the ticket as part of your moving expenses, so net-net you don't pay tax on it. But the ticket is definitely not tax exempt.
> Bev


I don't think that's correct
If the employer gives you money for relocation, there's a list of thing that do not count as income, and the flight for you and your family is one of them. (refer to IRS publication 521)

So, in the spirit of it, only a one way flight should be accepted, and if it's a return it's logical that they will consider half of the price of the ticket as income.

However I don't see anywere any reference to the exceptional situation where the one-way flight is more expensive than the return one (which is what I'm finding right now)
any idea if this is covered in any IRS document?


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## pericolo (Jul 29, 2013)

sorry will include quote for reference


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## pericolo (Jul 29, 2013)

BBCWatcher said:


> Where are you finding the one-way limitation in the U.S. tax code? The L-1 is a nonimmigrant visa, so (absent a status change) an L-1 holder must return.


on publication 521
the fact that the person relocating is on L1 is, as far as I know, irrelevant for the way the money spent on relocation flights is treated

if you think that's not the case please let me know where you saw this and I'll check it


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## BBCWatcher (Dec 28, 2012)

I'm not following your logic.

Your employer is sending you to the U.S. on business. This just happens to be a longer trip (L-1) but it's still a business trip, fundamentally. Generally if your employer buys the ticket then that's that. If your employer is giving you money to buy the ticket then what Bev describes is generally the scenario: the money is income, and your moving expenses (including the ticket) are generally deductible.

If the return portion of an employer-paid ticket is never used, it cannot be income to you. You never received that income.

If you're going to use the return portion of the ticket for a skiing vacation (or some other non-business purpose), that portion is taxable income. Going home at the end of the assignment, on the other hand, is still business-related.

I'm generalizing of course, but that's the basic idea. So where are you seeing anything different?


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## Bevdeforges (Nov 16, 2007)

They may have changed things in the many years since I moved on the company tab - however, they will NOT allow you "half the price" if you use a round trip ticket. The reason round trip tickets cost less than one-way is because they aren't usually refundable. In theory (though I've never heard of them doing it this way), the airline could come back and demand payment of the difference between the round trip fare and the full freight one way fare if you simply don't use the round trip portion. (Whether or not the round trip is refundable.)

If the ticket is not reportable as income, it really doesn't matter which kind of ticket your employer gets for you. That's the tax deduction the employer claims, and if the airline were to bother to come after them for the full one-way fare, it would be up to them to settle for the difference.

If, on the other hand, they are giving you the money to book your flight, the full amount they are giving you is (theoretically, at least) income to you, with the cost of the ticket you actually purchase being deductible as moving expense. In practice, if they give you the money, the IRS may simply "assume" that it is used for the airline ticket and not pursue it further (unless there are other "oddities" about your return that year that might provoke an audit).
Cheers,
Bev


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