I'm a Conductor for Union Pacific railroad. I'm still learning what I can and can't deduct. My main confusion is the Meal and Incidental deduction. Like an idiot, I didn't save my reciepts for the last year, but I do get a 39 dollar-per-instance Per Diem for my stays in Eau Claire and Adams, WI. UP also reimburses 6 dollars non-taxable on each payslip for the return train home. I'll be sure to save every meal related receipt from now on. So here's my questions... First, do I get to deduct the total amout of Per Diem x total out-of-town stays as "Meals as covered by hours of service laws"?
Second, I assume I have to subtract the reimbursed 6 dollars per stay, meaning 33 dollars per out-of-town stay?
Third, going forward, let's say I HAD saved my reciepts. How does that work, do I choose between the total dollar amount of the reciepts or the Per Diem, or do I get to add the receipt total to the Per Diem and deduct the combined total? Also, that 6 dollar per instance reimbursement, I assume that gets subtracted?
Finally, can I only claim 80% of whichever total I get, or the full Per Diem, based on the laws for transportation jobs?

Seriously, if anyone here can give me a clear answer to these questions, you would be my personal hero. Thank you!

If you are a W-2 employee, and if the reimbursements you get are NOT taxable income (most likely), then saving receipts and deducting the costs are NOT worth the efforts.

Here is why: Such deductions fall under "employee business expenses", which must be reported on Form 2106. You would list your actual costs, or the per diem allowance under IRS Pub 1542, and then subtract the reimbursement provided by Union Pacific. THEN the meal costs are divided by two (you get to deduct only HALF of your meal costs). The difference (if any) is your net deduction, which is then transferred to miscellaneous deductions on Schedule A.

However, in order to be deductible, the amount transferred must EXCEED 2% of your Adjusted Gross Income. That is the first barrier to overcome.

The second barrier is the fact that you must itemize to claim this deduction. With a joint standard deduction of $10,900, most people do NOT itemize because the total of all itemized deductions do NOT exceed the $10,900.

There is a THIRD barrier as well: that is the Alternative Minimum Tax (AMT). If your meal per diem is fully taxable, then it would make sense to deduct your meal costs, because there is NO offset for your reimbursement on the Form 2106. However, if the deduction hits a certan level, the AMT kicks in and negates the deduction once it hits a certain level, which varies depending on your income level.

BOTTOM LINE:

1) If your reimbursement for meals is tax-free, it is NOT worth the effort to track your receipts and report the difference due to the barriers involved.

2) If your reimbursement for meals is taxable income, then it IS worth the effort to report the meal costs, but the final deduction will not be much, and will be capped by the AMT.

If you are a contractor who gets paid under Form 1099-MISC, then different rules apply. Let me know if you are getting paid under a Form 1099-MISC for additional guidance.