How does per diem affect your taxes?
Most domestic crewmembers who work an average of 15 days per month will have a per diem allowance of around $10,000. Here’s an example-
|Per Diem Allowance||$10,000|
|Per Diem Deduction||$3,600||(80% x $4,500)|
Because you are Department of Transportation (DOT) employee, the difference between the per diem allowance and the per diem paid by your employer is multiplied by 80% (if you were not a DOT employee, it would be reduced by 50% instead of 20%, so you got that going for you- which is nice). As a side note, many tax professionals screw up the 50% versus 80%. That’s big bucks.
Rule of Thumb: You can take your per diem reimbursement for most domestic flying for most airlines and multiply it by 0.60. This is a wide brush of course, but it is also a good jumping off point to see if computing per diem allowances makes sense. In the above example, $5,500 x 0.60 is $3,300.
In the above calculation, your deduction is $3,600 which at a tax rate of 15% equals $540 in your pocket. International crewmembers can easily see a $10,000 deduction which is $1,500 in your pocket.
Seniority is everything as they say.