A recent tax court decision allows local commercial fishermen to deduct 50 percent of meal expenses while traveling away from home in pursuit of a trade or business.

The decision was made last year in Kurtz v. Commissioner of Internal Revenue.

Kurtz attempted to deduct 100 percent of the federal per diem (per day) rate for each day he was at sea, claiming an exception to the general rule that a person may only deduct 50 percent of meal expenses.

His claim was denied, but the U.S. 11th Circuit Court of Appeals concluded that 50 percent of meal expenses could be deducted.

Since the deductions can be based on the per diem rate rather than actual costs, tax liabilities owed by commercial fishermen could potentially be reduced.

Actual costs must be incurred to take the per diem deduction, if no cost is incurred for meals and incidentals, the per diem deduction is not applicable.

“Fishermen should be taking a look at their actual expense(s) so if they have expenses for gear, meals, sleeping bag, whatever they need, and they should take a look at whether or not actual expenses are greater or less than the 50 percent reduction per day at sea,” Sam Thompson, administrative staff at George R. Rieth C.P.A., P.C., said.

The way it’s set up is there is a federal rate for the per diem meal and expenses deduction.

The per diem meal and incidentals rate is published by the United States Department of Defense and updated annually.

For Kodiak the rate is approximately $82 per day, and $86 per day for Dutch Harbor. One-half of the daily rate may be claimed per day at sea instead of deductions for provision at actual cost.

In order to check if this deduction is beneficial, qualifying commercial fishermen should document the dates spent at sea and/or setnet sites, as well as the location.

All settlement statements also should be reviewed to clarify what amounts, if any, were deducted from gross proceeds on each trip made. An analysis of this information will aid in determining whether actual costs or the per diem rate deduction would be most beneficial.

Thompson said it’s a tax court decision fishermen need to know.

“It’s important for them to know that this per diem deduction is available,” he said. “Fishermen can be saving money.”

Mirror writer Louis Garcia can be reached via e-mail at lgarcia@kodiakdailymirror.com.