Per Diem question.

That’s way too complicated for me. My company gives us the option of taking up to 33% of our gross pay as per diem (non-taxable), which is the most that the IRS allows.

Plus side: $125 more take home per every $1000 of gross pay.

Potential down side: to a lender, it looks like I’m making 1/3 less income.

 

In my opinion, it's better to have more take home pay than it is to impress a bank. Plus you can afford a bigger down payment to make up for it.

 

My company pays two rates... per diem is less per mile than non. But they pay the full rate of the taxes on the per diem. Non means I pay full income taxes on every dime I make. And I've spoken to bankers... they see the entire income as your income as long as it's on your paystubs and tax returns.
Per diem is what we used to be able to write off on our taxes to cover business costs of being on the road every day. The tax structure changed and now company drivers can't claim this as a deduction. Companies still get the tax write off.
In my case, the per diem option nets me more money at the end of the year. It could depend on your tax structure. It's a question for your accountant, not a forum of ppl who drive.

 

Big picture, yes, per diem is the way to go. Lower income taxes, lower FICA, and other benefits of having a lower "income", such as eligibility for financial aid for college age kids, subsidies for medical insurance through the exchange, etc. If you have a contentious ex spouse, reduced income my make support negotiations easier.

It "may" reduce your ability to qualify for loans. In my opinion, that's a positive, not a negative. Loans make every purchase more expensive, and one should strive to minimize the amount of money borrowed.

However, you will reduce your contribution to SS, which means that you will reduce any benefits from that program such as survivor benefits if you die, disability payments if you get hurt, and reduced SS when you stop working.

Therefore, anyone taking the per diem option should ALSO evaluate if they need additional (term) life insurance and long term disability insurance, as well as invest some of the savings in a qualified retirement plan (401K at work or an individual IRA).

Just saying "take the per diem" and spend the money on hookers and blow would be a poor decision.

 

When applying for my mortgage they asked for pay stubs which showed the higher take home pay with per diem so not an issue The real impact will be to social security as that is based on taxable income. Not something I am going to worry about as the tax savings on per diem allows me to put more in a 401k. Who knows is SS will even be around when I hit retirement age anyway.

 

Employer benefit is that they don't have to contribute as much to your Social security.

You don't have to do anything regarding per diem when you file your taxes.

 

It's crap like this is the reason per diem was considered a rip off by the companies.

The company is not paying any taxes on per diem. It's a write off. In addition since it's considered an expense reimbursement to the employee, there no payroll taxes.

So in addition to saving money on taxes, the company wants sell you that they're paying the taxes instead of you, so they can cut your pay.

You're working for a company that's screwing you. Take the per diem and not get the total pay your entitled to, while saving the company money. Or, turn down the per diem and pay more taxes than you should.

 

They’re trying to persuade you to do per diem because it saves them on payroll taxes, unemployment, etc... it’ll save you on taxes too, but would hurt you on things like unemployment, etc...

Also, you need ask if they charge for doing per diem. Some companies charge YOU so they can save money.