Q: Tax Playa, what are the rules for business travel?
Terrence, Arlington VA
A: As a general rule, the ordinary and necessary expenses of business travel away from your tax home are deductible. You have to be away overnight. The deduction is only allowed to you, not your family. There are many limitations on this, though, which are aimed at preventing personal travel from being deducted as a business expense...
For more information on this, please see IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses.
Your "tax home" is the place of your regular course of business. This is distinct from your "family home," which is where you live. Therefore, business travel is relative to being away from where you normally work. If you work in many places, the plurality dictates the winner. If there is no plurality winner, the family home is the tax home.
Temporary Work Assignment
If you are temporarily away from your tax home for a work assignment (defined as expected to last less than one year), you can deduct business travel expenses. If you are away from your tax home for more than a year, where you are becomes your new tax home.
Deductible Business Expenses
- Transportation. Airplane tickets, train tickets, bus, and car expenses.
- Taxis. Airport to hotel, and hotel and work locations in the area.
- Baggage and Shipping.
- Car Expenses While at the Temporary Location. Business mileage or actual expenses.
- Lodging and Meals. 50% of meal-nondeductibility rules apply. Per-diem rates can be used in lieu of actual expenses.
- Telephone Calls.
- Miscellaneous Expenses.
Allocating Personal Use
If your trip is entirely for business use, it is 100% deductible. If it is partly for personal use, the personal percentage of the trip is not deductible. If the trip is mostly personal use, it is not deductible at all.
Travel Outside the United States
Travel costs to and from a destination outside the U.S. is deductible if the trip is entirely business-related. Even if it isn't entirely business-related, the cost is deductible if:
- the itinerary is not under your control, or
- you are outside the U.S. for less than a week, or
- you spend less than 25% of your time on personal activities, or
- vacation is not a primary concern in making the trip
There are daily dollar limits on the deductibility of luxury cruise travel.
The cost of attending conventions is deductible for you (but not your family). If conventions are on a cruise ship, there is an annual limit on deductibility of $2000.