• David Manes

What is business travel and when can you deduct for it?

If you often travel overnight for business the tax laws allow you to deduct for airfare, hotels and other business related expenses. However, there is a small maze of laws surrounding when and when you cannot deduct for business travel. Let’s take a quick look at what business travel is and when the IRS will allow you to deduct for it.

What is business travel?

For tax purposes business travel is when you travel away from your tax home for business purposes and stay a night away. There is no set mileage for how far you must travel, but it has to be outside the city limits or outside of your regional area. You cannot just stay in a hotel across town and hope to deduct it. If you do not stay overnight you cannot take an overnight business deduction, but local business trips are also deductible.

Differences between local business trips and overnight trips

For local business trips you are only entitled to deduct your transportation expenses, such as the cost of driving or using some other means of transportation. However, when you travel overnight you may deduct your travel expenses, your meals and a few other expenses.

Where is your tax home?

Your tax home is the entire city or general area where your principal place of business is located. If you run your business out of your residence your tax home is the city or area where you live. The IRS generally gives you a 40 mile radius of the area around your home.

No main place of business

Many professions have no main place of business, such as the traveling salesperson. In that case the IRS will let you use your home as your principal place of business where:

  1. You do part of your business there and live at home while doing business in the area around your home

  2. Have living expenses at home that are duplicated when you travel on the road.

  3. Satisfy one of the these three requirements:

  4. You have not abandoned the area where your home is located – you work in the area or have contacts there

  5. You have family living in your home

  6. You often live in the home yourself

Additionally, your home may still qualify if you meet just two out of the three requirements, as the IRS will take a holistic view of all the facts and circumstances of your situation.

Conclusion

There are two types of business travel: overnight and local. You may deduct for both, but the overnight travel gives you greater breadth in what to deduct. When deducting for business travel you must determine if your travel meets the distance requirements and what your “tax home” is. After making these determinations you are on the right track to determining how much you will be able to deduct. For more info on travel deductions stay tuned in to this blog or contact a local attorney to answer your questions.[1]


 

[1] Stephen Fishman, Home Business Tax Deductions: Keep What You Earn, 226-230 (Diana Fitzpatrick ed., Nolo 7th ed. 2011).

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