Posted by The TaxAdvocate Group, LLC

Unique Business Trip Expense Deduction

Unique Business Trip Expense Deduction

All the cost you incur while on a business trip away from home qualifies you for an impressive business expense deduction. There are, however, a lot of rules you must follow, or you risk seeing the wrong side of Uncle Sam.

While travel expenses are one of the most common business deductions, there are many things about it. When is a business trip classified deductible? What if you bring your family? How about a business trip to another city?

Depending on the circumstances and facts, here is a list of business trip expenses you can deduct:

  • Hotel expenses

  • Charges for baggage

  • Fares for bus, air or rail

  • 50% of the meal cost on the trip

  • Vehicle operation and maintenance on the journey like fuel cost, repairs, washing, lubrication, changing any parts, tolls, and parking fees.

  • Local transport cost for taxis and other means of transporting yourself from the train station or airport. 

  • Laundry expenses

  • Fax and telephone expenses


All Travel Expenses Must be Business Related 

For your trip expense to be deductible, it should be centered on business. You cannot deduct trips meant for pleasure, like a vacation. As long as the journey is away from home and is related to the existing business, you can remove it.

You, however, cannot deduct travel expenses related to starting or acquiring a new business. The provision from Uncle Sam for such is to add it as startup expenses. You can also elect to deduct some part or amortize what is left over 12 years.


All Expenses Must be Necessary and Reasonable

We classify travel expenses as a form of a business expense. As a result, you should meet the general business expense requirements to claim it as a deduction.

Lavish and extravagant business expenses cannot be deducted. The facts and circumstances will guide the deduction of the costs, and it must be reasonable. Although the silver lining is that Uncle Sam will not deny you because you chose to lodge in a five-star hotel or fly first class.

You Should be “Away From Home” to Deduct Travel Expenses 

While this seems obvious, you really must be traveling to qualify for the deduction.

With many of the tax laws, it comes with a deeper meaning. As a result, traveling away from home must meet the following two criteria:

  1. The travel is not around your vicinity, tax home, or place of abode.

  2. It is impossible for you to complete the trip without getting rest or sleep at a hotel, motel, or anywhere else other than your home. While it does not necessarily mean that you have to sleep overnight, it means the meeting or assignment was long enough that you had to catch a few hours of sleep before heading home.

According to Uncle Sam, the tax home is the general area that surrounds your business location. It can be a city or suburbs, without regard to the location of your place of abode.

We, however, have a couple of rules governing the above situations.


Two or More Places of Business: for people conducting their business in more than one location, take note of the total time dedicated to working in each area, the extent of business activity in each location, the income from each location, etc. With this, you can determine your central business place.


No Special Business LocationUncle Sam classifies people without a regular business place and dwelling place as an itinerant. Your tax home is anywhere you work. As a result, meeting the requirement for away-from-home is near impossible.

 

Temporary Assignment: For people working temporarily away from their primary business location, it does not change their tax home. By temporary, we mean less than a year. With this, your entire "away from home" expenses can be deducted.

 

Combining Business and Pleasure Requires Allocation 

There are provisions for travels that involve both business and personal stuff. For travelers' who engage in both business and personal activities, there is the opportunity to deduct traveling expenses, provided the primary purpose of the trip is business-related.

For a trip that the primary purpose is a personal assignment, the traveling appointment cannot be deducted. The fact that you had some business activity does not make it deductible while on the trip. Although, if you have expenses that qualify for business deductions, you can include it on your return.


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