Tax Topic #511 |
2008 Tax Year |
Topic 511 - Business Travel Expenses
Travel expenses are the ordinary and necessary expenses of traveling away
from home for your business, profession, or job. Generally, employees deduct
these expenses using Form 2106 (PDF) or Form 2106-EZ (PDF) and on Form 1040, Schedule A (PDF). You cannot deduct expenses that are lavish or extravagant
or that are for personal purposes.
You are traveling away from home if your duties require you to be away
from the general area of your tax home for a period substantially longer than
an ordinary day's work, and you need to get sleep or rest to meet the demands
of your work while away.
Generally, your tax home is the entire city or general area where your
main place of business or work is located, regardless of where you maintain
your family home. For example, you live with your family in Chicago but work
in Milwaukee where you stay in a hotel and eat in restaurants. You return
to Chicago every weekend. You may not deduct any of your travel, meals, or
lodging in Milwaukee because that is your tax home. Your travel on weekends
to your family home in Chicago is not for your work, so these expenses are
also not deductible. If you regularly work in more than one place, your tax
home is the general area where your main place of business or work is located.
In determining which is your main place of business, take into account
the length of time you are normally required to spend at each location for
business purposes, the degree of business activity in each area, and the relative
significance of the financial return from each area. However, the most important
consideration is the length of time spent at each location.
Travel expenses paid or incurred in connection with a temporary work assignment
away from home are deductible. However, travel expenses paid in connection
with an indefinite work assignment are not deductible. Any work assignment
in excess of one year is considered indefinite. Also, you may not deduct travel
expenses at a work location if it is realistically expected that you will
work there for more than one year, whether or not you actually work there
that long. If you realistically expect to work at a temporary location for
less than one year, and the expectation changes so that at some point you
realistically expect to work there for more than one year, travel expenses
become nondeductible when your expectation changes.
You may deduct travel expenses, including meals and lodging, you had in
looking for a new job in your present trade or business. You may not deduct
these expenses if you had them while looking for work in a new trade or business
or while looking for work for the first time. If you are unemployed and there
is a substantial break between the time of your past work and you're looking
for new work, you may not deduct these expenses, even if the new work is in
the same trade or business as your previous work.
Travel expenses for conventions are deductible if you can show that your
attendance benefits your trade or business. Special rules apply to conventions
held outside the North American area.
Deductible travel expenses while away from home include, but are not limited
to, the costs of:
- Travel by airplane, train, bus, or car between your home and your business
destination. If you are provided with a ticket or you are riding free as a
result of a frequent traveler or similar program, your cost is zero.
- Using your car while at your business destination,
- Fares for taxis or other types of transportation between the airport or
train station and your hotel, the hotel and the work location, and from one
customer to another, or from one place of business to another
- Meals and lodging
- Tips you pay for services related to any of these expenses.
- Dry cleaning and laundry.
- Business calls while on your business trip. This includes business communications
by fax machine or other communication devices.
- Other similar ordinary and necessary expenses related to your business
travel. These expenses might include transportation to and from a business
meal, public stenographer's fees, computer rental fees, and operating and
maintaining a house trailer.
Instead of keeping records of your meal expenses and deducting the actual
cost, you can generally use a standard meal allowance, which varies depending
on where you travel.
The deduction for business meals is generally limited to 50% of the unreimbursed
cost.
If you are an employee, your allowable travel expenses are figured on Form
2106 or Form 2106–EZ. Your allowable unreimbursed expenses are carried
from Form 2106 or Form 2106–EZ to Form l040 Schedule A, and are subject
to a limit based on 2% of adjusted gross income. Refer to Topic 508 for
information on the 2% limit. If you do not itemize your deductions, you cannot
deduct these expenses. If you are self–employed, travel expenses are
deductible on Form 1040, Schedule C (PDF), Form 1040, Schedule C-EZ (PDF) or, if you are a farmer, Form 1040, Schedule F (PDF).
Good records are essential. Refer to Topic 305 for information
on record keeping.
For more information on travel expenses, refer to Publication 463, Travel,
Entertainment, Gift and Car Expenses. If you are a member of the National
Guard or military reserve you may be able to claim a deduction from income
rather than an itemized deduction on Form 1040, Schedule A, for unreimbursed
travel expense. To qualify the travel must be: overnight, more than 100 miles
from your home, and for drill or meetings. Expenses must be ordinary and necessary.
This deduction is limited to the regular federal per diem rate (for lodging,
meals, and incidental expenses) and the standard mileage rate (for car expenses)
plus any parking fees, ferry fees, and tolls. These expenses are claimed on
Form 2106, or Form 2106-EZ and carried to the appropriate line on Form 1040.
Expenses in excess of the limit can be claimed only as an itemized deduction
on Form 1040, Schedule A.
Page Last Reviewed or Updated: December 22, 2008
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