Summertime is travel time, and often it happens to include a conference or business travel.
We get asked often, “Is my travel deductible?”
Business travel expenses are deductible to a business, but what if the trip combines business activities and personal events? The deductibility of business expenses depends on where the journey takes place – within the United States, partially within the U.S., and entirely outside of the U.S.
What Is Considered Business Travel
Business travel is defined by the IRS as travel away from your tax home that is “substantially longer than an ordinary day’s work” and that requires you to sleep or rest while away from home. You must also sleep away from home to be able to deduct these costs. The travel must also be “temporary” (lasting less than a year). Your tax home is your regular place of business, not your family home (unless you have a home-based business); it is the place you are traveling from for business expense purposes.
Business Airfare on a Vacation?
When you travel to a business location where you spend the night, you are in travel status. But will the tax rules make this a business or personal night?
The rules also affect your costs during the day. When you have an overnight business travel day, you generally deduct your expenses of sustaining life for the day, such as breakfast, lunch, dinner, snacks, drinks, lodging, and taxis.
Business days also are essential in determining how much of your travel cost you may deduct. For example, on a seven-day trip to London, one business day makes the airfare deductible.
Yep, you heard that right. Six personal days and one business day in London—you deduct 100 percent of the airfare.
Transportation days are the trickiest days!
Days spent traveling to or returning from a destination outside the United States are treated as business days—provided you use a “reasonably direct route” and you don’t engage in “substantial diversions for non-business reasons” that prolong your travel time.
If you do not use a reasonably direct route, you count as business days the amount of time that a sufficiently direct way would have taken.
Similarly, if you engage in substantial non-business diversions, you count as business days the amount of time it would have taken without such pursuits.
These rules apply to whatever mode of transportation you use. So, if you travel by airplane and don’t take a reasonably direct route, you count as business travel days the number of days an airplane would take to reach your destination by a reasonably direct route. The same is true for travel by car or cruise ship.
Once you are at your business travel destination, if a Saturday, a Sunday, a legal holiday, or another reasonably necessary standby day intervenes while you endeavor to conduct your business with reasonable dispatch, you treat such a day as a business day.
If you have questions about your business travel, please do not hesitate to contact us.
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Michael Tannery CPA CDFA® AIF® ● CEO
Registered Principal | Tannery & Company
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The opinions expressed in this material are for general informational purposes only and is not a substitute for professional advice. Individual circumstances do vary.
