Many people travel frequently as part of their profession, job or business. Internal Revenue Service codes allow these taxpayers to deduct travel expenses that are the “ordinary and necessary” costs of traveling away from home. The rules prohibit taxpayers from deducting work travel expenses that are excessive or incurred for personal use.
The IRS defines traveling away from home as responsibilities that necessitate you being away from your “tax home” for a duration that is significantly longer that a regular work day and you need to rest or sleep in order to perform your obligations while on the road.
According to the IRS, your tax home consists of the city of general area where you job, or main place of business is located. Where you maintain your family residence does not come into play. For example, you may live in New York but work in Boston where you reside in a hotel and have meals in local eateries. You go home on the weekends.
You cannot deduct any of the expenses—lodging, meals or travel expenses incurred in Boston because it is your tax home. Since your travel to New York on the weekends to be with your family is not work-related, the costs are not deductible. If your duties require you to work in more than one city, your tax home is the general area where your primary place of work or business is situated.
Here are guidelines for determining your tax home:
- Length of time you typically spend at each location to conduct business
- Degree of business activity for each area
- Significance of financial return from each area business
The length of time spent at each location is the most important factor. You may deduct expenses related to a temporary work assignment away from home. You cannot deduct work travel expenses associated with an “indefinite” work assignment—an assignment that exceeds one year. In addition, rules prohibit you from deducting travel expenses at a work location that you can reasonably anticipate you will work there more than 12 months even if it turns out to be less than a year.
If you that you will work at a temporary location for one year or less, and your outlook changes and you reasonably expect to work at the location for in excess of a year, the travel expenses become nondeductible from the time your expectations change.
Deductible travel expenses
You can deduct the travel expenses you incur when looking for a new job within your current profession or trade, including lodging and food. You cannot deduct any expenses looking for work in a new trade or profession or while looking for employment for the first time.
If you become unemployed for a substantial duration between your last job and when you actually began looking for new work, your expenses are nondeductible. If you can show that your attendance at a convention benefits your profession or business, you can deduct the expenses. If the convention takes place outside of North America, you must follow specific rules.
Refer to IRS Publication 529, Miscellaneous Deductions for more information.
Following is a list of deductible costs:
- Meals and hotel
- Actual costs incurred for travel by airplane, train, bus, or car between your home and your business destination.
- Use of your personal vehicle at business destination—standard mileage rate or actual expenses, including tools or parking fees
- Fares for taxi, subway, buses or other types of transportation between the airport or train station and your hotel, hotel and the work location, from one place of business to another or and from one customer to another
- Tips you pay for services related to any of these expenses.
- Laundry and dry cleaning
- Business communication—phones calls, faxes or other communication devices
- Shipping cost for baggage, samples, displays or other material between regular and temporary job locations
You may also deduct other ordinary and necessary work travel expenses, such as computer rental fees, maintaining a house trailer or transportation to a business meal.