Taxpayers can deduct travel expenses if their duties require them to both be away from home for substantially longer than an ordinary day’s work and they need to get sleep or rest in order to meet the demands of their work. For tax purposes, a “home” is considered the individual’s regular or principal place of business which includes the entire city or general area in which the business premises is located. When a taxpayer has multiple places of regular employment, the principal place of business is determined by considering: the time spent on business activity in each area, the amount of business activity in each area, and the amount of the resulting financial return in each area.
Deductions are allowed for ordinary and necessary traveling expenses incurred by a taxpayer away from home in pursuit of a trade or business. Recognized categories of deductible travel expenses include:
- Meals and lodging, both en route and at the destination (limitations apply),
- Transportation costs, including air, rail or bus fares (limitations apply),
- The allocable portion for travel of the operating and maintenance expenses of automobiles, house trailers, and airplanes,
- Costs of auto leasing and airplane charter,
- Baggage transportation costs, as well as the costs of transporting sample cases or display materials,
- Cleaning and laundry expenses,
- Telephone costs,
- Commuting expenses, including the costs of transportation between an airport or station and hotel, from one customer to another, or from one place of business to another, and from the place where meals and lodging are obtained to a temporary work assignment,
- Tips incidental to the foregoing expenses, and
- Services and goods for handicapped travelers, so long as necessitated by work and used only incidentally in personal activities
Taxpayers may also deduct daily transportation costs of travel between their residence and a temporary work location, regardless of how far away (or close) the work location is situated. Several important factors used in determining if a taxpayer qualifies for the deduction are:
- Employment at a work location is considered to be temporary if it is realistically expected to last, and actually does last, for one year or less, in the absence of facts to the contrary.
- A work location is not considered to be temporary if it is expected to last for over a year or if there is no expectation that it will last for less than a year.
- If the expectation regarding a work location changes from being less than one year to over a year, then the employment is considered to be temporary until the date of the change.
If the taxpayer is not considered to be away from home, the aforementioned expenses are considered personal in nature and do not qualify as deductions. No deductions are allowed for the travel expenses of a spouse, dependent or other individual who accompanies the taxpayer, unless such person is an employee of the person who is paying or reimbursing the expenses, the travel of such person serves a bona fide business purpose, and the expenses of such person are otherwise deductible.