Rules for Travel Expenses

Travel expenses can be tax deductible if they follow the rules set forth by the IRS.

Employees can deduct qualifying travel expenses from their federal income taxes if they follow certain rules. Travel expenses that are incurred when you are on a temporary work assignment away from your home are tax deductible. The IRS deems that "ordinary and necessary" expenses associated with traveling are deductible when you are working away from your "tax home" in a temporary location for less than a year. Expenses for extravagant personal purposes are not covered. Business travelers can keep track of actual expenses for meals or use the standard deduction for the location. Meals are deductible at the rate of 50 percent of the unreimbursed cost.

Rules for What Constitutes Travel

You are eligible to deduct travel expenses if your duties require you to work in a location that is away from your main place of business for a period that is longer than your ordinary work day. However, if you live in one city and work in another, expenses are not deductible because your tax home is the city where you work. If you are called upon to work in several places on a regular basis, your tax home is the area where your main place of business is situated. Your main place of business is determined primarily by how much time you spend there.

Rules for Travel Expenses while Job Hunting

The IRS allows you to deduct travel expenses you incur while looking for work in your current business. Meals and hotels are expenses that can be deducted. However, expenses for job searches for a position that will be a career change are not eligible. Likewise, neither meals nor lodging are deductible when you are looking for your first job or if the job search is conducted after you had a substantial layoff from work, even if you are looking for a position in the same field.

Rules for Travel Expenses for Conventions

Companies often gather employees from different geographic locations for conventions, and conventions are held for many companies in the same industry. Travel expenses for conventions are deemed tax deductible by the IRS. However, you must be able to demonstrate that your attendance at the convention will benefit your business.

Rules for Deductible Travel Expenses

Employees can deduct transportation expenses while traveling for business between home and the business destination. Travel may be by plane, train, bus or car. The use of your car while at the business destination is also deductible, along with taxi fare and other transportation between the airport and hotel, the hotel and the work destination and between customers. The cost of meals and lodging are deductible along with any associated tipping. Necessary travel expenses like business calls, dry cleaning and computer rental fees are also deductible.

References

• IRS: Topic 511-Business Travel Expenses