| Business Expenses / Business travel away from home (within the U.S.) |  |
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There are the rules for
deducting the cost of your out-of-town business travel within the U.S.
These rules only apply if the business conducted out of town reasonably
requires an overnight stay. The actual costs of travel (e.g.,
plane fare, cab to airport, etc.) are deductible for out of town
business trips. Significantly, however, you are also allowed to deduct
the cost of meals and lodging. Your meals are deductible even if they
are 'personal,' i.e., not connected with business, although, as with all
deductible meals, only 50% of the cost is allowed (55% for long-haul
truckers, certain airline, train and bus employees, and certain merchant
mariners). Additionally, no deduction will be allowed for meals or
lodging to the extent the expense is 'lavish or extravagant.' Although
this term is not defined in the tax rules, it has been interpreted to
mean 'unreasonable.' Personal entertainment costs on the
trip aren't deductible, but business-related costs such as for
dry-cleaning, phone calls, and computer rentals are. Some allocations may be required if
the trip is a combined business/pleasure trip, for example, if you fly
to a location for five days of business meetings and stay on for an
additional period of vacation. Only the cost of meals, lodging, etc.,
for the business days are deductible—not for the personal vacation
days. On the other hand, with respect to
the cost of the travel itself (plane fare, etc.), if the trip is
'primarily' business, it can be deducted in its entirety and no
allocation is required. Conversely, if the trip is primarily personal,
none of the travel costs are deductible. An important factor in
determining if the trip is primarily business or personal is the amount
of time spent on each, although this isn't the sole factor. If the trip doesn't involve the
actual conduct of business but is for the purpose of attending a
convention, seminar, etc., IRS checks the nature of the meetings
carefully to make sure they are not vacations in disguise. Be careful to
save all material helpful in establishing the business or professional
nature of this travel. The rules on deducting the costs for your spouse if she accompanies you on a business trip are very restrictive. No deduction is allowed unless she's an employee of yours or your company and her travel is also for a business purpose. |
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