HOME

ABOUT US

SERVICES

TAX INFO

TAX TOOLS

CONTACT US
 

 

 

 

 


Work Related Travel Expenses and Deductions

If you temporarily travel away from home you can use this guide to determine if you have deductible travel expenses. This guide defines what is needed to meet the IRS requirements to deduct these expenses on your federal tax return. These deductions are part of Itemized Deductions from Schedule A of your tax return. The total of Itemized Deductions needs to exceed the Standard Deduction to be worthwhile in computing your taxable income.

Even if you are reimbursed for some of your expenses there are deductions not covered by the reimbursement that can still be taken. When looking at your total deductible expenses it may show you have exceeded even the reimbursed amount received.

tax home

To deduct travel expenses, you must first determine the location of your tax home. Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. It includes the entire city or general area in which your business or work is located. If you have more than one regular place of business, your tax home is your main place of business.

If you do not have a regular or a main place of business because of the nature of your work, then your tax home may be the place where you regularly live. If you do not have a regular place of business or post of duty and there is no place where you regularly live, you are considered a transient (an itinerant) and your tax home is wherever you work. As a transient, you cannot claim a travel expense deduction because you are never considered away from home.

You may have a tax home even if you do not have a regular or main place of work. Your tax home may be the home where you regularly live.

Factors used to determine tax home.

If you do not have a regular or main place of business or work, use the following three factors to see if you have a tax home.

  • You perform part of your business in the area of your main home and use that home for lodging while doing business in the area.
  • You have living expenses at your main home that you duplicate because your business requires you to be away from that home.
  • You have not abandoned the area in which your main home is located; you have a member or members of your family living at your main home; and you return there when not on assignment.

If you satisfy all three factors, your tax home is the home where you regularly live, and you may deduct travel expenses. If you satisfy the two factors, you may have a tax home depending on all the facts and circumstances. If you satisfy only one factor, you are a transient; your tax home is wherever you work and you cannot deduct travel expenses.

Temporary Assignment or Job

You work outside the city or general area of your tax home and it is not practical to return home from this other location at the end of each workday you are considered to be away from home for the whole period you are away from your tax home. Your travel expenses are deductible. Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for less than one year

However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you cannot deduct your travel expenses while there. An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than one year, whether or not it actually lasts for more than one year. If your assignment is indefinite, you must include in your income any amounts you receive from your employer for living expenses, even if they are called travel allowances and you account to your employer for them. You may be able to deduct the cost of relocating to your new tax home as a moving expense.

What Travel Expenses IS Deductible?

Deductible travel expenses include those ordinary and necessary expenses you have when you travel away from home on business. The type of expense you can deduct depends on the facts and your circumstances.

vehicle Expenses

If you use your vehicle for business purposes, you can use one of two methods to figure your expenses: actual expenses or the standard mileage rate. Definition of a vehicle includes a car, van, pickup, or panel truck.

Standard Mileage Rate

You may be able to use the standard mileage rate to figure the deductible costs of operating your vehicle for business purposes. For 2009, the standard mileage rate is 55˝ cents a mile for all business miles.

You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. 

Actual Car Expenses

If you do not choose to use the standard mileage rate, you may be able to deduct your actual car expenses. Actual car expenses include the costs of:

  • Depreciation
  • Lease payments
  • Rental
  • Registration fees 
  • Licenses
  • Insurance 
  • Repairs
  • Gas 
  • Oil
  • Tires 
  • Garage rent
  • Parking fees 
  • Tolls

Depreciation Deduction

If you use a vehicle you own in your business, you can claim a depreciation deduction: that is, you can deduct a certain amount each year as a recovery of your cost or other basis in the car. You cannot use the standard mileage rate if you decide to take a depreciation deduction in the year you first place the car in service.

  • You generally need to know the following three things about the vehicle you intend to depreciate.
  •  Your basis in the car (what you paid for it).
  • The date you place the car in service (began using for business).
  • The method of depreciation, recovery period, and convention you will use. For most business use vehicles this is five years using the straight-line convention.

You may also claim a section 179-Deduction in the first year, which is accelerating a portion of the overall depreciation to the first year.

No matter which method of expensing your vehicle deduction you must track your business mileage for the year. This is discussed in detail in the recordkeeping section of this guide.

Lodging, Meals and Incidentals

The costs of motels, temporary lodging, including utilities are deductible for each day you are considered on temporary assignment. This also includes the days for traveling to the temporary assignment and returning to your tax home. A travel day is defined as longer than 500 miles of travel by vehicle.

Standard Meal Allowance

The IRS now allows a standard meal method as an alternative to the actual cost method. It allows you to deduct a set amount, depending on where and when you travel, as defined in the federal per diem instead of keeping records of your actual costs. If you use the standard meal allowance, you still must keep records to prove the time, place, and business purpose of your travel. 

Incidental Expenses

These include, but are not limited to, your costs for the following items.

  • Laundry, cleaning and pressing of clothing
  • Fees and tips for persons who provide services, such as porters and baggage carriers.

Other Deductible Expenses

These include, but are not limited to, your costs for the following items.

  • Taxicab fares
  • Lodging taxes
  • Costs of telegrams or telephone calls
  • Trade publications
  • Safety equipment
  • Union Dues
  • Work clothes

Some other deductions that can be claimed but are often subject to close scrutiny by the IRS are; cell phone charges, computers, and home office deductions.  The IRS requires they be exclusively for business use to claim a full expense deduction. A small portion of these expenses can be claimed as business usually without too much trouble.

Record Keeping

When you travel away from home on business, you should keep records of all the expenses you have and any advances you receive from your employer. You can use a log, diary, notebook, or any other written record to keep track of your expenses.

You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. You must generally prepare a written record for it to be considered adequate. This is because written evidence is more reliable than oral evidence alone. However, if you prepare these records by computer with the aid of a logging program, it is considered an adequate record.  Logging programs are software such as Microsoft Money, Quicken, and similar financial tracking programs. If you keep timely and accurate records, you will have support to show the IRS if your tax return is ever examined.

Adequate Records

You should keep the proof you need in an account book, diary, statement of expense, or similar record. You should also keep documentary evidence that, together with your record, will support each element of an expense.

Exception

Documentary evidence is not needed if any of the following conditions apply.

  • You have meals or lodging expenses while traveling away from home for which you account to your employer under an accountable plan, and you use a per diem allowance method that includes meals and/or lodging.
  • Your expense is less than $75.
  • You have a transportation expense for which a receipt is not readily available.

Adequate evidence

Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense. Although not specified in tax law the IRS is now accepting the records from credit and debit cards as proof of expenses and evidence as to time and place of the expense.

To claim vehicle expense deductions you must track your personal and business mileage for the year. Using the standard mileage method only the business miles are computed for deduction. In the actual expense method the listed expenses are reduced by the percentage of personal mileage. Tax law describes the method for keeping these records is a logbook showing the date, odometer readings, and purpose of the travel. In reality, the IRS will accept a vehicle service record that shows date and odometer reading for a date prior to starting the business travel as the beginning odometer reading, and a similar record late in the year as the ending odometer reading. You must also provide evidence as to the business mileage by logbook or computerized mapping service for the travel locations.

Not every mile logged while away from home is business miles. Mileage to the work location from home by the best direct route is business related. Swinging by Aunt Thelma’s house on the way is not business even though it was only fifty miles off the most direct route. Once at the work location daily travel from your temporary lodging to the job site is business related. Going to the Laundromat and restaurant is personal mileage and not deductible.

How Long To Keep Records and Receipts

You must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep records that support your deduction (or an item of income) for 3 years from the date you file the income tax return on which the deduction is claimed. A return filed early is considered filed on the due date. You must keep records of the business use of your car for each year of the recovery period.

CONUS – Federal per diem rates

The government developed CONUS to determine the maximum it would reimburse their employees for travel on business. Companies also use it as a guide for giving their employees reimbursement, or a per diem allowance for work related travel. A common myth among traveling workers is that if you receive a per diem that is less that the CONUS amount for that area you can deduct the difference as an expense. Well, let me put it this way, the law does not state that you can, and does not state that you cannot.  The IRS does allow a deduction for meals at the CONUS rate for the location of travel, and that you only need proof of lodging expense if over $75/day, but there are many factors in determining your deductions such as, location, duration, any reimbursements received, and gross income.

If under the scrutiny of the IRS you are having trouble proving any where near the amount claimed as a deduction taken it will lead to a denial of the deduction, your taxable income being recomputed and a new amount of tax owed along with penalty and interest being added to it. Being reasonable and using common sense achieves a much better outcome in the long run.

I hope this guide has helped you gain a better understanding of work related travel deductions. If you have any questions or need assistance do not hesitate to contact us.