Your Travel Expenses While Away from Home

Your Travel Expenses While Away from Home

Your Travel Expenses While Away from HomeYou can deduct travel costs while away from home in the pursuit of business.

These costs include your lodging, meals (subject to a 50% limit), dry cleaning and laundry, and other expenses.

But the key to deductibility is being “away from home.”

What’s a tax home?

If you live and work in the same general area, your tax home and personal residence are essentially one and the same. Thus, when you go out of town for a conference or to see a customer or vendor, you can deduct your travel expenses for that trip.

If you have a personal residence in one location but work in another location outside your general area and the arrangement isn’t temporary, your tax home is the place of work. This prevents you from deducting the cost of going between your home and place of work. These costs are viewed as commuting costs, which are nondeductible personal expenses.

Where a person does not have a permanent place of business, but rather is employed temporarily by various employers at different locations outside the general area called home, the person’s permanent residence is the tax home. Traveling expenses from the residence to those temporary places of employment may be deductible. A temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for one year or less.

If a person accepts employment either permanently or for an indefinite time away from the place of his/her usual abode, the person’s tax home shifts to the location of the new principal place of business.

Determining the principal place of business is based on a review of the location where the taxpayer spends more time, engages in greater business activity, and derives a greater proportion of his/her income.

Independent contractor and various work locations

What if you are an independent contractor who works for more than one company at more than one location outside of the general area of your residence? Whether you can deduct travel expenses depends on the situation.

In one case, a taxpayer was a “concierge CFO” who traveled from his home in Atlanta to the company that engaged him in Pennsauken, NJ. He worked 4 days a week there and returned to Atlanta for the balance of each week. Because his contract with the company was for 3 years, this work there wasn’t temporary so his tax home became that location; no travel costs were deductible.

The fact that he was an independent contractor who was free to solicit business from other companies was not relevant because all of his income was from the NJ company. Thus, that location became his regular place of business (“tax home”).

Resource

Find more about deducting travel costs in IRS Publication 463.

Open
Close

Big Ideas for Small Business®
Find it for free on the App Store.
Get