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If you temporarily travel away
from your tax home, you can use this guide to determine if you have
deductible travel expenses. This guide defines "tax home,"
"temporary assignment," and "travel expenses,"
including the "standard meal allowance."
Travel expenses defined. For tax purposes, travel expenses are the ordinary and necessary
expenses of traveling away from home for your business, profession, or
job. However, you cannot deduct expenses that are lavish or extravagant.
See, later, What Travel Expenses Are Deductible? You will find
examples of deductible travel expenses in Table 1, later. 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. See No main place of business or work, later. 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. No main place of business or work.
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. 1) 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. 2) You have living expenses at your main home that you duplicate
because your business requires you to be away from that home. 3) You have not abandoned the area in which both your traditional
place of lodging and your main home are located; you have a member or
members of your family living at your main home; or you often use that
home for lodging. If you satisfy all three factors, your tax home is the home where you
regularly live, and you may be able to deduct travel expenses. If you
satisfy only 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 may regularly work within the city or general area of your tax
home and also work at another location. It may not be practical to
return home from this other location at the end of each workday. If your
assignment or job away from your main place of work is temporary; your
tax home does not change. You are considered to be away from home for
the whole period you are away from your main place of work. 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 one year or less. 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 Are Deductible? Once you have determined that you are traveling away from your tax
home, you can determine what travel expenses are 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. Table 1 summarizes travel expenses you may be able to deduct. You
may have other deductible travel expenses that are not covered there,
depending on the facts and your circumstances. 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. The types of expenses you need to
record, along with supporting documentation, are described in Table 2
. Table 1 | IF
you have expenses for: | THEN
you can deduct the costs of: | | Transportation |
Travel
by airplane, train, bus, or car between your home and your
business destination. | | Taxi,
commuter Fares for these and other types of transportation that
take you to or from bus, and
airport limousine | 1)
The airport or station and your hotel
2) The hotel and the work location of your customers or clients,
your business meeting place, or your temporary work location. | | Baggage
and shipping | Sending
baggage and sample or display material between your regular and
temporary work locations. | | Car |
Operating
and maintaining your car when traveling away from home on
business. You can deduct actual expenses or the standard mileage
rate, as well as business-related tolls and parking. If you rent
a car while away from home on business, you can deduct only the
business-use portion of the expenses. | | Lodging
and meals | Your
lodging and meals if your business trip is overnight or long
enough that you need to stop for sleep or rest to properly
perform your duties. Meals include amounts spent for food,
beverages, taxes, and related tips. See Meals for
additional rules and limits. | | Cleaning |
Dry
cleaning and laundry. | | Telephone |
Business
calls while on your business trip. This includes business
communication by fax machine or other communication devices.
Calls home to keep family apprised of your status. | | Tips |
Tips
you pay for any expenses in this chart. | | Other |
Other
similar ordinary and necessary expenses related to your business
travel. These expenses might include transportation to or from a
business meal, public stenographers fees, computer rental
fees, and operating and maintaining a house trailer. |
Standard Meal Allowance You generally can deduct a standard amount for your daily meals
and incidental expenses (M&IE) while you are traveling away from
home on business. In this publication, "standard meal
allowance" refers to the federal rate for M&IE (which varies
based on where and when you travel). Incidental expenses. These include, but are not limited to, your
costs for the following items. 1) Laundry, cleaning and pressing of clothing. 2) Fees and tips for persons who provide services, such as porters
and baggage carriers. Incidental expenses do not include taxicab fares, lodging taxes, or
the costs of telegrams or telephone calls. The standard meal allowance method is an alternative to the actual
cost method. It allows you to deduct a set amount, depending on where
and when you travel, 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. Car Expenses If you use your car for business purposes, you may be able to deduct
car expenses. You generally can use one of two methods to figure your
expenses: actual expenses or the standard mileage rate. In this
publication, "car" includes a 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 car for business purposes. For 2000,
the standard mileage rate is 32 1 /2 cents a mile for all
business miles. This rate is adjusted periodically. 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. Choosing the standard mileage rate.
If you want to use the standard mileage rate for a car you own, you must
choose to use it in the first year the car is available for use in your
business. Then in later years, you can choose to use either the standard
mileage rate or actual expenses. If you want to use the standard mileage
rate for a car you lease, you must use it for the entire lease period.
For leases that began on or before December 31, 1997, the standard
mileage rate must be used for the entire portion of the lease period
(including renewals) that is after that date.If you choose to use the standard mileage rate, you are considered to
have chosen not to use the depreciation methods discussed later. This is
because the standard mileage rate includes an allowance for depreciation
that is not expressed in terms of years. If you change to the actual
expenses method in a later year, but before your car is fully
depreciated, you have to estimate the remaining useful life of the car
and use straight-line depreciation. 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
- Registration fees Licenses
- Insurance Repairs
- Gas Oil
- Tires Garage rent
- Parking fees Tolls
Depreciation Deduction If you use a car 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 car
you intend to depreciate. 1) Your basis in the car. 2) The date you place the car in service. 3) The method of depreciation, recovery period, and convention you
will use.
Record Keeping If you deduct travel, entertainment, business gift, or local
transportation expenses, you must be able to prove (substantiate)
certain elements of expense. This guide discusses
the records you need to keep to prove these expenses.If you keep timely and accurate records, you will have support to
show the IRS if your tax return is ever examined. You will also have
proof of expenses that your employer may require if you are reimbursed
under an accountable plan. How To Prove Expenses Table 2
is
a summary of records you need to prove each expense discussed in this
publication. You must be able to prove the elements listed across the
top portion of the chart. You prove them by having the information and
receipts (where needed) for the expenses listed in the first column.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 a record in a computer memory device with
the aid of a logging program, it is considered an adequate record. Table 2 How To Prove Certain Business
Expenses | IF you have expenses for: | THEN you must keep
records that show details of the following elements. | Travel | Amount | Time | Place or
Description | Business Purpose & Business
Relationship | Cost of each separate expense for
travel, lodging and meals. | Dates you left and returned for
each trip. | Destination or area of your
travel | Purpose: Business purpose for the
expense or the Business benefit gained or expected to be gained. | Totaled in reasonable categories | | Transportation (Car) | Cost of each separate expense. | Date of the expense | | | For car expenses, the cost of the
car and any improvements. | | | | The date you started using it for
business. | | | | The mileage for each business use
and the total miles for the year. | | | |
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. Documentary evidence. You generally must have documentary
evidence, such as receipts, canceled checks, or bills, to support your
expenses. Exception. Documentary evidence is not needed if any of the
following conditions apply. 1) 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. 2) Your expense, other than lodging, is less than $75. 3) 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. For example, a hotel receipt is enough to
support expenses for business travel if it has all of the following
information. 1) The name and location of the hotel. 2) The dates you stayed there. 3) Separate amounts for charges such as lodging, meals, and
telephone calls. A restaurant receipt is enough to prove an expense for a business
meal if it has all of the following information. 1) The name and location of the restaurant. 2) The number of people served. 3) The date and amount of the expense. If a charge is made for items other than food and beverages, the
receipt must show that this is the case. 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.
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