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Your Business Travel Tax Deduction Questions Answered

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Question: Your Business Travel Tax Deduction Questions Answered
In this article you will find answers to some of the most common questions about tax deductions for business travel.
Answer:

What is "business travel," as defined by the IRS?
The IRS has a specific definition for business travel, for the purpose of determining the deductibility of expenses. The IRS says business travel is travel away from your tax home that is "substantially longer than an ordinary day's work" and that requires you to sleep or rest while away from home. You must also sleep away from home to be able to deduct these costs. The travel must also be "temporary" (lasting less than a year). Read more about the definition of a tax home. If the qualifications for business travel are met, then many business expenses while traveling may be deductible.

Can I deduct business travel costs for a trip that is primarily personal?
You can deduct business travel costs incurred during a personal trip. For example, if you are visiting family in another city and you make an appointment to see a client, your costs for that appointment are deductible business expenses. You cannot deduct any other travel costs since the trip was primarily personal. The IRS considers these business activities as "incidental" to the main purpose of the trip, which is personal travel, stating, "The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip."

What are per diems? How do I know how much I can take as a per diem?
The term "per diem" means per day. Per diems are amounts that are considered reasonable for daily expenses while traveling, for meals and miscellaneous expenses. Per diem rates are set for U.S. and overseas travel, and rates differ depending on the area. For example, per diem rates in larger U.S. cities are higher than for sections of the country outside larger metropolitan areas. Companies can set their own per diem rates, but most businesses use the per diem rates set by the U.S. government. If you employees receive more per diem than the maximum rate set by the General Services Administration, the excess is taxable to the employee.

Read more about per diem rates and the current IRS allowable per diem rates.

Can I deduct the cost of air travel if I used frequent flyer mile credits?
No, if you used frequent flyer miles for air travel for a business trip, you can't deduct the cost as a business travel expense.

Are all the charges on a hotel bill deductible as business travel expenses?
The room charge and taxes are deductible, as are laundry expenses, but additional personal charges such as gym or fitness center fees, and fees for movies or games are not deductible. You can deduct hotel charges for phone calls or use of a fax machine.

Can I deduct the cost of bringing my spouse along on a business trip?
The cost of bringing a spouse, child, or other person along on a business trip is considered a personal expense and is not deductible. If you can prove that the other person is employed by the business and is performing substantial business-related tasks while on the trip (taking minutes at meetings or meeting with business clients) you may be able to deduct the cost of this person's travel.

Can I deduct 100% of meal costs on a business trip?
Although it would seem reasonable that meal costs on a business trip should be fully deductible, they are not. Meal costs are deductible at 50%, like entertainment expenses.

Read more about meals and entertainment expenses as part of business travel.

Can I deduct the cost of a cruise as a travel expense?
The cost of a cruise may be deductible, up to the current specified limit determined by the IRS (currently $2,000). You must also be able to show that the cruise was directly related to a business event, like a business meeting or board of directors meeting. The IRS imposes specific additional strict requirements for deducting cruise travel as a business expense, for obvious reasons. See more details under "Cruise Ships" in IRS Publication 463.

Read more about deducting business travel expenses

For more information, see these IRS publications:

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