Ask the Professional – Traveling on Business, Advice from Ann Etter, CPA, MBA

Traveling on Business, Tax Advice from Ann Etter, CPA, MBA

So you went on vacation to do research. Is it vacation? Is it research? Is it deductible? It depends.

The IRS says that in order to be deductible as a business expense, the primary reason for the trip must be business. It does not say that you have to only conduct business while on the trip. It does say that if you do take personal days while traveling for business, certain portions of the trip are not deductible. The IRS does look closely at the amount of time spent on business vs. pleasure when traveling for business if there is ever a question about the trip.

For all of these, except food per diem, contemporaneous written receipts are required. You do not have to send them to the IRS. You do need to keep them in your files for seven years, in the event you are ever audited.

How does it all work?

  • Airfare. If the primary purpose of the trip is business, 100% of the airfare is deductible, even if you take time to do personal things while there. If the primary purpose of the trip is pleasure, NONE of the airfare is deductible, even if you spent several weeks of the trip researching like a madwoman.
    1. Example: you are writing a book set in a deserted English castle and you need to visit to get the setting right because viewing photos on the internet doesn’t give you the sounds and smells of the area, nor does it expose you to the local food. You travel to England to spend time at the castle. You figure that as long as you are there you might as well take a few days to visit Stonehenge and Bath and a few other attractions. Your entire airfare is deductible.
    2. Example: you and your spouse are taking a trip to England to see the sights. While there you tour a deserted castle and think that it would make an excellent setting for a new book. You write feverishly the rest of the trip and can’t even remember visiting Bath. None of the airfare is deductible. The primary purpose of the trip was pleasure.
  • Meals. Meals, even those eaten alone, are deductible when you are away from home (farther than 50 miles) on business long enough to require overnight accommodations. There is not a hard and fast hour rule, but somewhere in the neighborhood of eighteen or more hours is usually pretty safe. You can choose to take the actual expenses of your meals, OR you can choose to use the federal per diem rates. You can use whichever is higher. Meals cannot be extravagant for the business purpose. There is no hard definition of extravagant. If you mix pleasure days in with the business days while traveling, the pleasure day meals are not deductible and no per diem is available for those days. Meals are almost always only 50% deductible.
    1. Example: You travel to New York City to research the tenement houses, the setting of your next novel. While there you eat out a couple of times and get the rest of your sustenance grabbing quick snacks from the vendor carts. After three days you have spent $255.71. The per diem for NYC is $71/day. Since your actual is higher than the per diem, you should take 50% of the actual ($255.71). If you had planned ahead and brought ramen to cook in your hotel room, you could still deduct 50% of the per diem of $213 for the three days, even though you spent $6 on ramen and $10 on the soda to wash it down.
  • When you are traveling for business, your hotel room is deductible. If you take some side trips, those hotel nights are not deductible. In the example from #1, your hotel by the castle is deductible every day you are researching. Your hotel for the side trip to Bath is not deductible. If you rent a flat for a longer period of research, the rent and utilities you pay are deductible.
  • You can deduct miles driven for business purposes as long as they are not commuting miles. If you maintain a home office, no miles are commuting miles. This is one of the advantages of having a home office.
  • When you attend a conference you are traveling for business. Your fees to attend the conference are deductible.
  • Local transportation. Your taxi, the shuttle to and from the hotel, your ride on the subway are all tax deductible when traveling for business purposes.
  • Entrance fees. When you pay to go to a museum exhibition related to your latest project or to research archives related to your business you can deduct that.
  • When in doubt- ask a CPA.

 

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6 thoughts on “Ask the Professional – Traveling on Business, Advice from Ann Etter, CPA, MBA

    1. http://www.gsa.gov is a good place to start for domestic per diem rates. https://aoprals.state.gov is the place to start for foreign per diem rates. The rate you are looking for is the M & IE rate. The lodging rates cannot be use by the general public. We must use actual expenses for everything but meals and mileage (mileage rate for 2016 is $0.54/mile).

      The rates run October-October each year (this has to do with the US government’s fiscal year).

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    2. I thought I posted a reply but when I came back it wasn’t here- I wonder if that’s because I had links in it? There are a couple of places to go for per diem rates- the GSA dot gov website is for domestic per diem rates. The US Dept of State has foreign per diem rates: aoprals dot state dot gov is their website. You are looking for the M & IE rate. There are other rates on there and those are for government employees being reimbursed. The tax deductible rates are just the Meals and Incidentals rates.

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  1. Obviously written for those working in the US, but probably similar rules apply in the UK (come and see our castles!) Good, clear information, well presented, Ms Etter.

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    1. I am coming to see your castles (first time since 1985) in the spring!! I can’t wait :). I don’t know a ton about UK taxes, I do know a bit about Canadian taxes. For Canada the rules are very similar.

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