Benefit

If you are self‐employed, business travel is a deductible expense. There is no overall dollar limit on what you can deduct. As an employee, you cannot deduct the business travel that you pay for. But if your employer reimburses you under an accountable plan, you aren't taxed on the reimbursements. An accountable plan is a reimbursement arrangement under which you are required to account for your expenses to your employer within a set time and refund to your employer any excess advances or reimbursements.

If, however, your employer has an accountable plan that reimburses you for travel expenses, you are not taxed on the reimbursements (your employer claims the deduction).

Conditions

Business travel costs are deductible if they are ordinary and necessary business expenses. In other words, the travel costs must be business‐related and not for personal reasons.

Also, as a condition for claiming a deduction, you must maintain good records (discussed later).

Planning Tips

If you plan a business trip that is canceled, you can deduct the costs you can't recoup. These costs may include a hotel charge that is nonrefundable or an airline fee to reschedule a flight.

You must keep good records of your business travel in order to claim a deduction. The tax law requires substantiation of business travel expenses as a condition of claiming the deduction. You generally need 2 types of records: written information and documentary evidence such as receipts or credit card statements.

You must note certain information in a diary, logbook, account statement, app, or other record keeper. The type of information to record and a sample weekly travel expense form that you can use for this purpose are included at the end of this chapter.

If you are an employee whose employer has an accountable plan, you are required to provide recordkeeping information to your employer. If not, you should generally retain these records along with copies of your tax return for at least 3 years from the date you filed the return on which you claimed a deduction for business travel. This will allow you to back up your deduction if your return is questioned by the IRS.

You do not have to retain receipts for travel costs (other than lodging) of less than $75. Thus, for example, you do not need receipts for taxi fares or ride shares under $75.

If you fail to maintain the necessary records or if they are destroyed by events beyond your control, such as a flood or fire, you may be able to prove your entitlement to a deduction through your own written or oral statement and other supporting evidence. But it may be difficult to establish the full amount of expenses, and you can lose out on a deduction you are otherwise entitled to claim.

In some situations, especially when records are destroyed through no fault of the taxpayer, courts have allowed taxpayers to estimate their expenses. This is called the Cohan rule, named after the famous entertainer George M. Cohan, who convinced a court of his entitlement to a business deduction despite the lack of records.

Pitfalls

Generally the cost of commuting to and from work is not deductible; it is a personal expense. This is so even if you are forced to use your car because there is no public transportation or you must travel great distances. You cannot convert nondeductible commuting costs to deductible expenses merely by using your cell phone on business or putting a sign with your business logo on the side of your car. Nondeductible commuting costs include:

• Carpooling expenses, even if you discuss business with your fellow passengers
• Emergency travel between home and work
• Travel from a union hall to a job site

However, there are certain situations in which commuting costs can be treated as deductible business expenses by self‐employed individuals.

• If you incur additional costs to transport tools to and from work you can treat the added cost as a deductible expense.
• You commute to a temporary work location.
• You work from home and claim a home office deduction. The cost of travel between your home and any business location, such as customers' offices, is deductible.
• You work at temporary locations. For example, if you are an accountant or other professional who travels to client work sites for a few days or a week or 2, you can deduct the costs of travel between home and these sites as business travel, provided you have a regular work office.

If you are an employee, you cannot deduct your business travel. No deduction for unreimbursed employee business expenses can be claimed in 2018 through 2025.

Where to Claim the Deduction

If you are an employee whose job‐related travel costs are covered by an employer's accountable plan, you do not have to do anything. Reimbursements for this travel are not included on your Form W‐2.

If you are self‐employed, you deduct your business travel costs on Schedule C.

Benefit

If you are self‐employed and work at a temporary location, your travel costs between home and this location are deductible.

If the temporary location is out of town, you can deduct not only your travel costs but also your living expenses, including lodging and 50% of meals (100% for meals provided by restaurants in 2022). There is no dollar limit on what you can deduct.

Conditions

There are 2 key conditions for deducting expenses related to temporary work assignments:

1. The assignment must be temporary.
2. You must have a regular place of business to deduct travel costs between home and work or be away from home on business to deduct travel and living costs.

Planning Tips

When you travel away from home, be sure to keep accurate and complete records of your travel and living expenses.

If you are in the armed forces and your ship or squadron is away from your home port or base, you may be able to deduct travel expenses while away. However, you are not treated as being “away” if you are at your permanent duty station or you are a naval officer assigned to permanent duty aboard a ship.

Pitfalls

Spouses who live and work in different cities can have different tax homes. Just because they are treated as domiciled within the same place and may vote or file their taxes together, they may be restricted in deducting travel expenses between these locations.

Pitfalls

If you work in another state, you may be responsible for paying state income taxes there. Check the rules in the state in which you temporarily work.

Where to Claim the Benefit

As a self‐employed individual, you deduct your business travel costs on temporary work assignments on Schedule C.

Benefit

You can deduct the cost of attending business conventions, including travel, lodging, 50% of meal costs (100% if provided at a restaurant), and attendance fees, even though there is an element of pleasure associated with such activities.

There are restrictions, however, if you attend a convention held outside the North American area or on a cruise ship.

Conditions

You must be able to show that your attendance at the convention has some benefit to your trade or business. This can be shown by comparing the purpose of the convention as stated in its program or agenda with your official job duties or work.

The fact that you are appointed or elected as a delegate to the convention does not, by itself, establish a business benefit.

Planning Tip

Keep good records of your expenses at the convention, including a copy of the convention program with notations of the sessions you attended. If the convention has a sign‐in book, be sure to sign in at every session.

If the convention is held on a cruise ship, follow the recordkeeping requirements discussed earlier.

Pitfall

If your spouse or other person accompanies you to the convention, you cannot deduct the expenses of your companion. This is so even if your companion is helpful to you.

However, as a practical matter, there may be no added cost for a second person in your room, so the only extras for your companion are meals and travel. And if you drive to the convention, even extra travel costs are eliminated.

Where to Claim the Deduction

If you are an employee whose job‐related travel costs are covered by an employer's accountable plan, you do not have to do anything. Reimbursements for attendance at a business convention are not included on your Form W‐2. Your employer claims the deduction for your travel costs.

If you are self‐employed, you deduct your business convention costs on Schedule C.

Benefit

Medical insurance typically does not cover your expenses for getting to and from the doctor or pharmacy or other travel for other medical purposes. These costs are deductible as an itemized medical deduction. This means that the costs of medical travel are added to your other medical expenses, the total of which is deductible to the extent they exceed 7.5% of your adjusted gross income.

Conditions

To be treated as qualified medical expenses, the costs of travel must be related to obtaining a diagnosis, cure, mitigation, treatment, or prevention of disease or any treatment that affects a part or function of your body.

Deductible expenses include those paid not only for yourself, but also for a spouse and dependents. Who qualifies as a dependent is explained in Chapter 1.

Planning Tips

Keep good records of your expenditures for medical‐related travel.

• For use of your car, note the date, purpose, and odometer reading at the start and end of each trip, as well as related parking and tolls
• For other travel costs, retain receipts of all expenses

Pitfall

You cannot deduct the costs of trips taken for general good health. For example, your car mileage to and from the gym is not deductible if you are there to improve your appearance or maintain general good health rather than to treat a condition such as obesity or high blood pressure.

Similarly, if you fly to Florida each winter to escape the cold of New Hampshire, you cannot deduct your travel costs, even though the warm climate or other factors may be beneficial to your health. You are not traveling for the purpose of obtaining treatment or for some other deductible medical purpose.

Where to Claim the Deduction

Medical travel costs, which are part of itemized medical expenses, are reported in the “Medical and Dental Expenses” section of Schedule A of Form 1040 or 1040‐SR.

Benefit

If you use your car for charitable purposes, including attending meetings of organizations you serve, you can deduct either your actual car expenses for gas and oil or mileage at the rate of 14¢ per mile. Whichever method you select, you can also write off parking and tolls.

You can also deduct travel expenses, plus meals and lodging, for overnight trips away from home to serve as an official delegate to a convention of a church, charitable, veteran, or other similar organization.

Conditions

You qualify to deduct your car expenses to the extent that the use of your car is for a tax‐exempt organization or governmental unit. To see whether the charity you work for is tax exempt, see Chapter 6.

You qualify for convention‐related expenses that you are not reimbursed for if you serve as an official delegate on behalf of a religious, charitable, veteran, or other similar organization.

Planning Tip

Keep track of your mileage and out‐of‐pocket expenses on behalf of the charity. In a diary, logbook, or app, note the odometer readings for every charity‐related trip for which your car is used, as well as any related parking and tolls.

Pitfalls

You cannot deduct travel costs to work on a project for a nonprofit organization if there is a significant element of personal pleasure, recreation, or vacation involved.

You cannot deduct travel costs to attend a charity‐related convention if you do not serve as an official delegate.

Where to Claim the Benefit

To claim a charitable deduction for your charity‐related travel expenses, you must complete Schedule A of Form 1040 or 1040‐SR. Enter your deduction for charity‐related expenses in the “Gifts to Charity” section of Schedule A.

Benefit

Whether you drive across town to take college credits or fly across the country for a continuing education course, you can deduct your travel costs as a business expense. For example, if you go to night school to take a computer course to keep you up‐to‐date for your business, which is working with computers, your travel from work to school and from school to home is deductible.

Conditions

For educational travel to be treated as a deductible expense, the education you are traveling for must be work‐related. This means that:

• You are self‐employed. For example, you cannot deduct as work‐related expenses the cost of an undergraduate education because you are not already working at your business.
• You already meet the minimum requirements for your position, based on the laws and regulations of your state.
• The courses maintain or improve your current business skills.
• The courses do not lead to qualification for a new profession.

Planning Tip

If you are taking a course out of town and spend some time on personal activities, be prepared to prove that the primary purpose of the out‐of‐town travel was business‐related education. This can be done by showing that you spend most of your time attending the course and only a relatively small amount of time on sightseeing or other personal activities.

Pitfalls

You cannot deduct travel that is educational in nature, even though it may be beneficial to your work. For example, an architect may not deduct the cost of travel to a foreign country to look at the architecture. However, if the architect takes courses abroad, then the travel costs become deductible even if the courses are not taken for credit. Decide whether it will save you money to pay for and take a course in order to deduct your travel costs.

If you are away from home for education purposes, you may not deduct travel costs for sightseeing, social visiting, or entertaining while taking the course.

You cannot deduct the cost of traveling to and attending investment seminars, despite how educational and beneficial they may be. The tax law specifically bans this deduction.

You cannot deduct education expenses in 2018 through 2025 if you are an employee. The reason: No deduction is allowed for miscellaneous itemized expenses subject to the 2%‐of‐adjusted‐gross‐income floor, which include employee‐related education costs.

Where to Claim the Benefit

As a self‐employed individual, you enter your education‐related travel on Schedule C.

Benefit

You can deduct your overnight travel costs as an adjustment to gross income.

Conditions

To claim the deduction, besides the obvious requirement of being a member of the National Guard or in the reserves, you must meet the following 3 conditions:

1. You must incur the costs to attend a meeting more than 100 miles away from home. You are considered to be away from home if you are away from the permanent duty station long enough to require rest or sleep in order to complete your duties. For naval personnel of a drydocked submarine, your tax home is the area or vicinity of your principal place of employment or shore assignment (not the submarine itself).
2. The costs must relate to overnight transportation, meals, and lodging.
3. The amount of the deductible expenses cannot exceed the general federal per diem rate applicable to the locality to which you travel. You can find these per diem rates at www.gsa.gov (click on Per Diem Rates).

Planning Tips

Keep good records of your travel mileage and expenses to be able to substantiate the deduction you claim.

Pitfalls

Only 50% of the cost of meals not provided at restaurants is deductible. Service‐related travel expenses that cannot be deducted as an adjustment to gross income are nondeductible. This is because in 2018 through 2025 no miscellaneous itemized deduction is allowed for unreimbursed employee business expenses.

Where to Claim the Deduction

The deduction for travel expenses that meet these qualifications is claimed on Schedule 1 of Form 1040 or 1040‐SR.

Benefit

You are not taxed on the value of frequent flier miles you earn on business travel and use for personal travel. For example, you earn enough points on your business travel throughout the year to receive free tickets for your summer vacation. You are not taxed on the frequent flier miles as they accrue, and you are not taxed when you use them for travel benefits—business or personal. The IRS, for the moment, has given up trying to tax this benefit because it is too difficult to assign a value to it. There is no dollar limit to the amount of this benefit that you can exclude from income.

Condition

To be excludable from income, frequent flier miles can be used only for in‐kind benefits, which include free airline tickets or seat upgrades.

Planning Tips

Check on the expiration date of frequent flier miles you have earned so that you can use them up before it is too late.

Consider donating your frequent flier miles to charity. While you can't claim a tax deduction (there is no way to value the miles, and the donation is viewed as having been made to the user of the miles rather than to the organization), you'll benefit someone. For instance, Make‐A‐Wish Foundation needs over 2.8 billion miles annually to grant wishes to children with life‐threatening medical conditions.

Pitfalls

If you convert frequent flier miles to cash, the cash value of the benefits must be reported as income in this case.

If you receive frequent flier miles as a bonus or gift, the miles may be taxable. For example, a number of years ago Citibank ran a special promotion offering frequent flyer miles for opening deposit accounts and reported on a Form 1099 frequent flier miles at 2.5¢ per mile for those who opened new accounts. There has been no similar reporting since this one.

Where to Claim the Exclusion

Since this employee fringe benefit is excluded from income, you do not have to report anything on your tax return. Frequent flier miles earned as an employee are not reported on your Form W‐2.