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Chapter 20 Travel and Entertainment Expense Deductions

Unreimbursed employee travel expenses are deductible but are subject to the 2% of adjusted gross income (AGI) floor on Schedule A. If you are self-employed, the 2% floor does not apply to travel expenses claimed on Schedule C. The types of deductible travel expenses are highlighted in Table 20-1. Generally, you must be away from home to deduct travel expenses on overnight business trips, but local lodging costs to attend a business meeting or training required by an employer may also be deductible. Meals and entertainment costs are subject to restrictions, including a 50% deduction limit (20.15) that applies to employees prior to the 2% floor (20.29). On one-day business trips within the general area of your employment, only transportation costs may be deducted; meals may not.

Table 20-1 Deductible Travel and Transportation Expenses

Your Travel Status—	Tax Rule—
Local trips to see customers and client	You may deduct your transportation expenses but not the cost of personal meals on one-day business trips within the general area of your tax home.
Local lodging necessary to participate in employer meeting.	Lodging costs are generally deductible only on business trips “away from home” (20.7). However, the IRS allows an employee to deduct local lodging costs (not away from home) if the lodging is necessary on a temporary basis for the employee to participate in a bona fide business meeting or function of the employer (20.6)..
Two job locations for one employer in the same area EXAMPLE: Your employer has two business locations in the city in which you live. You work about half of the time in each place—at one location in the morning and at the other in the afternoon.	You deduct transportation expenses from one location to the other. However, if, for personal reasons, such as the choice of a place for eating lunch, you do not go directly from one location to the other, you may deduct your transportation expenses only to the extent that they do not exceed the cost of going directly from the first location to the second. But say your employer has several locations in the same city, but you do not move from one location to another in the same day. You spend the entire day at one place. You may not deduct transportation expenses between your home and the various locations, even if you report to a different location each day.
Two different jobs in the same area EXAMPLE: You work for two different employers in the city in which you live. Most of the time you work a full work shift at your principal place of employment. Then you work a part-time shift for your second employer some distance away.	You may deduct the transportation expenses from one job to another within the same working day. But you may not claim the deduction if you return home after the first job and then, after supper, go to your second job.
Permanent job in an area other than where you have your residence EXAMPLE: You live with your family in Chicago, but work in Milwaukee. During the week, you stay in a hotel in Milwaukee and eat meals in a restaurant. You return to your family in Chicago every weekend.	Milwaukee is your “home” for tax purposes; see 20.7. Thus, your expenses for traveling to Milwaukee and your meals and lodging there are personal, nondeductible expenses.
Temporary assignment in an area other than where you have your residence EXAMPLE: You live in Kansas City, where you work. You have been assigned to duty in Omaha for 60 days. Occasionally, you return to Kansas City on your days off, but most of the time you stay in Omaha.	You may deduct the necessary expenses for traveling from Kansas City to Omaha and returning to Kansas City after your temporary assignment is completed. You may also deduct expenses for meals and lodging (even for your days off) while you are in Omaha. As discussed at 20.9, deductions are not allowed on temporary assignments that are expected to last more than one year.
Weekend trip home from temporary assignment EXAMPLE: Same facts as in the Example above except that you return home to Kansas City during the weekend.	You are not “away from home” while you are in Kansas City on your days off and your meals and lodging while you are there are not deductible. However, you may deduct your traveling expenses (including meals and lodging, if any) from Omaha to Kansas City and back if they are no more than the amount it would have cost you for your meals and lodging if you had stayed in Omaha. If they are more, your deduction is limited to the amount you would have spent in Omaha. If you retain your room in Omaha while in Kansas City, your expenses of returning to Kansas City on days off are deductible only to the extent of the amount you would have spent for your meals had you stayed in Omaha.
Temporary job location away from home where there are no living accommodations EXAMPLE: You live and work in Chicago. You have been assigned for three months to a construction job located 20 miles outside Nashville. There are no living facilities near the job site and you have to stay at a hotel in Nashville.	Under these circumstances, your necessary expenses in getting to and from your temporary job are business expenses and not commuting expenses. If you were employed at the site for an indefinite period (20.9), then the costs of commuting would be nondeductible, regardless of the distance (20.2).
Taxi trips between customers’ locations	The cab fares are deductible (20.2).
Seasonal jobs in different areas EXAMPLE: You live in Cincinnati, where you work for eight months each year. You earn the greater share of your annual income from that job. For the remaining four months of the year, you work in Miami. When in Miami, you eat and sleep in a hotel. You have been working on both of these jobs for several years and expect to continue to do so.	You have two recurring seasonal places of employment. Cincinnati is your principal place of employment. You may deduct the costs of your traveling expenses while away from Cincinnati working at your minor place of employment in Miami, including meals and lodging in Miami.
Trailer home moved to different job sites EXAMPLE: You are a construction welder. You live in a trailer that you move from city to city, where you work on construction projects. You have no other established home	You may not deduct your expenses for meals and lodging. Each place where you locate becomes your principal place of business and, therefore, you are not “away from home.”
Travel to school after work to take job-related courses	You may deduct travel costs if you meet the rules discusse at 33.17.
Finding a new job in the same line of work EXAMPLE: You live in New York. You travel to Chicago for an interview for a new position.	You may deduct the cost of the trip and living expenses in Chicago (19.7).
Convention trip	You may deduct costs of travel to a business convention under the rules in 20.12. If you are a delegate to a charitable or veterans’ convention, you may claim a charitable deduction for the travel costs (14.4).
Trip to out-of-town college for educational courses	You deduct the cost of the trip if you meet the rules at 33.17.
Trip for health reasons	You may deduct the cost of the trip as a medical expense if you meet the rules at 17.9.

To support your travel expense deductions, keep records that comply with IRS rules (20.26). If you are employed, you can avoid the 2% AGI deduction floor only if your employer maintains an “accountable” reimbursement plan (20.31).

You report unreimbursed employee transportation and travel expenses on Form 2106. You can use short form 2106-EZ if you are not reimbursed by your company and you do not claim depreciation on a car used for business.

Unreimbursed expenses from Form 2106 or 2106-EZ are entered on Schedule A, where they are subject to the 2% AGI floor.

Under an “accountable plan” arrangement, an employer’s expense allowance for travel costs is not reported as income on Form W-2 if you substantiated the expenses to your employer and returned any unsubstantiated portion of the allowance (20.31).

If you are self-employed, you deduct travel costs on Schedule C. The 2% AGI floor does not apply, but only 50% of meal and entertainment expenses are deductible.

20.1 Deduction Guide for Travel and Transportation Expenses

20.2 Commuting Expenses

20.3 Overnight-Sleep Test Limits Deduction of Meal Costs

20.4 IRS Meal Allowance

20.5 Business Trip Deductions

20.6 Local Lodging Costs

20.7 When Are You Away From Home?

20.8 Fixing a Tax Home If You Work in Different Locations

20.9 Tax Home of Married Couple Working in Different Cities

20.10 Deducting Living Costs on Temporary Assignment

20.11 Business-Vacation Trips Within the United States

20.12 Business-Vacation Trips Outside the United States