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QuicktaxQuicktax 1. Quicktax Travel Table of Contents Traveling Away From HomeTax Home Tax Home Different From Family Home Temporary Assignment or Job What Travel Expenses Are Deductible?Employee. Quicktax Business associate. Quicktax Bona fide business purpose. Quicktax Meals Travel in the United States Travel Outside the United States Luxury Water Travel Conventions If you temporarily travel away from your tax home, you can use this chapter to determine if you have deductible travel expenses. Quicktax This chapter discusses: Traveling away from home, Temporary assignment or job, and What travel expenses are deductible. Quicktax It also discusses the standard meal allowance, rules for travel inside and outside the United States, luxury water travel, and deductible convention expenses. Quicktax Travel expenses defined. Quicktax For tax purposes, travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. Quicktax An ordinary expense is one that is common and accepted in your trade or business. Quicktax A necessary expense is one that is helpful and appropriate for your business. Quicktax An expense does not have to be required to be considered necessary. Quicktax You will find examples of deductible travel expenses in Table 1-1 , later. Quicktax Traveling Away From Home You are traveling away from home if: Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work, and You need to sleep or rest to meet the demands of your work while away from home. Quicktax This rest requirement is not satisfied by merely napping in your car. Quicktax You do not have to be away from your tax home for a whole day or from dusk to dawn as long as your relief from duty is long enough to get necessary sleep or rest. Quicktax Example 1. Quicktax You are a railroad conductor. Quicktax You leave your home terminal on a regularly scheduled round-trip run between two cities and return home 16 hours later. Quicktax During the run, you have 6 hours off at your turnaround point where you eat two meals and rent a hotel room to get necessary sleep before starting the return trip. Quicktax You are considered to be away from home. Quicktax Example 2. Quicktax You are a truck driver. Quicktax You leave your terminal and return to it later the same day. Quicktax You get an hour off at your turnaround point to eat. Quicktax Because you are not off to get necessary sleep and the brief time off is not an adequate rest period, you are not traveling away from home. Quicktax Members of the Armed Forces. Quicktax If you are a member of the U. Quicktax S. Quicktax Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. Quicktax You cannot deduct your expenses for meals and lodging. Quicktax You cannot deduct these expenses even if you have to maintain a home in the United States for your family members who are not allowed to accompany you overseas. Quicktax If you are transferred from one permanent duty station to another, you may have deductible moving expenses, which are explained in Publication 521, Moving Expenses. Quicktax A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a tax home (explained next) aboard the ship for travel expense purposes. Quicktax Tax Home To determine whether you are traveling away from home, you must first determine the location of your tax home. Quicktax Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. Quicktax It includes the entire city or general area in which your business or work is located. Quicktax If you have more than one regular place of business, your tax home is your main place of business. Quicktax See Main place of business or work , later. Quicktax 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. Quicktax See No main place of business or work , later. Quicktax If you do not have a regular or main place of business or post of duty and there is no place where you regularly live, you are considered an itinerant (a transient) and your tax home is wherever you work. Quicktax As an itinerant, you cannot claim a travel expense deduction because you are never considered to be traveling away from home. Quicktax Main place of business or work. Quicktax If you have more than one place of work, consider the following when determining which one is your main place of business or work. Quicktax The total time you ordinarily spend in each place. Quicktax The level of your business activity in each place. Quicktax Whether your income from each place is significant or insignificant. Quicktax Example. Quicktax You live in Cincinnati where you have a seasonal job for 8 months each year and earn $40,000. Quicktax You work the other 4 months in Miami, also at a seasonal job, and earn $15,000. Quicktax Cincinnati is your main place of work because you spend most of your time there and earn most of your income there. Quicktax No main place of business or work. Quicktax You may have a tax home even if you do not have a regular or main place of work. Quicktax Your tax home may be the home where you regularly live. Quicktax Factors used to determine tax home. Quicktax If you do not have a regular or main place of business or work, use the following three factors to determine where your tax home is. Quicktax 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. Quicktax You have living expenses at your main home that you duplicate because your business requires you to be away from that home. Quicktax You have not abandoned the area in which both your historical place of lodging and your claimed 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. Quicktax If you satisfy all three factors, your tax home is the home where you regularly live. Quicktax If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. Quicktax If you satisfy only one factor, you are an itinerant; your tax home is wherever you work and you cannot deduct travel expenses. Quicktax Example 1. Quicktax You are single and live in Boston in an apartment you rent. Quicktax You have worked for your employer in Boston for a number of years. Quicktax Your employer enrolls you in a 12-month executive training program. Quicktax You do not expect to return to work in Boston after you complete your training. Quicktax During your training, you do not do any work in Boston. Quicktax Instead, you receive classroom and on-the-job training throughout the United States. Quicktax You keep your apartment in Boston and return to it frequently. Quicktax You use your apartment to conduct your personal business. Quicktax You also keep up your community contacts in Boston. Quicktax When you complete your training, you are transferred to Los Angeles. Quicktax You do not satisfy factor (1) because you did not work in Boston. Quicktax You satisfy factor (2) because you had duplicate living expenses. Quicktax You also satisfy factor (3) because you did not abandon your apartment in Boston as your main home, you kept your community contacts, and you frequently returned to live in your apartment. Quicktax Therefore, you have a tax home in Boston. Quicktax Example 2. Quicktax You are an outside salesperson with a sales territory covering several states. Quicktax Your employer's main office is in Newark, but you do not conduct any business there. Quicktax Your work assignments are temporary, and you have no way of knowing where your future assignments will be located. Quicktax You have a room in your married sister's house in Dayton. Quicktax You stay there for one or two weekends a year, but you do no work in the area. Quicktax You do not pay your sister for the use of the room. Quicktax You do not satisfy any of the three factors listed earlier. Quicktax You are an itinerant and have no tax home. Quicktax Tax Home Different From Family Home If you (and your family) do not live at your tax home (defined earlier), you cannot deduct the cost of traveling between your tax home and your family home. Quicktax You also cannot deduct the cost of meals and lodging while at your tax home. Quicktax See Example 1 , later. Quicktax If you are working temporarily in the same city where you and your family live, you may be considered as traveling away from home. Quicktax See Example 2 , later. Quicktax Example 1. Quicktax You are a truck driver and you and your family live in Tucson. Quicktax You are employed by a trucking firm that has its terminal in Phoenix. Quicktax At the end of your long runs, you return to your home terminal in Phoenix and spend one night there before returning home. Quicktax You cannot deduct any expenses you have for meals and lodging in Phoenix or the cost of traveling from Phoenix to Tucson. Quicktax This is because Phoenix is your tax home. Quicktax Example 2. Quicktax Your family home is in Pittsburgh, where you work 12 weeks a year. Quicktax The rest of the year you work for the same employer in Baltimore. Quicktax In Baltimore, you eat in restaurants and sleep in a rooming house. Quicktax Your salary is the same whether you are in Pittsburgh or Baltimore. Quicktax Because you spend most of your working time and earn most of your salary in Baltimore, that city is your tax home. Quicktax You cannot deduct any expenses you have for meals and lodging there. Quicktax However, when you return to work in Pittsburgh, you are away from your tax home even though you stay at your family home. Quicktax You can deduct the cost of your round trip between Baltimore and Pittsburgh. Quicktax You can also deduct your part of your family's living expenses for meals and lodging while you are living and working in Pittsburgh. Quicktax Temporary Assignment or Job You may regularly work at your tax home and also work at another location. Quicktax It may not be practical to return to your tax home from this other location at the end of each work day. Quicktax Temporary assignment vs. Quicktax indefinite assignment. Quicktax If your assignment or job away from your main place of work is temporary, your tax home does not change. Quicktax You are considered to be away from home for the whole period you are away from your main place of work. Quicktax You can deduct your travel expenses if they otherwise qualify for deduction. Quicktax Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. Quicktax 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. Quicktax An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than 1 year, whether or not it actually lasts for more than 1 year. Quicktax 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. Quicktax You may be able to deduct the cost of relocating to your new tax home as a moving expense. Quicktax See Publication 521 for more information. Quicktax Exception for federal crime investigations or prosecutions. Quicktax If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule. Quicktax This means you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year provided you meet the other requirements for deductibility. Quicktax For you to qualify, the Attorney General (or his or her designee) must certify that you are traveling: For the federal government, In a temporary duty status, and To investigate, prosecute, or provide support services for the investigation or prosecution of a federal crime. Quicktax Determining temporary or indefinite. Quicktax You must determine whether your assignment is temporary or indefinite when you start work. Quicktax If you expect an assignment or job to last for 1 year or less, it is temporary unless there are facts and circumstances that indicate otherwise. Quicktax An assignment or job that is initially temporary may become indefinite due to changed circumstances. Quicktax A series of assignments to the same location, all for short periods but that together cover a long period, may be considered an indefinite assignment. Quicktax The following examples illustrate whether an assignment or job is temporary or indefinite. Quicktax Example 1. Quicktax You are a construction worker. Quicktax You live and regularly work in Los Angeles. Quicktax You are a member of a trade union in Los Angeles that helps you get work in the Los Angeles area. Quicktax Your tax home is Los Angeles. Quicktax Because of a shortage of work, you took a job on a construction project in Fresno. Quicktax Your job was scheduled to end in 8 months. Quicktax The job actually lasted 10 months. Quicktax You realistically expected the job in Fresno to last 8 months. Quicktax The job actually did last less than 1 year. Quicktax The job is temporary and your tax home is still in Los Angeles. Quicktax Example 2. Quicktax The facts are the same as in Example 1, except that you realistically expected the work in Fresno to last 18 months. Quicktax The job actually was completed in 10 months. Quicktax Your job in Fresno is indefinite because you realistically expected the work to last longer than 1 year, even though it actually lasted less than 1 year. Quicktax You cannot deduct any travel expenses you had in Fresno because Fresno became your tax home. Quicktax Example 3. Quicktax The facts are the same as in Example 1, except that you realistically expected the work in Fresno to last 9 months. Quicktax After 8 months, however, you were asked to remain for 7 more months (for a total actual stay of 15 months). Quicktax Initially, you realistically expected the job in Fresno to last for only 9 months. Quicktax However, due to changed circumstances occurring after 8 months, it was no longer realistic for you to expect that the job in Fresno would last for 1 year or less. Quicktax You can only deduct your travel expenses for the first 8 months. Quicktax You cannot deduct any travel expenses you had after that time because Fresno became your tax home when the job became indefinite. Quicktax Going home on days off. Quicktax If you go back to your tax home from a temporary assignment on your days off, you are not considered away from home while you are in your hometown. Quicktax You cannot deduct the cost of your meals and lodging there. Quicktax However, you can deduct your travel expenses, including meals and lodging, while traveling between your temporary place of work and your tax home. Quicktax You can claim these expenses up to the amount it would have cost you to stay at your temporary place of work. Quicktax If you keep your hotel room during your visit home, you can deduct the cost of your hotel room. Quicktax In addition, you can deduct your expenses of returning home up to the amount you would have spent for meals had you stayed at your temporary place of work. Quicktax Probationary work period. Quicktax If you take a job that requires you to move, with the understanding that you will keep the job if your work is satisfactory during a probationary period, the job is indefinite. Quicktax You cannot deduct any of your expenses for meals and lodging during the probationary period. Quicktax 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. Quicktax You can deduct ordinary and necessary expenses you have when you travel away from home on business. Quicktax The type of expense you can deduct depends on the facts and your circumstances. Quicktax Table 1-1 summarizes travel expenses you may be able to deduct. Quicktax You may have other deductible travel expenses that are not covered there, depending on the facts and your circumstances. Quicktax 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. Quicktax You can use a log, diary, notebook, or any other written record to keep track of your expenses. Quicktax The types of expenses you need to record, along with supporting documentation, are described in Table 5-1 (see chapter 5). Quicktax Separating costs. Quicktax If you have one expense that includes the costs of meals, entertainment, and other services (such as lodging or transportation), you must allocate that expense between the cost of meals and entertainment and the cost of other services. Quicktax You must have a reasonable basis for making this allocation. Quicktax For example, you must allocate your expenses if a hotel includes one or more meals in its room charge. Quicktax Travel expenses for another individual. Quicktax If a spouse, dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, you generally cannot deduct his or her travel expenses. Quicktax Employee. Quicktax You can deduct the travel expenses of someone who goes with you if that person: Is your employee, Has a bona fide business purpose for the travel, and Would otherwise be allowed to deduct the travel expenses. Quicktax Business associate. Quicktax If a business associate travels with you and meets the conditions in (2) and (3), earlier, you can deduct the travel expenses you have for that person. Quicktax A business associate is someone with whom you could reasonably expect to actively conduct business. Quicktax A business associate can be a current or prospective (likely to become) customer, client, supplier, employee, agent, partner, or professional advisor. Quicktax Bona fide business purpose. Quicktax A bona fide business purpose exists if you can prove a real business purpose for the individual's presence. Quicktax Incidental services, such as typing notes or assisting in entertaining customers, are not enough to make the expenses deductible. Quicktax Table 1-1. Quicktax Travel Expenses You Can Deduct This chart summarizes expenses you can deduct when you travel away from home for business purposes. Quicktax IF you have expenses for. Quicktax . Quicktax . Quicktax THEN you can deduct the cost of. Quicktax . Quicktax . Quicktax transportation travel by airplane, train, bus, or car between your home and your business destination. Quicktax If you were provided with a free ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero. Quicktax If you travel by ship, see Luxury Water Travel and Cruise Ships (under Conventions) for additional rules and limits. Quicktax taxi, commuter bus, and airport limousine fares for these and other types of transportation that take you between: The airport or station and your hotel, and The hotel and the work location of your customers or clients, your business meeting place, or your temporary work location. Quicktax baggage and shipping sending baggage and sample or display material between your regular and temporary work locations. Quicktax car operating and maintaining your car when traveling away from home on business. Quicktax You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking. Quicktax If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. Quicktax 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. Quicktax Meals include amounts spent for food, beverages, taxes, and related tips. Quicktax See Meals for additional rules and limits. Quicktax cleaning dry cleaning and laundry. Quicktax telephone business calls while on your business trip. Quicktax This includes business communication by fax machine or other communication devices. Quicktax tips tips you pay for any expenses in this chart. Quicktax other other similar ordinary and necessary expenses related to your business travel. Quicktax These expenses might include transportation to or from a business meal, public stenographer's fees, computer rental fees, and operating and maintaining a house trailer. Quicktax Example. Quicktax Jerry drives to Chicago on business and takes his wife, Linda, with him. Quicktax Linda is not Jerry's employee. Quicktax Linda occasionally types notes, performs similar services, and accompanies Jerry to luncheons and dinners. Quicktax The performance of these services does not establish that her presence on the trip is necessary to the conduct of Jerry's business. Quicktax Her expenses are not deductible. Quicktax Jerry pays $199 a day for a double room. Quicktax A single room costs $149 a day. Quicktax He can deduct the total cost of driving his car to and from Chicago, but only $149 a day for his hotel room. Quicktax If he uses public transportation, he can deduct only his fare. Quicktax Meals You can deduct the cost of meals in either of the following situations. Quicktax It is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business. Quicktax The meal is business-related entertainment. Quicktax Business-related entertainment is discussed in chapter 2 . Quicktax The following discussion deals only with meals that are not business-related entertainment. Quicktax Lavish or extravagant. Quicktax You cannot deduct expenses for meals that are lavish or extravagant. Quicktax An expense is not considered lavish or extravagant if it is reasonable based on the facts and circumstances. Quicktax Expenses will not be disallowed merely because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. Quicktax 50% limit on meals. Quicktax You can figure your meals expense using either of the following methods. Quicktax Actual cost. Quicktax The standard meal allowance. Quicktax Both of these methods are explained below. Quicktax But, regardless of the method you use, you generally can deduct only 50% of the unreimbursed cost of your meals. Quicktax If you are reimbursed for the cost of your meals, how you apply the 50% limit depends on whether your employer's reimbursement plan was accountable or nonaccountable. Quicktax If you are not reimbursed, the 50% limit applies whether the unreimbursed meal expense is for business travel or business entertainment. Quicktax Chapter 2 discusses the 50% Limit in more detail, and chapter 6 discusses accountable and nonaccountable plans. Quicktax Actual Cost You can use the actual cost of your meals to figure the amount of your expense before reimbursement and application of the 50% deduction limit. Quicktax If you use this method, you must keep records of your actual cost. Quicktax Standard Meal Allowance Generally, you can use the “standard meal allowance” method as an alternative to the actual cost method. Quicktax It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs. Quicktax The set amount varies depending on where and when you travel. Quicktax In this publication, “standard meal allowance” refers to the federal rate for M&IE, discussed later under Amount of standard meal allowance . Quicktax If you use the standard meal allowance, you still must keep records to prove the time, place, and business purpose of your travel. Quicktax See the recordkeeping rules for travel in chapter 5 . Quicktax Incidental expenses. Quicktax The term “incidental expenses” means fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. Quicktax Incidental expenses do not include expenses for laundry, cleaning and pressing of clothing, lodging taxes, costs of telegrams or telephone calls, transportation between places of lodging or business and places where meals are taken, or the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings. Quicktax Incidental-expenses-only method. Quicktax You can use an optional method (instead of actual cost) for deducting incidental expenses only. Quicktax The amount of the deduction is $5 a day. Quicktax You can use this method only if you did not pay or incur any meal expenses. Quicktax You cannot use this method on any day that you use the standard meal allowance. Quicktax This method is subject to the proration rules for partial days. Quicktax See Travel for days you depart and return , later in this chapter. Quicktax Note. Quicktax The incidental-expenses-only method is not subject to the 50% limit discussed below. Quicktax Federal employees should refer to the Federal Travel Regulations at www. Quicktax gsa. Quicktax gov. Quicktax Find the “Most Requested Links” on the upper left and click on “Regulations: FAR, FMR, FTR” for Federal Travel Regulation (FTR) for changes affecting claims for reimbursement. Quicktax 50% limit may apply. Quicktax If you use the standard meal allowance method for meal expenses and you are not reimbursed or you are reimbursed under a nonaccountable plan, you can generally deduct only 50% of the standard meal allowance. Quicktax If you are reimbursed under an accountable plan and you are deducting amounts that are more than your reimbursements, you can deduct only 50% of the excess amount. Quicktax The 50% limit is discussed in more detail in chapter 2, and accountable and nonaccountable plans are discussed in chapter 6. Quicktax There is no optional standard lodging amount similar to the standard meal allowance. Quicktax Your allowable lodging expense deduction is your actual cost. Quicktax Who can use the standard meal allowance. Quicktax You can use the standard meal allowance whether you are an employee or self-employed, and whether or not you are reimbursed for your traveling expenses. Quicktax Use of the standard meal allowance for other travel. Quicktax You can use the standard meal allowance to figure your meal expenses when you travel in connection with investment and other income-producing property. Quicktax You can also use it to figure your meal expenses when you travel for qualifying educational purposes. Quicktax You cannot use the standard meal allowance to figure the cost of your meals when you travel for medical or charitable purposes. Quicktax Amount of standard meal allowance. Quicktax The standard meal allowance is the federal M&IE rate. Quicktax For travel in 2013, the rate for most small localities in the United States is $46 a day. Quicktax Most major cities and many other localities in the United States are designated as high-cost areas, qualifying for higher standard meal allowances. Quicktax You can find this information (organized by state) on the Internet at www. Quicktax gsa. Quicktax gov/perdiem. Quicktax Enter a zip code or select a city and state for the per diem rates for the current fiscal year. Quicktax Per diem rates for prior fiscal years are available by using the drop down menu under “Search by State. Quicktax ” Per diem rates are listed by the Federal government's fiscal year which runs from October 1 to September 30. Quicktax You can choose to use the rates from the 2013 fiscal year per diem tables or the rates from the 2014 fiscal year tables, but you must consistently use the same tables for all travel you are reporting on your income tax return for the year. Quicktax If you travel to more than one location in one day, use the rate in effect for the area where you stop for sleep or rest. Quicktax If you work in the transportation industry, however, see Special rate for transportation workers , later. Quicktax Standard meal allowance for areas outside the continental United States. Quicktax The standard meal allowance rates above do not apply to travel in Alaska, Hawaii, or any other location outside the continental United States. Quicktax The Department of Defense establishes per diem rates for Alaska, Hawaii, Puerto Rico, American Samoa, Guam, Midway, the Northern Mariana Islands, the U. Quicktax S. Quicktax Virgin Islands, Wake Island, and other non-foreign areas outside the continental United States. Quicktax The Department of State establishes per diem rates for all other foreign areas. Quicktax You can access per diem rates for non-foreign areas outside the continental United States at: www. Quicktax defensetravel. Quicktax dod. Quicktax mil/site/perdiemCalc. Quicktax cfm. Quicktax You can access all other foreign per diem rates at: www. Quicktax state. Quicktax gov/travel/. Quicktax Click on “Travel Per Diem Allowances for Foreign Areas,” under “Foreign Per Diem Rates” to obtain the latest foreign per diem rates. Quicktax Special rate for transportation workers. Quicktax You can use a special standard meal allowance if you work in the transportation industry. Quicktax You are in the transportation industry if your work: Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates. Quicktax If this applies to you, you can claim a standard meal allowance of $59 a day ($65 for travel outside the continental United States). Quicktax Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. Quicktax If you choose to use the special rate for any trip, you must use the special rate (and not use the regular standard meal allowance rates) for all trips you take that year. Quicktax Travel for days you depart and return. Quicktax For both the day you depart for and the day you return from a business trip, you must prorate the standard meal allowance (figure a reduced amount for each day). Quicktax You can do so by one of two methods. Quicktax Method 1: You can claim 3/4 of the standard meal allowance. Quicktax Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice. Quicktax Example. Quicktax Jen is employed in New Orleans as a convention planner. Quicktax In March, her employer sent her on a 3-day trip to Washington, DC, to attend a planning seminar. Quicktax She left her home in New Orleans at 10 a. Quicktax m. Quicktax on Wednesday and arrived in Washington, DC, at 5:30 p. Quicktax m. Quicktax After spending two nights there, she flew back to New Orleans on Friday and arrived back home at 8:00 p. Quicktax m. Quicktax Jen's employer gave her a flat amount to cover her expenses and included it with her wages. Quicktax Under Method 1, Jen can claim 2½ days of the standard meal allowance for Washington, DC: 3/4 of the daily rate for Wednesday and Friday (the days she departed and returned), and the full daily rate for Thursday. Quicktax Under Method 2, Jen could also use any method that she applies consistently and that is in accordance with reasonable business practice. Quicktax For example, she could claim 3 days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited to only 2½ days. Quicktax Travel in the United States The following discussion applies to travel in the United States. Quicktax For this purpose, the United States includes the 50 states and the District of Columbia. Quicktax The treatment of your travel expenses depends on how much of your trip was business related and on how much of your trip occurred within the United States. Quicktax See Part of Trip Outside the United States , later. Quicktax Trip Primarily for Business You can deduct all of your travel expenses if your trip was entirely business related. Quicktax If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct only your business-related travel expenses. Quicktax These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination. Quicktax Example. Quicktax You work in Atlanta and take a business trip to New Orleans in May. Quicktax Your business travel totals 850 miles round trip. Quicktax On your way, you stop in Mobile to visit your parents. Quicktax You spend $2,120 for the 9 days you are away from home for travel, meals, lodging, and other travel expenses. Quicktax If you had not stopped in Mobile, you would have been gone only 6 days, and your total cost would have been $1,820. Quicktax You can deduct $1,820 for your trip, including the cost of round-trip transportation to and from New Orleans. Quicktax The deduction for your meals is subject to the 50% limit on meals mentioned earlier. Quicktax Trip Primarily for Personal Reasons If your trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. Quicktax However, you can deduct any expenses you have while at your destination that are directly related to your business. Quicktax A trip to a resort or on a cruise ship may be a vacation even if the promoter advertises that it is primarily for business. Quicktax 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. Quicktax Part of Trip Outside the United States If part of your trip is outside the United States, use the rules described later in this chapter under Travel Outside the United States for that part of the trip. Quicktax For the part of your trip that is inside the United States, use the rules for travel in the United States. Quicktax Travel outside the United States does not include travel from one point in the United States to another point in the United States. Quicktax The following discussion can help you determine whether your trip was entirely within the United States. Quicktax Public transportation. Quicktax If you travel by public transportation, any place in the United States where that vehicle makes a scheduled stop is a point in the United States. Quicktax Once the vehicle leaves the last scheduled stop in the United States on its way to a point outside the United States, you apply the rules under Travel Outside the United States . Quicktax Example. Quicktax You fly from New York to Puerto Rico with a scheduled stop in Miami. Quicktax You return to New York nonstop. Quicktax The flight from New York to Miami is in the United States, so only the flight from Miami to Puerto Rico is outside the United States. Quicktax Because there are no scheduled stops between Puerto Rico and New York, all of the return trip is outside the United States. Quicktax Private car. Quicktax Travel by private car in the United States is travel between points in the United States, even though you are on your way to a destination outside the United States. Quicktax Example. Quicktax You travel by car from Denver to Mexico City and return. Quicktax Your travel from Denver to the border and from the border back to Denver is travel in the United States, and the rules in this section apply. Quicktax The rules under Travel Outside the United States apply to your trip from the border to Mexico City and back to the border. Quicktax Travel Outside the United States If any part of your business travel is outside the United States, some of your deductions for the cost of getting to and from your destination may be limited. Quicktax For this purpose, the United States includes the 50 states and the District of Columbia. Quicktax How much of your travel expenses you can deduct depends in part upon how much of your trip outside the United States was business related. Quicktax Travel Entirely for Business or Considered Entirely for Business You can deduct all your travel expenses of getting to and from your business destination if your trip is entirely for business or considered entirely for business. Quicktax Travel entirely for business. Quicktax If you travel outside the United States and you spend the entire time on business activities, you can deduct all of your travel expenses. Quicktax Travel considered entirely for business. Quicktax Even if you did not spend your entire time on business activities, your trip is considered entirely for business if you meet at least one of the following four exceptions. Quicktax Exception 1 - No substantial control. Quicktax Your trip is considered entirely for business if you did not have substantial control over arranging the trip. Quicktax The fact that you control the timing of your trip does not, by itself, mean that you have substantial control over arranging your trip. Quicktax You do not have substantial control over your trip if you: Are an employee who was reimbursed or paid a travel expense allowance, and Are not related to your employer, or Are not a managing executive. Quicktax “Related to your employer” is defined later in chapter 6 under Per Diem and Car Allowances . Quicktax A “managing executive” is an employee who has the authority and responsibility, without being subject to the veto of another, to decide on the need for the business travel. Quicktax A self-employed person generally has substantial control over arranging business trips. Quicktax Exception 2 - Outside United States no more than a week. Quicktax Your trip is considered entirely for business if you were outside the United States for a week or less, combining business and nonbusiness activities. Quicktax One week means 7 consecutive days. Quicktax In counting the days, do not count the day you leave the United States, but do count the day you return to the United States. Quicktax Example. Quicktax You traveled to Brussels primarily for business. Quicktax You left Denver on Tuesday and flew to New York. Quicktax On Wednesday, you flew from New York to Brussels, arriving the next morning. Quicktax On Thursday and Friday, you had business discussions, and from Saturday until Tuesday, you were sightseeing. Quicktax You flew back to New York, arriving Wednesday afternoon. Quicktax On Thursday, you flew back to Denver. Quicktax Although you were away from your home in Denver for more than a week, you were not outside the United States for more than a week. Quicktax This is because the day you depart does not count as a day outside the United States. Quicktax You can deduct your cost of the round-trip flight between Denver and Brussels. Quicktax You can also deduct the cost of your stay in Brussels for Thursday and Friday while you conducted business. Quicktax However, you cannot deduct the cost of your stay in Brussels from Saturday through Tuesday because those days were spent on nonbusiness activities. Quicktax Exception 3 - Less than 25% of time on personal activities. Quicktax Your trip is considered entirely for business if: You were outside the United States for more than a week, and You spent less than 25% of the total time you were outside the United States on nonbusiness activities. Quicktax For this purpose, count both the day your trip began and the day it ended. Quicktax Example. Quicktax You flew from Seattle to Tokyo, where you spent 14 days on business and 5 days on personal matters. Quicktax You then flew back to Seattle. Quicktax You spent 1 day flying in each direction. Quicktax Because only 5/21 (less than 25%) of your total time abroad was for nonbusiness activities, you can deduct as travel expenses what it would have cost you to make the trip if you had not engaged in any nonbusiness activity. Quicktax The amount you can deduct is the cost of the round-trip plane fare and 16 days of meals (subject to the 50% limit), lodging, and other related expenses. Quicktax Exception 4 - Vacation not a major consideration. Quicktax Your trip is considered entirely for business if you can establish that a personal vacation was not a major consideration, even if you have substantial control over arranging the trip. Quicktax Travel Primarily for Business If you travel outside the United States primarily for business but spend some of your time on other activities, you generally cannot deduct all of your travel expenses. Quicktax You can only deduct the business portion of your cost of getting to and from your destination. Quicktax You must allocate the costs between your business and other activities to determine your deductible amount. Quicktax See Travel allocation rules , later. Quicktax You do not have to allocate your travel expenses if you meet one of the four exceptions listed earlier under Travel considered entirely for business . Quicktax In those cases, you can deduct the total cost of getting to and from your destination. Quicktax Travel allocation rules. Quicktax If your trip outside the United States was primarily for business, you must allocate your travel time on a day-to-day basis between business days and nonbusiness days. Quicktax The days you depart from and return to the United States are both counted as days outside the United States. Quicktax To figure the deductible amount of your round-trip travel expenses, use the following fraction. Quicktax The numerator (top number) is the total number of business days outside the United States. Quicktax The denominator (bottom number) is the total number of business and nonbusiness days of travel. Quicktax Counting business days. Quicktax Your business days include transportation days, days your presence was required, days you spent on business, and certain weekends and holidays. Quicktax Transportation day. Quicktax Count as a business day any day you spend traveling to or from a business destination. Quicktax However, if because of a nonbusiness activity you do not travel by a direct route, your business days are the days it would take you to travel a reasonably direct route to your business destination. Quicktax Extra days for side trips or nonbusiness activities cannot be counted as business days. Quicktax Presence required. Quicktax Count as a business day any day your presence is required at a particular place for a specific business purpose. Quicktax Count it as a business day even if you spend most of the day on nonbusiness activities. Quicktax Day spent on business. Quicktax If your principal activity during working hours is the pursuit of your trade or business, count the day as a business day. Quicktax Also, count as a business day any day you are prevented from working because of circumstances beyond your control. Quicktax Certain weekends and holidays. Quicktax Count weekends, holidays, and other necessary standby days as business days if they fall between business days. Quicktax But if they follow your business meetings or activity and you remain at your business destination for nonbusiness or personal reasons, do not count them as business days. Quicktax Example 1. Quicktax Your tax home is New York City. Quicktax You travel to Quebec, where you have a business appointment on Friday. Quicktax You have another appointment on the following Monday. Quicktax Because your presence was required on both Friday and Monday, they are business days. Quicktax Because the weekend is between business days, Saturday and Sunday are counted as business days. Quicktax This is true even though you use the weekend for sightseeing, visiting friends, or other nonbusiness activity. Quicktax Example 2. Quicktax If, in Example 1, you had no business in Quebec after Friday, but stayed until Monday before starting home, Saturday and Sunday would be nonbusiness days. Quicktax Nonbusiness activity on the way to or from your business destination. Quicktax If you stopped for a vacation or other nonbusiness activity either on the way from the United States to your business destination, or on the way back to the United States from your business destination, you must allocate part of your travel expenses to the nonbusiness activity. Quicktax The part you must allocate is the amount it would have cost you to travel between the point where travel outside the United States begins and your nonbusiness destination and a return to the point where travel outside the United States ends. Quicktax You determine the nonbusiness portion of that expense by multiplying it by a fraction. Quicktax The numerator (top number) of the fraction is the number of nonbusiness days during your travel outside the United States and the denominator (bottom number) is the total number of days you spend outside the United States. Quicktax Example. Quicktax You live in New York. Quicktax On May 4 you flew to Paris to attend a business conference that began on May 5. Quicktax The conference ended at noon on May 14. Quicktax That evening you flew to Dublin where you visited with friends until the afternoon of May 21, when you flew directly home to New York. Quicktax The primary purpose for the trip was to attend the conference. Quicktax If you had not stopped in Dublin, you would have arrived home the evening of May 14. Quicktax You do not meet any of the exceptions that would allow you to consider your travel entirely for business. Quicktax May 4 through May 14 (11 days) are business days and May 15 through May 21 (7 days) are nonbusiness days. Quicktax You can deduct the cost of your meals (subject to the 50% limit), lodging, and other business-related travel expenses while in Paris. Quicktax You cannot deduct your expenses while in Dublin. Quicktax You also cannot deduct 7/18 of what it would have cost you to travel round-trip between New York and Dublin. Quicktax You paid $750 to fly from New York to Paris, $400 to fly from Paris to Dublin, and $700 to fly from Dublin back to New York. Quicktax Round-trip airfare from New York to Dublin would have been $1,250. Quicktax You figure the deductible part of your air travel expenses by subtracting 7/18 of the round-trip fare and other expenses you would have had in traveling directly between New York and Dublin ($1,250 × 7/18 = $486) from your total expenses in traveling from New York to Paris to Dublin and back to New York ($750 + $400 + $700 = $1,850). Quicktax Your deductible air travel expense is $1,364 ($1,850 − $486). Quicktax Nonbusiness activity at, near, or beyond business destination. Quicktax If you had a vacation or other nonbusiness activity at, near, or beyond your business destination, you must allocate part of your travel expenses to the nonbusiness activity. Quicktax The part you must allocate is the amount it would have cost you to travel between the point where travel outside the United States begins and your business destination and a return to the point where travel outside the United States ends. Quicktax You determine the nonbusiness portion of that expense by multiplying it by a fraction. Quicktax The numerator (top number) of the fraction is the number of nonbusiness days during your travel outside the United States and the denominator (bottom number) is the total number of days you spend outside the United States. Quicktax None of your travel expenses for nonbusiness activities at, near, or beyond your business destination are deductible. Quicktax Example. Quicktax Assume that the dates are the same as in the previous example but that instead of going to Dublin for your vacation, you fly to Venice, Italy, for a vacation. Quicktax You cannot deduct any part of the cost of your trip from Paris to Venice and return to Paris. Quicktax In addition, you cannot deduct 7/18 of the airfare and other expenses from New York to Paris and back to New York. Quicktax You can deduct 11/18 of the round-trip plane fare and other travel expenses from New York to Paris, plus your meals (subject to the 50% limit), lodging, and any other business expenses you had in Paris. Quicktax (Assume these expenses total $4,939. Quicktax ) If the round-trip plane fare and other travel-related expenses (such as food during the trip) are $1,750, you can deduct travel costs of $1,069 (11/18 × $1,750), plus the full $4,939 for the expenses you had in Paris. Quicktax Other methods. Quicktax You can use another method of counting business days if you establish that it more clearly reflects the time spent on other than business activities outside the United States. Quicktax Travel Primarily for Personal Reasons If you travel outside the United States primarily for vacation or for investment purposes, the entire cost of the trip is a nondeductible personal expense. Quicktax However, if you spend some time attending brief professional seminars or a continuing education program, you can deduct your registration fees and other expenses you have that are directly related to your business. Quicktax Example. Quicktax The university from which you graduated has a continuing education program for members of its alumni association. Quicktax This program consists of trips to various foreign countries where academic exercises and conferences are set up to acquaint individuals in most occupations with selected facilities in several regions of the world. Quicktax However, none of the conferences are directed toward specific occupations or professions. Quicktax It is up to each participant to seek out specialists and organizational settings appropriate to his or her occupational interests. Quicktax Three-hour sessions are held each day over a 5-day period at each of the selected overseas facilities where participants can meet with individual practitioners. Quicktax These sessions are composed of a variety of activities including workshops, mini-lectures, role playing, skill development, and exercises. Quicktax Professional conference directors schedule and conduct the sessions. Quicktax Participants can choose those sessions they wish to attend. Quicktax You can participate in this program since you are a member of the alumni association. Quicktax You and your family take one of the trips. Quicktax You spend about 2 hours at each of the planned sessions. Quicktax The rest of the time you go touring and sightseeing with your family. Quicktax The trip lasts less than 1 week. Quicktax Your travel expenses for the trip are not deductible since the trip was primarily a vacation. Quicktax However, registration fees and any other incidental expenses you have for the five planned sessions you attended that are directly related and beneficial to your business are deductible business expenses. Quicktax These expenses should be specifically stated in your records to ensure proper allocation of your deductible business expenses. Quicktax Luxury Water Travel If you travel by ocean liner, cruise ship, or other form of luxury water transportation for business purposes, there is a daily limit on the amount you can deduct. Quicktax The limit is twice the highest federal per diem rate allowable at the time of your travel. Quicktax (Generally, the federal per diem is the amount paid to federal government employees for daily living expenses when they travel away from home, but in the United States, for business purposes. Quicktax ) Daily limit on luxury water travel. Quicktax The highest federal per diem rate allowed and the daily limit for luxury water travel in 2013 is shown in the following table. Quicktax 2013 Dates Highest Federal Per Diem Daily Limit on Luxury Water Travel Jan. Quicktax 1 – Mar. Quicktax 31 $367 $734 Apr. Quicktax 1 – June 30 312 624 July 1 – Aug. Quicktax 31 310 620 Sept. Quicktax 1 – Sept. Quicktax 30 366 732 Oct. Quicktax 1 – Dec. Quicktax 31 374 748 Example. Quicktax Caroline, a travel agent, traveled by ocean liner from New York to London, England, on business in May. Quicktax Her expense for the 6-day cruise was $5,200. Quicktax Caroline's deduction for the cruise cannot exceed $3,744 (6 days × $624 daily limit). Quicktax Meals and entertainment. Quicktax If your expenses for luxury water travel include separately stated amounts for meals or entertainment, those amounts are subject to the 50% limit on meals and entertainment before you apply the daily limit. Quicktax For a discussion of the 50% Limit , see chapter 2. Quicktax Example. Quicktax In the previous example, Caroline's luxury water travel had a total cost of $5,200. Quicktax Of that amount, $3,700 was separately stated as meals and entertainment. Quicktax Caroline, who is self-employed, is not reimbursed for any of her travel expenses. Quicktax Caroline figures her deductible travel expenses as follows. Quicktax Meals and entertainment $3,700 50% limit × . Quicktax 50 Allowable meals & entertainment $1,850 Other travel expenses + 1,800 Allowable cost before the daily limit $3,650 Daily limit for May 2013 $624 Times number of days × 6 Maximum luxury water travel deduction $3,744 Amount of allowable deduction $3,650 Caroline's deduction for her cruise is limited to $3,650, even though the limit on luxury water travel is slightly higher. Quicktax Not separately stated. Quicktax If your meal or entertainment charges are not separately stated or are not clearly identifiable, you do not have to allocate any portion of the total charge to meals or entertainment. Quicktax Exceptions The daily limit on luxury water travel (discussed earlier) does not apply to expenses you have to attend a convention, seminar, or meeting on board a cruise ship. Quicktax See Cruise Ships under Conventions. Quicktax Conventions You can deduct your travel expenses when you attend a convention if you can show that your attendance benefits your trade or business. Quicktax You cannot deduct the travel expenses for your family. Quicktax If the convention is for investment, political, social, or other purposes unrelated to your trade or business, you cannot deduct the expenses. Quicktax Your appointment or election as a delegate does not, in itself, determine whether you can deduct travel expenses. Quicktax You can deduct your travel expenses only if your attendance is connected to your own trade or business. Quicktax Convention agenda. Quicktax The convention agenda or program generally shows the purpose of the convention. Quicktax You can show your attendance at the convention benefits your trade or business by comparing the agenda with the official duties and responsibilities of your position. Quicktax The agenda does not have to deal specifically with your official duties and responsibilities; it will be enough if the agenda is so related to your position that it shows your attendance was for business purposes. Quicktax Conventions Held Outside the North American Area You cannot deduct expenses for attending a convention, seminar, or similar meeting held outside the North American area unless: The meeting is directly related to your trade or business, and It is reasonable to hold the meeting outside the North American area. Quicktax See Reasonableness test , later. Quicktax If the meeting meets these requirements, you also must satisfy the rules for deducting expenses for business trips in general, discussed earlier under Travel Outside the United States . Quicktax North American area. Quicktax The North American area includes the following locations. Quicktax American Samoa Johnston Island Antigua and Barbuda Kingman Reef Aruba Marshall Islands Bahamas Mexico Baker Island Micronesia Barbados Midway Islands Bermuda Netherlands Antilles Canada Northern Mariana Costa Rica Islands Dominica Palau Dominican Republic Palmyra Atoll Grenada Panama Guam Puerto Rico Guyana Trinidad and Tobago Honduras USA Howland Island U. Quicktax S. Quicktax Virgin Islands Jamaica Wake Island Jarvis Island The North American area also includes U. Quicktax S. Quicktax islands, cays, and reefs that are possessions of the United States and not part of the fifty states or the District of Columbia. Quicktax Reasonableness test. Quicktax The following factors are taken into account to determine if it was reasonable to hold the meeting outside the North American area. Quicktax The purpose of the meeting and the activities taking place at the meeting. Quicktax The purposes and activities of the sponsoring organizations or groups. Quicktax The homes of the active members of the sponsoring organizations and the places at which other meetings of the sponsoring organizations or groups have been or will be held. Quicktax Other relevant factors you may present. Quicktax Cruise Ships You can deduct up to $2,000 per year of your expenses of attending conventions, seminars, or similar meetings held on cruise ships. Quicktax All ships that sail are considered cruise ships. Quicktax You can deduct these expenses only if all of the following requirements are met. Quicktax The convention, seminar, or meeting is directly related to your trade or business. Quicktax The cruise ship is a vessel registered in the United States. Quicktax All of the cruise ship's ports of call are in the United States or in possessions of the United States. Quicktax You attach to your return a written statement signed by you that includes information about: The total days of the trip (not including the days of transportation to and from the cruise ship port), The number of hours each day that you devoted to scheduled business activities, and A program of the scheduled business activities of the meeting. Quicktax You attach to your return a written statement signed by an officer of the organization or group sponsoring the meeting that includes: A schedule of the business activities of each day of the meeting, and The number of hours you attended the scheduled business activities. Quicktax Prev Up Next Home More Online Publications
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