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Employee Business Expenses

Business Travel Expenses

Travel expenses are the ordinary and necessary expenses incurred while traveling away from your home for your business, profession, or job. You are traveling away from your home if duty requires you to be away from the general area of your tax home for a period longer than one day's work, and you need to get sleep or rest while you are away.

Tax Home

In general your tax home is the entire city or general area where your main place of business is located. Your tax home is based on your business, not where you maintain your family home.

When determining your tax home, take into account all of the following:

  • Length of time you spend at each location
  • Degree of business activity at each location
  • Significance of financial return in each location

The most important factor in determining your tax home is the length of time spent at each location.

Qualifying Expenses

Travel expenses paid or incurred for an indefinite work assignment are not deductible.

A work assignment is determined indefinite when the work assignment is in excess of one year, or if it is realistic to expect the assignment will be in excess of one year. If you expect the assignment to be longer than one year, travel expenses are not deductible even if the time period ends up being less.

If you can reasonably expect the assignment to last less than one year, and that expectation changes to a period of time longer than one year, travel expenses become nondeductible when the determination is made.

Travel expenses paid or incurred while looking for work in your present trade or business are deductible. However, you cannot deduct travel expenses while looking for work in a new trade or business, or if you are looking for work for the first time. If you are unemployed and there is a substantial break between the time since you were last employed, you cannot deduct your travel expenses, even if the work is in the same trade or business as your previous work.

Deductible Expenses

Deductible expenses include, but are not necessarily restricted to:

  • Travel by plane, train, bus, or car from your home to the business location
  • Using your car while at the business location
  • Meals
    • The deduction for business meals and entertainment is limited to 50% of the cost.
    • In lieu of keeping records of meal expenses and deducting the actual cost, you can deduct a standard allowance based on the location where you travel.
  • Lodging
  • Transportation fares for taxis, etc.
    • Between the airport or bus/train station and your hotel
    • Between the hotel and your work location
    • From one customer to another
    • From one place of business to another
  • Tips paid for services related to any of these expenses

For more information see IRS Publication 463.