Deductions for Business Travel

Millions of employees travel every year for business purposes. Many employers are very good about reimbursing 100% of their employee's expenses; others may leave employees covering some of the tab. If an employer reimburses you for all out-of-pocket travel related expenses, you usually have nothing to deduct. However, if your employer only reimburses some of your expenses or none at all, you can often deduct the unreimbursed costs when you file your taxes. So if you’re traveling to another city for business purposes, you can deduct expenses like gas, tolls, and meals. You can also deduct airline, bus, or train tickets, cab fare, hotel bills, and even dry cleaning and laundry if you stay overnight. Other expenses you can deduct include tips, computer and other equipment rental, and the cost of shipping your baggage.

Keep in mind that commuting to and from your job, no matter the distance, doesn’t count as business travel. No matter the cost, such expenses aren’t deductible. The business travel expenses you can claim must be from your tax home, where your job is located, to an out-of-area location. Your tax home is the locality where you work. So, if you normally work in downtown Atlanta and you need to travel to Savannah to meet a client, for example, you can deduct your travel expenses. But if you live in Savannah and choose to commute to downtown Atlanta for work, the expenses you incur wouldn’t be tax deductible.

You may claim travel expenses if you have to take a temporary assignment out of town, but you must know at the outset that the job will last less than a year to claim travel expenses associated with taking the assignment. If you take a temporary job that’s supposed to last more than a year but ends abruptly within a few months, the IRS says that your travel expenses aren’t deductible. You can also claim travel expenses if you’re established in your profession and travel out of town to look for a new job. However, first-time job seekers can’t deduct business travel expenses even if they travel far away from their homes to find work.

Normally, you calculate your business travel expenses on Form 2106 or Form 2106-EZ and carry the figures to Form 1040, Schedule A, the form on which you itemize your deductions. As a benefit, U.S. National Guard and military reservists can figure their ordinary business travel expenses on Form 2106 or Form 2106-EZ and carry them to Form 1040 to get a tax deduction, without itemizing the expenses on Schedule A.

Quiz: Which Travel Expenses Are Deductible?

True or False: For business travel purposes, your tax home is the city or general area where your primary residence is located. Answer
False. Your tax home is where your job is located, not where your primary residence is located.

True or False: If you live more than one hour away from your workplace, you can deduct some of your mileage as a business travel expense. Answer
False. Commuting from your job to your home or from your home to your job, does not count as a deductible travel expense.

You're allowed to deduct travel expenses when you have a temporary job away from your home. Answer
True. It is only possible to claim travel expense for a temporary job assignment, if the job will last less than a year. In the event that a temporary job is supposed to last more than a year but for whatever reason is cut short – you cannot deduct the travel or commuting expenses.

The standard deduction for meals purchased during business travel is ____% of the unreimbursed amount. Answer
50% of the unreimbursed amount, after determining what amount qualifies for a deduction. (More about inclusions and exceptions here).

You calculate or carry over your business travel expenses on which IRS Forms? Answer
IRS Form 1040, Schedule A is the form on which you itemize your deductions, and normally you calculate your expenses on Form 2016 or 2016EZ, which relate to Employee Business Expenses.

True or False: U.S. National Guard and military reservists may claim ordinary, unreimbursed travel expenses without itemizing the deduction on Schedule A. Answer
True. The U.S. National Guard and military reservists can figure out their expenses on the Form 2016 or Form 2016EZ without itemizing them on Schedule A.

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