When it comes to business travel, expenses, and deductions, I am frequently asked “What constitutes travel away from home and why is it important?”
In order for certain business travel expenses to be deductible, you must be traveling “away from home.” There are actually two parts to this question. The first is, “Where is my tax home?” The second is, “What constitutes being ‘away’ from home?”
Your tax home is a facts and circumstances question. That is, each person’s tax home will be different, not just depending on location of the person’s residence, but depending on the person’s circumstances. For most of us, our tax home is where we live full time. But there are many circumstances where this is not clear. For example, where is a full-time student’s tax home? Is it his permanent address with his parents or his temporary address while at school nine months during the year?
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Or, what happens if you don’t really have a permanent residence? This was the situation in a case several years back where a traveling salesman traveled so much that the IRS and the court concluded that he did not even have a tax home.
Then, we have the question of how far do we have to travel to be “away” from our tax home? Is an hour across town sufficient? What about going 50 miles away to a neighboring town? There are many court cases discussing this question. One court suggested that a taxpayer had to go beyond the metropolitan area in which he lived in order to be “away.” Another court said that the taxpayer had to go into another county.
Finally, how long do you have to be away in order to qualify as “away” for tax purposes? The courts and the IRS generally have held that if you need to stay overnight to rest because of the work and the distance, then you are “away.” But, if you can reasonably go to and from the location in a single day without rest, you are not away from home.
Why is this important? If you are away from home, your meals and lodging are deductible so long as they are ordinary and necessary to your business. Meals are always deductible if you have a business purpose for the meal, specifically if you are eating with a business associate or client. But what if you are eating alone? Then, you have to be traveling away from home for the meal to be deductible. Even lodging is only deductible if you are away from home.
Since everyone’s situation is different, if you have a question about whether your trip is away from home, I suggest you contact your tax coach to get help.
Tom Wheelwright is not only the founder and CEO of Provision, but he is the creative force behind Provision Wealth Strategists. In addition to his management responsibilities, Tom likes to coach clients on wealth, business, and tax strategies. Along with his frequent seminars on such strategies, Tom is an adjunct professor in the Masters of Tax program at Arizona State University. For more information, please visit http://www.provisionwealth.com
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