Proper Travel Deductions

Courtesy of IRS

The Internal Revenue Service has provided you with the proper rules for deducting the cost of lodging, meals and other expenses when traveling away from home for business, particularly when furnished by the employer at no charge to the employee.

Meals and Lodging
In certain professions employers provide meals and lodging at no cost for employees away from home. No amount is deductible to the employee on his/her personal tax return in this situation because there is no out of pocket expense.

Incidental Expenses
An individual might be entitled to an employee business expense deduction for other expenses incurred while working away from home, commonly referred to as “incidental expenses.”

Examples of incidental expenses include fees out of pocket for:

Fees and tips given to porters, baggage carriers, bellhops, hotel maids, stewardesses, etc.

Transportation to the place where meals are taken, if meals cannot be obtained on site and if transportation is not provided.

Mailing costs associated with filing travel vouchers or payment of employer-sponsored charge card billings.

Incidental expenses do not include expenses for laundry, cleaning or pressing of clothing, lodging taxes, or the costs of telegrams or telephone calls.

In order to claim a deduction for incidental expenses, the employee must establish when, where and why (business purpose) they were away from home. For example, barge workers or mariners could use a copy of their ship’s log to establish the information.

Employees may choose to keep track of actual incidental expenses and deduct the actual amount spent, or they may use an optional method, which allows a set amount per day. The optional method allows $3.00 per day (effective October 1, 2003, $2.00 prior to October 1, 2003) and no receipts are required. A tax professional can help determine the best method.

Incidental expenses are deducted on Form 1040; Schedule A, Itemized Deductions, as Unreimbursed Employee Business Expenses.