Your business like many, may incur travel costs that are legitimate business deductions. When you are away from your tax home over night at a temporary work location, you can deduct the cost of hotels/motels, meals (subject to 50% limit) and related transportation, all under the category of travel costs. The same costs would not be deductible as travel costs if the location you “traveled” to is really just your tax home.
Your tax home is generally defined as your principal place of business. If you have no regular place of business then your tax home is where you are considered to regularly live. When you are away from your tax home, you are considered to be in a temporary work location. Generally you cannot claim to be away from your tax home if you are at that location for more than one year or your stay in the location is indefinite. If you are working in a location that cannot be claimed as a temporary work location you lose the ability to deduct travel costs.
Assuming you are away from your tax home, in a temporary work location the Treasury Regulations provide strict rules for documenting your travel costs.
In a recent court case, Snellman, TC Summary Opinion 2014-10, the Tax Court upheld the taxpayer’s claim of travel deductions while at a temporary work location. Snellman who lived in Indialantic Florida was hired for a short-term job as project manager in Wentzville Missouri. On his 2009 tax return he claimed travel deductions as un-reimbursed employee business expenses on his Schedule A, for itemized deductions. The deductions included the costs of driving from his home in Florida to Wentzville Missouri, the costs of meals, hotel costs and later the short-term lease of an apartment for his stay in Missouri. Snellman was living and working in Wentzville Missouri, May 25 through November 18, 2009. The IRS had disallowed these deductions, claiming that Wentzville Missouri was Snellman’s tax home during that period. The IRS took the position that Snellman was working for an indefinite period of time and therefore had to assume it was not a temporary work location. The Court fortunately disagreed, noting that the short-term lease on Snellman’s apartment made it clear that the work location was temporary.
Ultimately Snellman was able to deduct travel costs on the basis that his stay in Wentzville was a temporary work location away from his tax home. He did lose some of the deduction he claimed because he didn’t have the required documentation of the costs.
Please contact me if I can advise on determining your tax home or maintaining the proper documentation for deducting your business travel costs.