Travel and Travel for Companions

Traveling Away From Home

Ordinary and necessary expenses incurred while traveling "away from home" in the conduct of a trade or business are deductible. (IRC section 162(a)(2); Reg. section 1.162-2) Individuals are not away from home unless their duties require them to be away from the general area of their tax homes for a period substantially longer than an ordinary workday and it is reasonable for them to need sleep or rest. The sleep or rest rule applies even though the individual is away from home for a period of less than 24 hours.

Business owners and employees may use standard per diem amounts to compute meal expense deductions instead of maintaining records to substantiate actual expense. Documentary evidence, such as receipted bills and canceled checks, must support all lodging expenditures and any other expenditures of $75 or more. (Reg. sections 1.274-5A(c)(2)(iii) and 1.274-5T(c)(2)(iii))

Traveling Companions

If a spouse, dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, you generally cannot deduct his or her travel expenses. Only deduct the expenses paid for an accompanying individual if that individual:  Is your employee,  Has a bona fide business purpose for the travel, and  Would otherwise be allowed to deduct the travel expenses.

Taxpayers may substantiate their expenses not only by adequate records, but also by their oral or written statements, if supported by sufficient corroborating evidence. (IRC section 274(d)) Statements must contain specific, detailed information about the expense being substantiated, and the taxpayer must present other corroborative evidence to support it. (Reg. sections 1.274-5A(c)(3) and 1.274-5T(c)(3)(I)) Disinterested, unrelated third parties with knowledge of the expenditure also may offer corroborating oral or written evidence. Written statements have more corroborative value. (Reg. section 1.274-5T(c)(1))

Example:

Jane travels from her Atlanta home to New Orleans. While in New Orleans, Jane spends one week on business activities, looking for new cable affiliates and three weeks on vacation, looking for a new horse for her Wyoming ranch.   Jane's trip is primarily for personal reasons and neither her airfare nor other expenses in traveling to and from New Orleans are deductible. However, Jane's living expenses during the week she is engaged in business activities generally are deductible.   Note that her business meal expenses are subject to the percentage reduction rule (§274(n)) and, if unreimbursed (Her husband, Ted, does not have his Cable Company reimburse her, the 2% floor on miscellaneous itemized deductions. §62(a)(1), §67.   Since Ted and Jane will probably be in an upper income bracket they may loose the deduction due to the 2% limit or loose their itemized deductions entirely. 

Failure to report the expenses to the company and have the company reimburse the costs is a failure to plan for the tax consequences.

Expenses for Companions

A taxpayer may not deduct travel expenses for a spouse, dependent, or other individual accompanying the taxpayer on a business trip unless the companion is an employee of the taxpayer who is paying or reimbursing the companion's expenses. In addition, the travel must be for a bona fide business purpose, and the companion must otherwise be able to deduct the expenses. (IRC section 274(m)(3))