If you're one of the many Americans who travel during the holidays to visit friends and family, you'll probably be thrilled to hear that you may be able to get a tax deduction for part of your travel costs. However, doing so requires you to spend at least some of your trip doing something job-related. If you can swing that, you'll be able to get a tax break based on your expenses.
How the IRS defines business travel
In order to qualify as business travel in the IRS's eyes, your trip must take you outside the general area of your "tax home." The tax home is the city or geographical area where your main workplace is. For example, if you work in San Francisco, then San Francisco would be your tax home, and you'd have to travel outside the city for it to qualify as "travel" by IRS standards. If you work in more than one location, then the place where you spend the majority of your time working is considered your tax home. You also have to be gone for longer than an ordinary day's work -- i.e., long enough that you need to sleep or rest away from your home.
Business travel, not surprisingly, must also somehow be related to your job. Going to a convention counts if the convention is related to, or somehow benefits, your work. For example, a dentist wouldn't be able to deduct the expenses of attending a scuba-diving convention, but a scuba instructor could get away with it. You can also deduct expenses for travel spent looking for a new job, as long as it's in the same line of work as your current job.
Business versus personal travel
If the majority of the time you spend on your trip is business-related, you can deduct the travel expenses for the business part of the trip. For example, let's say you travel out of town to attend a convention for three days and then spend two days at your parents' house (which happens to be in the same city as your convention) to celebrate the holidays. You can deduct the cost of traveling to and from the city, as well as the costs related to the three days you spent at the convention, including hotel bills or other lodging charges, but not any expenses related to the two days you spent at your parents' house.
On the other hand, if the majority of your trip was personal, rather than business-related, you can only deduct the expenses related directly to the business. If in the previous example you spent five days at your parents' house instead of two, you could deduct the enrollment fee for the convention but not your travel or lodging expenses.
Note that the above rules apply to travel within the United States. Deductions for travel outside the U.S. are more limited. For example, if you spent more than 25% of the trip on personal activities, you can only deduct a percentage of your travel costs. So if your overseas trip lasted 10 days, and you spent seven of those days attending business events and the other three days doing the tourist bit, you'd be able to deduct 70% of the cost of your plane tickets.
How to claim your travel deduction
In order to claim business-related travel deductions, you need to have proof in the form of receipts and other documentation. For example, if you traveled by plane, you need to be able to prove how much the plane tickets cost, the dates when you left and returned, the number of days you spent on business during the trip, and the name of the city or town where you traveled. Get receipts for car rentals, taxis, meals, fees, dry cleaning, and everything else you spent money on during your trip.
If your employer or business reimbursed you for part of the trip, you'll be able to claim the unreimbursed expenses as a tax deduction. In that case, you'll also need records to show how much you received from your employer compared to how much the actual expenses were.
You can usually deduct the full expense for hotels, travel, and other trip-related expenses, but you can only deduct 50% of the cost of your meals while you were traveling. The IRS reasons that you would have eaten those meals whether or not you were traveling, so it's only willing to give you a partial deduction to compensate for the extra expense of eating on the road.
If you're self-employed, business travel expenses will go on your Schedule C form along with all your other business expenses. Most business-related expenses go on line 24 of this form. If you're an employee, you can claim business-related travel deductions on Form 2106 (which is also where you list any reimbursement you received from your employer). If you're both an employee and self-employed (i.e., an employee with a side gig), then business travel expenses related to your self-employment work go on Schedule C, and expenses related to your employee position go on Form 2106.
If you can find a job-related reason to travel during the holidays, you can save a lot of money on your travel expenses while still being able to spend time with friends and family. That's not a bad way to give yourself an extra gift during the holiday season.
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