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Business Travel Deductions for 2012
Many of our clients have questions regarding what expenses are deductible for business travel away from home. The following rules apply if the business is conducted out of town and reasonably requires an overnight stay.
The actual costs of travel (e.g. plane tickets, cab to or from the airport, etc.) are deductible for out-of-town business. You are also allowed to deduct the cost of meals and lodging. The meals are deductible even if they are "personal" (e.g. not connected with business), but as with all deductible meals only 50% of the cost is allowed. Additionally, no deduction is allowed for meals or lodging expenses that are "lavish or extravagant".
Personal entertainment costs on the trip aren't deductible, but business related costs such as dry cleaning, phone calls or computer rentals are fully deductible.
Some allocations may be required if the trip is a combined business/personal trip. Only the costs of meals, lodging, etc., for the days you are conducting business are deductible. On the other hand, the cost of the travel (plane fare, rental cars, etc.) can be fully deductible if the trip was "primarily" for business. An important factor in determining if the trip is primarily business or personal is the amount of time spent on each, although this is not the sole factor.
If the trip doesn't involve actually conducting business but is for the purpose of attending a convention or seminar, be sure to save material helpful in establishing the business or professional nature of the trip.
There are also strict rules for deducting a spouse's travel. If a spouse is an employee of the company, in order to deduct his or her travel costs there must also be a bona fide business purpose for business claimed. Even if your spouse's travel doesn't satisfy the requirements you may still be able to deduct a portion of the trip's cost. This is because the rules don't require you to allocate 50% of your travel costs to your spouse. You need only allocate to your spouse any additional costs incurred by them. For example if the single room costs $150 a night and a double room costs $200 a night, then only $50 is disallowed.
Typically employees are reimbursed for their expenses incurred during travel. For those who aren't reimbursed, the deduction would be a miscellaneous itemized deduction subject to the 2% of adjusted gross income floor.
For individuals seeking reimbursement or deductibility for expenses note the standard business mileage rate for 2012 is 55.5 cents/mile. Also for employers who pay per diem allowances to employees for business travel these rates differ by location. Rates can be found by location at www.gsa.gov/perdiem.
Finally, note that personal expenses incurred at home as a result of taking the trip (e.g. the cost of boarding a pet while you are away) are not deductible.
If you have any questions regarding these issues, please contact an SVA professional.