Defining Business Travel
Business travel is defined by the IRS as travel away from your tax home that is “substantially longer than an ordinary day’s work” and that requires you to sleep or rest while away from home. You must also sleep away from home to be able to deduct these costs. The travel must also not be for an indefinite period of time and must last less than a year. Your tax home is the location of your regular place of business, not your family home. Your tax home is defined as the place you are traveling from, for business expense purposes.
Combining Personal and Business Travel
To deduct expenses for business travel in the United States, the trip must be entirely business-related. If you had some incidental personal travel within the trip - visiting family or taking a side trip, for example - the expenses relating to the personal activities (gas miles to someone’s home or hotel at a personal location) are not deductible business expenses. If the trip is primarily personal, like a vacation, you cannot deduct business expenses unless you can show that these expenses are directly related to your business. For example, if you take a vacation and spend a morning visiting a client, you can deduct the cost of the visit, but not the cost of getting from your tax home to the client’s location.
Partly International Trips
If you take a trip for business and personal reasons that are partly within the U.S. and partly outside the U.S., follow the IRS guidelines for the location of the trip. For example, if you spend three days within the U.S., the in-country rules apply, and if you then spend three more days in Canada, out-of-country rules apply.
International Business Trips
If you travel outside the U.S. and you spend the entire time on business activities, you can deduct all of your travel expenses as business expenses. If you were outside the United States for a week or less, and you combined personal and business activities, your trip is considered entirely for business by the IRS. One week means 7 consecutive days.
International Travel Deduction Exceptions
Even if you don’t spend all your time on business activities, your international business travel expenses may be deductible if they meet at least one of four exceptions:
If you had no “substantial control” over the arrangements for the trip. For example, if you are an employee that is not related to your employer, you are generally considered to have no substantial control over a business trip.If you travel outside the U.S. for less than a week, your trip can be considered entirely for business, even if you combine business and personal activities.If you spend less than 25% of your time on personal activities during the trip.Your trip can be considered entirely for business if you can establish that vacation was not a major consideration, even if you had control over the trip arrangements.
To determine percentages, divide the total number of days on the trip by the number of personal days.
