When you travel to a business location where you spend the night, you are in business travel status. But will the tax rules make this a business or personal night?
The rules also affect your costs during the day. When you have an overnight business travel day, you generally deduct your costs of sustaining life for the day, such as breakfast, lunch, dinner, snacks, drinks, lodging, and taxis.
Business days also are important in determining how much of your travel cost you may deduct. For example, on a seven-day trip to London, one business day makes the airfare deductible.
Yep, you heard that right. Six personal days and one business day in London—you deduct 100 percent of the airfare.
Transportation Days are the Trickiest Days
Days spent traveling to or returning from a destination outside the United States are treated as business days—provided you use a “reasonably direct route” and you don’t engage in “substantial diversions for non-business reasons” that prolong your travel time.
If you don’t use a reasonably direct route, you count as business days the amount of time that a reasonably direct route would have taken.
Similarly, if you engage in substantial non-business diversions, you count as business days the amount of time it would have taken without such diversions.
Mode of Transportation
These rules apply to whatever mode of transportation you use. So if you travel by airplane and don’t take a reasonably direct route, you count as business travel days the number of days an airplane would take to reach your destination by a reasonably direct route. The same is true for travel by car or cruise ship.
Days That Are Primarily Business
You have a business day on a day when, during the hours normally considered appropriate for business, your principal activity is the pursuit of business.
Under this rule, if eight hours is the appropriate length of a workday, you have to work or attend training at least four hours and one minute to qualify the day as a business day.
Standby Days(An IRS Term)
You are at your business travel destination, if a Saturday, a Sunday, a legal holiday, or another reasonably necessary standby day intervenes. And then you endeavor to conduct your business with reasonable dispatch, you treat such a day as a business day.
Takeaways
The business-day classification of a trip day is important for two reasons:
- First, the business-day classification produces deductions for the costs of sustaining life for the day (lodging, food, etc.).
- Second, the business-day classification counts toward the trip being a business trip. And this produces deductions for the cost of travel to and from the destination.
If you have questions about your business travel, please don’t hesitate to call me on my direct line at 509-543-7600 or send a request HERE.
July 2021
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