8738 / Is a taxpayer entitled to deduct business travel expenses?

Generally, a taxpayer is entitled to deduct travel expenses when those expenses are incurred while the taxpayer is “away from home” for business reasons.1 This is the case even though those travel expenses would otherwise be personal expenses (such as food or lodging). There are three basic requirements that must be met before a taxpayer will be entitled to deduct business-related travel expenses:

(1)  The expense must be a reasonable and necessary traveling expense;

(2)  The expense must be incurred while “away from home;” and

(3)  The expense must be incurred “in the pursuit of business.”²

For an expense to be incurred in the pursuit of business, it must be directly connected to the trade or business of the taxpayer, and the expense must be necessary or appropriate to developing or pursuing the taxpayer’s business or trade.³

Interpretation of the “away from home” requirement has been litigated extensively. Under the IRS interpretation, “away from home” for these purposes means that the taxpayer must be away from the taxpayer’s principal place of business—not personal residence.⁴Several courts, however, have agreed with the contrasting opinion that the taxpayer’s “home” is the taxpayer’s residence.

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Planning Point: If the taxpayer is engaged in business at two or more separate locations, the “tax home” for purposes of section 162(a)(2) is located at the principal place of business during the taxable year.⁵

See Q 8739 for a detailed discussion of the “away from home” requirement as it applies to taxpayers who travel frequently for business.

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