Tax laws provide numerous deductions for business travel, including travel outside the U.S. To qualify for a deduction, expenses must be ordinary and necessary. This means that they are commonly accepted in your type of business, and they are helpful and appropriate for your job. They do not need to be absolutely essential. The expenses also must have been incurred for travel away from home, which is obvious for international trips. (Generally, this requirement means that you must stay outside the area of your normal tax home for much longer than an ordinary day’s work, such that you need to rest to handle your job duties while you are away from home.)
You can claim a deduction for expenses related to business travel only if it is temporary. The tax laws classify a period of working away from home in a single location as a non-deductible indefinite assignment if it lasts for over a year. An indefinite assignment also may arise if you spend many short periods that combine to comprise a long period in the same location.
Common Types of Deductible Business Travel Costs
Some examples of costs that you normally can deduct for business travel, whether domestic or international, include shipping and luggage costs, communications costs, laundry bills, and lodging. You can deduct the full cost of your lodging, regardless of how expensive it is. You also can deduct up to half the cost of any meals while you are traveling for business if they are not lavish or extravagant. You do not need to show that the meal was related to business.
Transportation costs are also deductible in most cases. These include the costs of getting to the destination for your business trip, as well as costs for transportation while you are there. For example, you can deduct the cost of a plane ticket to another city and the cost of taking a taxi from the airport to your hotel or business site once you arrive. You also can deduct the cost of a car rental or any costs related to using your own car on the trip. In the unlikely event that you take a cruise ship or another form of luxury water travel to your destination, you will want to explore the special rules in these situations.
Transportation for International Business Travel
If you are traveling to a foreign country for business, you can deduct the full cost of your transportation to and from the country if your trip was entirely for business purposes. This means that you spent all of your waking hours during the trip handling matters related to your job. You also can deduct the full cost of your transportation to and from a foreign country if your trip is considered entirely for business purposes. This can be more complex.
An international trip will be considered entirely for business purposes if you do not spend more than one week outside the U.S., you spend at least 76 percent of your time on work-related activities, you did not have substantial control in planning the trip, or you can show that a personal vacation was not a major consideration in taking the trip. To qualify under the one-week rule, you must count the day on which you returned to the U.S. as part of the week, but you will not count the day on which you left the U.S. To qualify under the 76 percent rule, you must count both the day on which you left the U.S. and the day on which you returned to the U.S. To qualify under the substantial control rule, you cannot be related to your employer.
Even if your trip does not fit into one of these categories, you may be able to take a limited deduction if you took the trip primarily for business purposes. (If your trip was primarily for personal purposes, you cannot take any deduction.) You will need to determine which days of the trip counted as business days and divide that number by the total number of days that the trip lasted. This will give you the percentage of the trip costs that you can deduct. A business day is defined as a day on which you needed to be present in the foreign country for business reasons, or a day on which you were principally engaged in business activity during working hours. If business days fall on either side of a weekend or holiday, those days can count as business days. Days in transit also count as business days.