Academic journal article Journal of Accountancy

Travel Expenses Revisited

Academic journal article Journal of Accountancy

Travel Expenses Revisited

Article excerpt

Section 162(a)(2) of the tax code allows a deduction for all ordinary and necessary expenses paid or incurred in carrying on a trade or business during the taxable year, including travel expenses while the taxpayer is away from home overnight. Travel expenses are broadly defined and include those for transportation, meals and lodging (which should not be lavish or extravagant under the circumstances and are only 80% deductible) as well as routine incidentals such as laundry.

Travel expenses are allowed only if the taxpayer is away from home for a temporary period. "Temporary" means that the assignment will end within a reasonably short period of time. Thus, if a taxpayer is reassigned to a new location for an indefinite period, the new location becomes the taxpayer's tax home and any related travel expense deductions are denied.

Under section 1938 of the Energy Policy Act of 1992, a taxpayer is not treated as being temporarily away from home under section 162(a)(2) during any period of employment that exceeds one year. This new one-year rule is effective for costs paid or incurred after December 31, 1992.

In notice 93-29, the Internal Revenue Service recently announced that if the period away from home straddles the end of 1992 and the beginning of 1993, a taxpayer may be able to deduct the travel expenses incurred before the end of 1992. …

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