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TRAVEL AND TRANSPORTATION

OVERVIEW

Code Section 162(a) permits taxpayers to deduct all ordinary and necessary expenses incurred while carrying on any trade or business. Deductible expenses include "traveling expenses (including amounts expended for meals and lodging other than amounts that are lavish or extravagant under the circumstances) while away from home in the pursuit
of a trade or business." Code Section 162(a)(2). Code Section 212 generally permits individuals a similar deduction for ordinary and necessary expenses paid or incurred in the production or collection of income.

Under Code Section 62(a)(1), a taxpayer engaged in a trade or business is entitled to deduct trade or business expenses as an above-the-line deduction. Travel expenses are deductible as a trade or business expense if such expenses are incurred while away from home in the pursuit of a
trade or business and if they are reasonable and necessary to the conduct of the taxpayer's business and directly attributable to such business. Deductible travel expenses include the following:

(1) Air, rail, and bus transportation. Reg. Section 1.162-2(a).

(2) operating and maintaining an automobile. Reg. Section
1.162-2(a).

(3) taxi fares and other costs of transportation between the airport or station and hotel, from one customer to another, or from one place of business to another.

(4) transportation from the place where a taxpayer eats and sleep to his temporary work assignment. Cockrell v. Commissioner, 321 F.2d 504 (8th Cir. 1963).

(5) baggage charges and transportation costs for sample and display materials. IRS Publication 463, Travel, Entertainment and Gift Expenses.

(6) meals and lodging while the taxpayer is away from home on business. Reg. Section 1.162-2(a).

(7) cleaning and laundry expenses. (Rev. Rul. 63-145,
1963-2 C.B. 86.

(8) telephone and telegraph expenses. Reg. Section 1.162-2(a).

(9) public stenographer fees. Reg. Section 1.162-2(a).

(10) operating and maintaining house trailers. IRS Publication
463, Travel, Entertainment and Gift Expenses.

(11) tips that are incident to any of the above listed expenses.
IRS Publication 463, Travel, Entertainment and Gift
Expenses.

(12) services and goods for handicapped travelers, so long as necessitated by work and used incidentally in personal activities. Rev. Rul. 75-317, 1975-2 C.B. 57; and

(13) other similar expenses related to qualifying travel. Reg.
Section 1.162-2(a).

OBSERVATION: When travel expenses are incurred in connection with a trip that combines business and pleasure, the expenses incurred for transportation to and from the business destination and the expenses incurred for meals and lodging expenses while the taxpayer is there are treated differently. As explained below, the transportation expenses are deductible only if the trip is related primarily to the
taxpayer's business, but in that case the travel expenses are
deducted in full (except for international travel). On the other
hand, expenses at the destination that are allocable to the
taxpayer's business are deductible, even if the expenses of getting to and from the destination are disallowed because the trip was primarily a pleasure trip.

If the trip is primarily for business and the taxpayer extends her stay for personal reasons -- makes side trips or engages in other non-business activities, she may deduct only the expenses, such as lodging and 50 percent of the cost of meals, that she would have incurred if the trip had been totally for business. However, no allocation is required for transportation costs to and from business destinations. Reg. Section 1.162-1(b)(1). See Section 27.2 for a discussion of this issue.