Travel and Entertainment: Frequently Asked Questions

Can I deduct the cost of meals on days I call on customers or clients away from my office?

Generally not. Usually, you can only deduct costs of meals when you’re away from home overnight. Even so, the deduction is allowed only to the extent of 50 percent of the cost of meals and related tips. Also, because business-related entertainment expenses were eliminated under tax reform, starting in 2018, the deduction for meals at entertainment events is deductible (at 50%) only when costs for meals are itemized separately from entertainment costs.

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Must I report employer reimbursements for travel, entertainment and meals?

Under tax reform, miscellaneous itemized deductions subject to the 2-percent floor were eliminated for tax years 2018-2025. However, prior to tax reform (i.e., for tax years prior to 2018), the following applied:It depends. If you give your employer a detailed expense accounting, return any excess reimbursement, and meet other requirements, you don’t have to report the reimbursement and you don’t deduct the expenses. This means that any deduction limits are imposed on your boss, not you, and the 2-percent limit on miscellaneous itemized deductions won’t affect your travel, entertainment and meals costs.

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What are the limits on deductible travel, entertainment and meals costs?

Prior to tax reform (i.e., for tax years before 2018), the deduction for business entertainment and business meals could not exceed 50 percent of the cost. There are no dollar limits. Expenses must be “ordinary and necessary” (meaning appropriate and helpful) and not “lavish or extravagant,” but this doesn’t bar deluxe accommodations, travel or meals. Additionally, there were additional special limitations on skyboxes and luxury water travel.

Starting in 2018 and continuing through tax year 2025, no deduction is allowed for business entertainment. Tax reform also eliminated deductions for expenses relating to sporting events such as those for skybox expenses (previously 50%), tickets to sporting events (previously 50%), and transportation to and from sporting events (previously 50%).

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Can I deduct living expenses on temporary assignment away from the area where I live and work?

Yes. Living expenses at the temporary work site are away from home travel expenses. An assignment is temporary if it’s expected to last no more than a year. If it’s expected to last more than a year, the new area is your tax home, so you can’t deduct expenses there as away from home travel.

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What expenses can I deduct while traveling away from home?

A wide range of expenses can be deducted while traveling away from home.

Here are the main ones:

  • Transportation fares, or actual costs (or a standard per mile rate) of using your own vehicle. Also, transportation costs of getting around in the work area-to and from hotels, restaurants, offices, terminals, etc.
  • Lodging and meals (subject to the 50 percent limit on meals)
  • Phone, fax, laundry, baggage handling
  • Tips related to the above

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