Work-related Tax Deductions: Travel, Transportation, Entertainment, And Gift Expenses

By Author: Angela Stringfellow
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If you are working for a company and have ordinary and necessary business-related expenses for travel away from home, local transportation, entertainment, and gifts, you may be able to deduct these expenses. Generally, you must file Form 2106 or 2106-EZ to claim these deductions .

Travel Expenses
Travel expenses are sustained when traveling on business away from home for your employer. While you may deduct travel expenses incurred in connection with a temporary work assignment, you cannot deduct travel expenses incurred in relation to a permanent work assignment.

Travel expenses include the following:
The cost of getting to and from your business destination (air, rail, bus, car, etc.)
Meals and lodging while on travel
Taxi fares
Baggage charges
Cleaning and laundry expenses

Temporary work assignment.
A job is temporary if your assignment or job away from home in a single location is expected to last (and does in fact last) for one year or less. This is the case unless there are facts and circumstances that indicate that the job ...
... is not temporary.

Indefinite work assignment.
A job is indefinite if your assignment or job away from home in a single location lasts for more than one year. This is the case whether the job lasts for more than one year or not. Please note that employment that is initially temporary may become indefinite due to changed circumstances.

Federal crime investigation and prosecution.
If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the one-year rule for deducting temporary travel expenses. This means that you may be able to deduct travel expenses even if you are away from your primary tax residence for longer than one year.

To qualify for this deduction, the Attorney General must certify that you are traveling for the following purposes:
Traveling performing duties for the Federal Government.
Performing duties for the Federal Government on a temporary duty status.
Providing support services to the Federal Government for the investigation or prosecution of a federal crime.

Local transportation expenses.
Local transportation expenses are expenses incurred while traveling from one workplace to another when you are not traveling away from home. They include the cost of transportation by air, rail, bus, taxi, and the cost of using your car. You can choose to use the standard mileage rate to figure your car expenses. Beginning January 1, 2008, the standard mileage rate was increased to 50.5 cents per mile for business travel.

Work at two places in a day.
If you perform work at two separate locations in a day, whether or not for the same employer, you can generally deduct any travel expenses incurred while traveling between the two locations.

Temporary work location.
You can deduct expenses incurred while traveling between your home and a temporary work location if at least one of the following applies:
The work location is outside the metropolitan area where you live and normally work.
You have at least one regular work location (other than your home) for the same trade or business. (If this applies, the distance between your home and the temporary work location is irrelevant.)

For this purpose, a work location is generally considered temporary if your work there is realistically expected to last (and does in fact last) for 1 year or less. It is not temporary if your work there is realistically expected to last for longer than 1 year, even if it actually lasts for 1 year or less. If your work there initially is realistically expected to last for one year or less, but later is realistically expected to last for more than 1 year, the work location is generally considered temporary until the date your realistic expectation changes and not temporary after that date.

Home office.
You can deduct expenses incurred while traveling between your home and workplace, if your home is your principal place of business for the same trade or business. (In this situation, it is irrelevant whether the workplace is temporary or full-time.)

Meals and entertainment.
You may deduct entertainment expenses (including entertainment-related meals) only if they are directly related to the primary conduct of your trade or business. However, the expense only needs to be associated with the active conduct of your trade or business if it directly precedes or follows a substantial and bona fide business-related meeting .

You can deduct only 50% of your business-related meal and entertainment expenses unless the expenses meet certain exceptions. You apply this 50% limit before you apply the 2%-of-adjusted-gross-income limit.

Meals when subject to "hours of service" limits. You can deduct 75% of your business-related meal expenses if you consume the meals during or incident to any period subject to the Department of Transportation's "hours of service" limits. You apply this 75% limit before you apply the 2%-of-adjusted-gross-income limit.

Gift expenses.
You can deduct up to $25 worth of business gifts you offer to a customer within the year. The following items do not count toward the $25 limit:
Identical, widely distributed items of $4 or less that have your name clearly and permanently imprinted.
Signs, racks, and promotional materials to be displayed on the business premises of the recipient.
To learn more about tax deductions and find tax tips to help you maximize your tax savings, visit http://www.efile.com/tax=deduction. Estimate your federal taxes free at http://www.efile.com/tax-calculator.