Will you be away from home this summer on business? If so, you might have tax-deductible expenses. Generally, when you travel away from home for your existing work or business, ordinary and necessary expenses are deductible on your federal tax return.
You probably noticed that one sentence contains three criteria — “away from home,” “existing work or business,” and “ordinary and necessary.” While you no doubt have a handle on the last two phrases, proposed regulations expanded the definition of the first — which could mean additional deductions.
What’s changed. The term “away from home” has traditionally been interpreted as a sleep-or-rest rule. That rule says when business travel keeps you away from home long enough to require a rest period — an overnight trip, for example — you can deduct your expenses.
Under the new rules, certain local business-related lodging expenses can now be deducted. For instance, say you want employees to attend training at a hotel near your business. Your employees could easily travel home in the evening and back the next morning, but you want them available for an early session. When you require all your employees to stay at the hotel overnight, you can deduct the cost. In addition, the amount you pay is not income to your employees, though they’re not traveling away from home under the standard definition.
The new rules do have limits. As an example, you can deduct the cost of a hotel room for a recently hired employee who has not yet moved to the area where your business is located. However, the payment is taxable to the employee.
The change can be applied to prior years. If you paid lodging expenses for local business travel in the past, you may want to amend those returns. Give us a call for more information.
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