16.2 Business Travel Expenses
Key Takeaways
- "Away from home" requires overnight stay.
- Tax home = main place of business (not residence).
- Temporary (<1 year) vs. indefinite assignments.
- Domestic: primary purpose test (all-or-nothing transportation).
- Foreign: allocation required unless <7 days or <25% personal.
- 2025 per diem high-low (CONUS): $319 high cost ($86 M&IE) / $225 low cost ($74 M&IE).
- Spouse travel only deductible if employee with business purpose.
Why This Matters for the Exam
Travel expense rules are heavily tested. Know the tax home definition, the overnight rule, and domestic vs. foreign travel allocation.
Expect at least 3-4 questions on travel.
"Away from Home" Requirements
| Requirement | Description |
|---|---|
| Overnight rule | Must require sleep or rest |
| Tax home | General area of main business |
| Temporary | <1 year assignment |
| Indefinite | New tax home (no deduction) |
Tax Home Definition
| Situation | Tax Home |
|---|---|
| One work location | That city/area |
| Multiple locations | Location with most time/income |
| No regular location (itinerant) | No tax home = no deduction |
Domestic vs. Foreign Travel
| Type | Transportation Rule | Meals/Lodging |
|---|---|---|
| Domestic | Primary purpose test | Business days only |
| Foreign | Allocation (unless exception) | Business days only |
Domestic Travel: Primary Purpose Test
| Primary Purpose | Transportation Deduction |
|---|---|
| Business (>50%) | 100% |
| Personal (>50%) | 0% |
Foreign Travel Exceptions (No Allocation)
| Exception | Rule |
|---|---|
| <7 days | 100% transportation |
| <25% personal | 100% transportation |
| No control over trip | 100% transportation |
Per Diem (High-Low CONUS) — 2025
Employers may use the IRS high-low simplified per diem in lieu of substantiating actual lodging and M&IE.
| Locality Tier | Total Per Diem | M&IE Portion |
|---|---|---|
| High-cost localities | $319 | $86 |
| Low-cost (all other CONUS) | $225 | $74 |
Source: IRS Notice 2024-68 / 2025 successor (effective Oct. 1, 2024). The M&IE portion remains subject to the 50% meal limitation. Self-employed taxpayers can use the M&IE-only per diem (not lodging).
Foreign Travel Allocation Example
| Item | Amount |
|---|---|
| Trip duration | 10 days |
| Business days | 6 |
| Personal days | 4 |
| Airfare | $2,000 |
| Business % | 60% |
| Deductible airfare | $1,200 |
Specific Travel Limitations
| Type | Limitation |
|---|---|
| Luxury water travel | 2× federal per diem |
| Cruise conventions | $2,000/person/year |
| Spouse travel | Only if employee with business purpose |
The Friday/Monday Rule
| Scenario | Treatment |
|---|---|
| Business Friday, business Monday | |
| Stay for weekend | |
| Saturday/Sunday | Count as business days |
Real-World Scenario
Scenario (Tax Year 2025): Architect flies to Miami. 5-day trip: 3 days convention, 2 days beach. Airfare $500.
- Primary purpose: Business (3/5 = 60%).
- Domestic rule: 100% transportation deductible.
- Deductible airfare: $500.
On the Exam
Expect 3-4 questions on travel, typically:
- Itinerant Questions: "Can this worker deduct travel?"
- Allocation Questions: "How much airfare is deductible?"
- Cruise Questions: "What is the convention limit?"
The key is to remember: Overnight + tax home required. Domestic = primary purpose. Foreign = allocate unless <7 days or <25% personal. Itinerant = no deduction.
Architect: Miami 5 days, 3 convention, 2 beach. Airfare $500. Deductible?
What disqualifies a taxpayer from "away from home" deduction?
Maximum annual cruise convention deduction?