Are travel expenses to avoid a long commute deductible?

Question of the week: May a taxpayer deduct the cost of transportation, meals, and lodging to stay near her business office?

September 24, 2020

Q. May a taxpayer deduct the cost of transportation, meals, and lodging to stay near her business office?

A new client, Petra, owns a business, a single-member LLC she started in 2018. The business is located more than 50 miles from where she lives. Rather than face a 100-mile daily round trip, she rents some rooms in a friend’s home that is within walking distance from her office. She travels from her home by railroad on Mondays, buys groceries for the week, and returns home on Fridays. When she did her own return in 2018, she deducted the rent, food, and train fares as travel expenses. Are these business travel expenses or commuting expenses? If the expenses aren’t deductible, should she amend her 2018 return?

A. No, travel costs to get to and stay near a taxpayer’s tax home are nondeductible personal expenses.

Petra cannot deduct the cost of rent, food, and railroad fares as business travel expenses. The rent and groceries are nondeductible personal expenses. The railroad fares are commuting expenses and also non-deductible personal expenses.

The cost of meals, lodging, and transportation are deductible as business travel expenses if a taxpayer is traveling away from the taxpayer’s tax home and the trip is for business purposes. A tax home is generally defined as the taxpayer’s main or regular place of business. If a taxpayer’s personal or family home is different from the taxpayer’s tax home, the cost of traveling from one to the other and the cost of meals and lodging while at the taxpayer’s tax home is not deductible.

This is the case no matter how far apart the two locations are. For instance, in example 1 on page 4 of IRS Pub. 463, Travel, Gift, and Car Expenses, a taxpayer travels from his home in Phoenix to his main business location in Tucson and stays overnight there once a week. Even though the round-trip distance between the two cities is over 200 miles, Tucson is the taxpayer’s tax home and he cannot deduct the cost of getting from his family home to his tax home or of staying near his tax home.

Although Petra is traveling to her office location for business reasons, her office location is her tax home. She may not see it this way, but it is her choice to live and work in two different locations. If criteria are met, the cost of travel to other business locations is potentially deductible. For instance, if Petra travels from her tax home to call on clients or potential clients those costs would be deductible. If Petra works close to her personal home some days and at her business office on other days, facts and circumstances would determine which travel costs, if any, are deductible.

As Petra’s new tax preparer, you are not required to amend her 2018 return, but you should explain why her 2019 return will be prepared differently and advise her to amend her 2018 return.

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