Business travel is deductible under IRC §162 when it is ordinary and necessary for the taxpayer's trade or business and requires the taxpayer to be away from home overnight. The rules sound simple but have sharp edges: the primary purpose test, the meals 50% haircut, foreign travel proration, and the spouse/companion exclusion create substantial disallowances for taxpayers who do not structure trips correctly.
1. Ordinary and necessary: The expense must be common and accepted in the taxpayer's trade or business and directly related to carrying on that business.
2. Away from home: The taxpayer must be away from their "tax home" (the principal place of business, not the personal residence) long enough to require sleep or rest.
3. Business purpose: The primary purpose of the trip must be business. For domestic travel, transportation costs are deductible only if the trip is primarily business (Treas. Reg. §1.162-2(b)(1)); for foreign travel, section 274(c) proration applies when the trip exceeds one week and personal time is 25% or more of the total.
The "tax home" for travel deduction purposes is the taxpayer's principal place of business - not where they live. A consultant who lives in New Jersey but works primarily in New York City has a tax home in New York City. Travel from home to the tax home is a commute, not a business travel deduction. Travel away from the tax home for business purposes is deductible. This distinction is critical for employees who work remotely but travel to a company headquarters: their tax home may be the headquarters city, making those trips non-deductible.
For domestic travel, transportation costs (airfare, train, rental car) are fully deductible if the primary purpose of the trip is business - even if some personal days are included. Lodging and other expenses are deductible only for business days. A 5-day trip with 3 business days and 2 personal days: airfare fully deductible, lodging deductible for 3 days only.
Counting business days: days of travel to and from the destination count as business days. A day when business is conducted for a substantial portion of the day counts as a business day. A day spent waiting for delayed transportation counts as a business day if the delay is not the taxpayer's choice.
Foreign travel is subject to stricter proration under IRC §274(c). If a foreign trip has any personal component, the trip exceeds one week, and personal time is 25% or more of total travel time, the transportation cost must be allocated between business and personal days. Deductible transportation = total cost × (business days / total days). If 10 days total, 7 business, 3 personal: 70% of airfare deductible. Proration also does not apply if the taxpayer did not have substantial control over arranging the trip (control over timing alone is not enough, and an employee traveling under a reimbursement arrangement is treated as lacking substantial control unless a managing executive or related to the employer), or if a major consideration for the trip was not obtaining a personal vacation (Treas. Reg. §1.274-4(f)(5)).
Business meals while traveling are generally subject to the 50% limitation under IRC §274(n)(1) regardless of how clearly business-related they are, subject to the exceptions in §274(n)(2) and the 80% rule for individuals subject to Department of Transportation hours-of-service limits in §274(n)(3). A $200 dinner during a business trip produces a $100 deduction. There is no exception for solo traveler meals during overnight travel - the 50% cap is the general rule for meals, with narrow statutory exceptions. The OBBBA deduction for qualified tips received (IRC §224) is separate and does not affect the traveler's meal deduction.
Costs attributable to a spouse or companion who accompanies a business traveler are not deductible unless the spouse is also a bona fide employee of the business, travels for a genuine business purpose, and would otherwise be entitled to deduct the trip. The spouse's presence at social events during a business trip does not qualify. When booking travel for two but only one is on business, use the cost of a solo ticket as the deductible amount - the incremental cost of the companion is personal.