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, any business days create a deduction for transportation; for foreign travel, proration applies when personal days exceed a threshold.
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 and the trip exceeds 7 days, or if personal time exceeds 25% of total days, 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. Exceptions apply if the taxpayer had no control over scheduling or if the travel was for employment (not self-employment).
Business meals while traveling are subject to the 50% limitation under IRC §274(n) regardless of how clearly business-related they are. 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 applies universally to meals. The OBBBA new deduction for tips paid by employers 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.