Tax Deductions on Foreign Business Travel – What You Need to Know

Posted on 09.09.14

Tax Deductions on Foreign Business Travel – What You Need to Know

Foreign Business Travel - Richmond CPA Firm Author: Sarah B. French, Tax Senior Associate

Many of the rules surrounding foreign business travel are dependent on the length and purpose of the trip.  When it comes to deducting foreign business travel here are some key points to consider:

Trips Lasting Seven Days or Less:

  1. Business trips outside of the U.S. lasting seven consecutive days or less (not counting the day you leave the U.S.) enable travel costs to be 100% tax deductible, with the exception of 50% deductibility for most business meals and entertainment.
  2. Out-of-pocket costs, including hotel stay, incurred on personal days during the trip are not tax deductible.

Trips Lasting More Than Seven Days:

  1. Foreign business trips outside of the U.S. lasting more than seven consecutive days are subject to a “25% test.”  Under these rules, both the day of departure and the day of return are considered.
  2. As long as non-business activity amounts to 25% or less of the total trip, 100% of the travel costs are tax deductible, with the exception of 50% deductibility for most business meals and entertainment.
  3. If non-business activity exceeds 25%, the allocation is calculated on a day-to-day basis considering business days and non-business days.
  4. Out-of-pocket costs, including hotel stay, incurred on personal days during the trip are not deductible.

 

If you have any questions regarding the business travel tax deductions, or any other tax questions, contact your Keiter Advisor at 804.747.0000 or information@keitercpa.com

 

Sources: Deducting Foreign Business Travel. (2014, September 1). Retrieved September 4, 2014, from http://www.fgpcpa.com/wp-content/uploads/2014/08/2014-September-Deducting-Foreign-Business-Travel.pdf
Key Issue 12E: Travel out of the Country. (2013). PPC's Federal Tax Compliance, 1040 Deskbook
 
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The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.