It’s just business. Don’t take it ‘personally’ — unless you should

It's just businessPrognosticators on the future of business travel differ in their views. Some say business travel will become obsolete, replaced by 3-D virtual reality meetings. Others maintain that traveling for face-to-face business dealings will never go away. Amid the speculation, one thing remains true right now: If your employees travel for work, they need to be clear for tax purposes about how much time is spent on business and how much is spent on personal pursuits.

Asking simple questions can help determine business versus personal travel expenses:
  • Is travel primarily for business and within the U.S.? The entire cost to and from the destination is excluded from employee income. Is it primarily personal? The entire cost is included in employee income.
  • What constitutes business more than personal? Here’s an example: An employee flies in on Monday, takes Tuesday as a vacation day, meets with clients on Wednesday and Thursday, then flies home. This trip is primarily business and excluded from income.
  • How does an employee account for costs at the destination? Costs are paid by an employer and excluded from income if they are related to business. Employer-paid costs not related to business — a massage, a tennis lesson, sightseeing — are included in employee income.
  • What about expenses for family and others? Travel expenses for a spouse, dependents or another accompanying individual generally are not excludable from employee income.
  • What about travel outside the 50 states? Travel costs to and from the destination are paid by the employer, and must be allocated between business and personal. Exceptions to allocations: Travel does not exceed seven consecutive days, personal time is less than 25% of trip, employee had little control over arrangements for or the necessity of the trip, and personal vacation was not a major consideration.

For help differentiating business and personal travel costs, contact Eddie Adkins.

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.