Making Travel Less Taxing: Lodging and Meals

Its a small point, but DOD establishes per diem for Alaska and Hawaii.

This may not apply to a lot of people on this particular board, but if you hold a CDL and spend time over the road away from your home terminal, you can deduct 80% of $59/day ($47.20/day) per diem with no receipts as long as you keep a log book as proof (opposed to the standard 50%).

This does not only apply to truck drivers in the traditional sense - if you drive promotional vehicles for marketing companies etc etc etc you can use this as long as you identify yourself as a driver come tax time, which is fine if you hold the proper CDL and keep log books.

Thanks, jfhscott, for the clarification.

Thanks, too, Matt S, for highlighting the 80% rule for those subject to DOT hours of service limits. Here's the full list of occupations that the lists who are eligible for that higher limit:

*Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations.

*Interstate truck operators and bus drivers who are under Department of Transportation regulations.

*Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations.

*Certain merchant mariners who are under Coast Guard regulations.

I would add that self-employed taxpayers who adequately account for meal expenses to and subsequently receive reimbursement from a client are not subject to the 50% limit on deductions.

UK tax law is somewhat different: when I worked there, my employer had a rule that whenever we entertained a guest, the host was only allowed to bring along one fellow employee. At some point I learned that this was due to a rule by Her Majesty's Revenue and Customs, whereby any meal paid for by the employer where the ratio of employees to guests exceeded 2:1 was considered to be taxable income to the employees.

@Mark - Yes, I'd count that under the category of "reimbursed" business expenses, and I was highlighting the rules for unreimbursed expenses.

@Ron - Thanks for the UK info. Interesting how tax drives behavior sometimes, huh? I'm not sure if any country uses tax to try to influence behavior more than the US, but maybe HMRC gives the IRS a run for its, er, money.

My former employee requires actual receipts for reimbursements of employee meals while on business travel. I would be annoyed as a taxpayer if my former employee could take the per diem deduction such as $180 for London while requiring receipts and reimbursing for actual expenses with a travel policy recommendation to keep meal expenses far lower than that example $180. Is the employer in this example required to only deduct the actual expense it realizes, namely the actual expenses it reimbursed me?

PH -

In that instance, I do think the employer could deduct the per diem allowance even if the actual was less than that amount, similar to how a self-employed person can deduct the per diem for meals even if the actual were less than that.

I don't think employees would be pleased at all if they found out about such a practice, but as long as the employee has all of their expenses reimbursed, I'm not sure they would know or complain about what the employer deducts. The employer in the "actual expense" scenario also takes the risk that the employee will exceed the maximum, too, I suppose.

Hi Scott, just to check i understand: so being sole proprietor I can't use a per diem rate over seas (or US) but have to keep receipts for all meals and lodgings. But, meals overseas are fully recompensed? If I start an S or C corp i can reimburse myself at per diem rates? Thanks!

Levi -

For a sole proprietor, you can use the per diem rate for meals, but you cannot use it for lodging, regardless of domestic or international travel.

if you start a corporation and are more than 10% owner, then you are also limited to the actual lodging costs and cannot take the per diem for lodging. The IRS apparently anticipated someone doing exactly what you are contemplating to maximize their lodging deductions!

I am a sole proprietor. Recently, I was under contract to two separate companies. Both would reimburse me for travel using the same rules and limitations that apply to Government employees. (I had to file travel vouchers with receipts with each.) One company included the total reimbursement for all my trips in my Form 1099-Misc. The other included none of the reimbursements on their 1099 to me.

Two questions: (1) Which company did it correctly from the IRS view? (2) For the company who included my reimbursement in my 1099, I can deduct the full amount that I was reimbursed, correct? (Specifically, since I was reimbursed, the meal deduction is NOT limited to 50% of what I was reimbursed for meals, correct?)

@jmd001, neither company was per se wrong in how they reported it, but obviously on your end, you will report it differently. You are correct that for (2), you should show the expenses against the income reported to you, and that you won't "lose" the 50% deduction in this instance, so report your meals at 100% since you were reimbursed under an accountable plan.

I am self-employed. For a per diem in a given city/state, do I understand it correctly that the meal per diem can be taken even without actual receipts, or an actual costs which is less than the per diem, but the lodging per diem rate offered for that locality must have all receipts attached?

I frequently travel to the same place for business. For the first year I did this, I would stay in hotels. However due to the expense, I decided to simply purchase a home there. My primary residence is in another state. I only use the second home when conducting business there. Are the costs associated with that second home deductible?

Clarification! It is clear from the article that the full per diem rate can be expensed when you are away from home.

If I am at a Starbucks for clear business purposes in my own town… Can I take the full Per diem rate?

Please explain in more details

For those travelers whose actual expenses are less than the allowance, the excess is a “free” tax deduction since the permitted deduction is greater than the cash spent.

How can this be done?

I travel for a living and am self employed. My clients reimburse me for my meals as well as my crew's meals. Since this is reported as income to me, I deduct 100% of this. My question..... since my reimbursement is for actual dollars spent, I write off actual dollars spent. Am I allowed to write off the standard per diem instead? I would think this would not be allowed. And second question is can I write off standard per diem for my crew (I pay for their meals and my client reimburses me for actual expenses).