Travel Expense Tax Deductions for Expats

Travel Expense Tax Deductions for Expats
January 20, 2017

As a US expat, you’re likely accustomed to travel. But if you travel for work, you may be wondering about travel expense tax deductions for expats. Some expenses are deductible, while others are not, so it’s a good idea to understand the intricacies so there will be no surprises come tax season. Read on for the details.

Defining Travel Expenses for Work

Typically, business travel will involve a number of expenses, from transportation to lodging and many other items in between. The key is understanding what expenses actually qualify as travel expenses for work, when it comes to expatriate taxes. To be considered a travel expense, it must be directly related to your work or the operation of your business, and requires that you are away from your tax home for longer than an ordinary day’s work. Also, in order for it to be tax-deductible for an employee, the travel expenses must exceed travel expense reimbursements you receive from an employer.

To determine which of your travel expenses are deductible, you’ll need to determine your tax home. For example, if you live in London, pay taxes there and file your US expat taxes from the UK, you can only deduct travel expenses required for work that take place outside of the UK. So, if you met with a client in Paris, you would have deductible expenses. However, if you stayed in a hotel in London that was near a place of business for convenience reasons, it would not be a deductible expense.

Do you conduct work in two locations? Generally, where you spend more time determines your tax home or place of business – though some argue that it’s where the majority of your revenue comes from.

Living Abroad: Travel Expenses That Are Deductible

We’ve explained what a deductible travel expense is, so now you’ll need to understand the specific expenses that you can deduct when you’re living abroad. These travel expenses, found on the IRS website, are considered to be deductible:

  • Air, train, car or bus travel
  • Using your car at a business destination
  • Fares paid for taxes or other transportation:
    • between the airport or train station and your hotel
    • between the hotel and work location
    • from one customer to another
    • from one place of business to another
  • Meals and lodging necessary for conducting work
  • Tips paid for services related to any of these exemptions
  • Dry cleaning and laundry
  • Business calls while you’re on the business trip (this includes fax or other communication devices)
  • Similar ordinary and necessary expenses directly related to business travel

Reporting Your Travel Expenses on Your Expatriate Taxes

Now that you’re aware of which travel expenses are deductible, you need to know how to report them on your expatriate taxes. The process will differ depending on whether you’re an employee or self-employed.

Employee

  • Your unreimbursed and allowable travel expenses (based on the information above) will be figured on Form 2106 or Form 2106-EZ. The expenses are then carried forward to Form 1040 via Schedule A. Travel expenses must be itemized in order to be deducted, unlike other types of deductions – this is why the Schedule A is required.

Self-Employed

  • You’ll see that your reporting requirements differ from an employee’s. You will report your travel expenses on Schedule C or Schedule C-EZ, which you’ll attach to your Form 1040 as part of your US Tax Return.

Keeping accurate records throughout the year is critical when it comes to reporting your travel expenses, since you’ll need to provide detailed information. Additionally, having your records available is important in the event of an audit, since things like deducting travel expenses can raise your risk of an audit. If you keep accurate records, you’ll have nothing to worry about, though! Looking for more expat tax specifics? Download a US expat tax guide for deadlines, ways to save and more.

Ready to Begin Preparing Your US Expatriate Taxes?

Our expat-expert CPAs and IRS Enrolled Agents will help make filing your expatriate taxes a hassle-free experience, so you can cross taxes off your ‘to-do list’ and get back to your adventure abroad – even when it comes to travel expense tax deductions for expats. Learn more from our expat tax guide here, or you can go ahead and get started today!

The IRS tax code is 7,000 pages. Want the cliff notes version for expats? Let us help.
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