Foreign Business Travel
the world shrinks, business owners may
find themselves traveling to foreign destinations.
Often, such trips are vital, leading to
personal visits with suppliers and potential
customers. Ideally, you'll be able to
deduct all your travel costs, but that
may not be the case if you venture beyond
the 50 states and Washington, D.C.
If you travel outside the U.S. for a week
or less, your trip will be considered
entirely for business, even if you combine
business and nonbusiness activities. Then,
you can deduct all of your travel costs.
A week, for this purpose, is seven consecutive
days, not counting the day you leave the
1: Denise Edwards has a clothing import
business in Chicago. She travels to San
Francisco on Tuesday, then flies to Hong
Kong on Wednesday. After spending Thursday
and Friday in business discussions, Denise
spends Saturday through Tuesday sightseeing,
She flies back to San Francisco on Wednesday
and returns to Chicago on Thursday.
Denise was not outside the U.S. for more
than a week. (Tie day she departed from
San Francisco does not count as a day
outside the U. S.) Therefore, she can
deduct all of her travel costs. She also
can deduct the cost of her stay in Hong
Kong for the days she worked there but
not her costs for her sightseeing days.
than one week
Business trips longer than one week trigger
another set of rules. As long as 75% or
more of the trip's total days are business
days, you can deduct all your travel costs.
Days traveling to and from your destination
count as business days, for the purpose
of reaching the 75% mark. Again, your
costs for nonbusiness days are not tax
If your trip is primarily for business,
but you fail both the one week and the
75% tests for the travel, calculating
your deduction becomes more complicated.
You can only deduct the business portion
of your cost of getting to and from your
destination and must allocate your travel
time on a day-today basis between business
days and nonbusiness days.
2: Henry Jackson owns a restaurant
supply business in Boston. He flies to
Berlin on March 7 for a conference and
spends time there on business until March
17. That day, Henry flies to Brussels
to see friends and tour the local museums.
On March 24, he returns to Boston from
the IRS looks at Henry's itinerary, it
appears that Henry could have returned
to Boston on March 17, after completing
his business. Thus, 11 days of the trip
(March 7-17) count as business days while
the other seven days (March 18-24) are
this reasoning, 7 out of 18 days of the
trip were nonbusiness days, so 7 lis of
what it would have cost him to travel
roundtrip between Boston and Brussels
is not tax deductible.
Henry's total airfare costs were $2,000,
whereas roundtrip airfare between Boston
and Brussels would have been $1,500. Henry
must subtract 7/is of this roundtrip fare
($1,500 x 7/is = $583) from his actual
travel expenses. Because Henry spent $2,000,
subtracting $583 gives him a $1,417 deduction
for his airfare. He can deduct his costs
while in Berlin on business but not his
costs while in Brussels for other purposes.
you can see, calculating foreign business
travel deductions can be complex. If you
will be outside the United States for
business, our office can help you set
up a schedule for optimal tax benefits.
Source: September 2014 AICPA Client