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taxmap/pubs/p463-003.htm#TXMP514e5539 What Travel Expenses Are Deductible?(p4)

Out-of-town Transportation

Once you have determined that you are traveling away from your tax home, you can determine what travel expenses are deductible.

You can deduct ordinary and necessary expenses you have when you travel away from home on business. The type of expense you can deduct depends on the facts and your circumstances.

Table 1-1 summarizes travel expenses you may be able to deduct. You may have other deductible travel expenses that are not covered there, depending on the facts and your circumstances.

When you travel away from home on business, you should keep records of all the expenses you have and any advances you receive from your employer. You can use a log, diary, notebook, or any other written record to keep track of your expenses. The types of expenses you need to record, along with supporting documentation, are described in Table 5-1 (see chapter 5).

taxmap/pubs/p463-003.htm#TXMP14504fb4 Separating costs.(p4)

If you have one expense that includes the costs of meals, entertainment, and other services (such as lodging or transportation), you must allocate that expense between the cost of meals and entertainment and the cost of other services. You must have a reasonable basis for making this allocation. For example, you must allocate your expenses if a hotel includes one or more meals in its room charge.

taxmap/pubs/p463-003.htm#TXMP04271be2 Travel expenses for another individual.(p4)

If a spouse, dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, you generally cannot deduct his or her travel expenses.

taxmap/pubs/p463-003.htm#TXMP3abf74c4 Employee.(p4)

You can deduct the travel expenses of someone who goes with you if that person:

1. Is your employee,
2. Has a bona fide business purpose for the travel, and
3. Would otherwise be allowed to deduct the travel expenses.

taxmap/pubs/p463-003.htm#TXMP6fff96cc Business associate.(p5)

If a business associate travels with you and meets the conditions in (2) and (3) above, you can deduct the travel expenses you have for that person. A business associate is someone with whom you could reasonably expect to actively conduct business. A business associate can be a current or prospective (likely to become) customer, client, supplier, employee, agent, partner, or professional advisor.

taxmap/pubs/p463-003.htm#TXMP3c3ba284 Bona fide business purpose.(p5)

A bona fide business purpose exists if you can prove a real business purpose for the individual's presence. Incidental services, such as typing notes or assisting in entertaining customers, are not enough to make the expenses deductible.

taxmap/pubs/p463-003.htm#TXMP58e13d3b
Example.(p5)

Jerry drives to Chicago on business and takes his wife, Linda, with him. Linda is not Jerry's employee. Linda occasionally types notes, performs similar services, and accompanies Jerry to luncheons and dinners. The performance of these services does not establish that her presence on the trip is necessary to the conduct of Jerry's business. Her expenses are not deductible.

Jerry pays $199 a day for a double room. A single room costs $149 a day. He can deduct the total cost of driving his car to and from Chicago, but only $149 a day for his hotel room. If he uses public transportation, he can deduct only his fare.

taxmap/pubs/p463-003.htm#TXMP4a00a772 Meals(p5)

Meals and Entertainment

You can deduct the cost of meals in either of the following situations.

• It is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business.
• The meal is business-related entertainment.

Business-related entertainment is discussed in chapter 2. The following discussion deals only with meals that are not business-related entertainment.

taxmap/pubs/p463-003.htm#TXMP4d05b962 Lavish or extravagant.(p5)

You cannot deduct expenses for meals that are lavish or extravagant. An expense is not considered lavish or extravagant if it is reasonable based on the facts and circumstances. Expenses will not be disallowed merely because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts.

taxmap/pubs/p463-003.htm#TXMP60a20887 50% limit on meals.(p5)

You can figure your meals expense using either of the following methods.

• Actual cost.
• The standard meal allowance.

Both of these methods are explained below. But, regardless of the method you use, you generally can deduct only 50% of the unreimbursed cost of your meals.

If you are reimbursed for the cost of your meals, how you apply the 50% limit depends on whether your employer's reimbursement plan was accountable or nonaccountable. If you are not reimbursed, the 50% limit applies whether the unreimbursed meal expense is for business travel or business entertainment. Chapter 2 discusses the 50% limit in more detail, and chapter 6 discusses accountable and nonaccountable plans.

taxmap/pubs/p463-003.htm#TXMP1d63005b Actual Cost(p5)

You can use the actual cost of your meals to figure the amount of your expense before reimbursement and application of the 50% deduction limit. If you use this method, you must keep records of your actual cost.

taxmap/pubs/p463-003.htm#TXMP1012dbae Standard Meal Allowance(p5)

Standard Meal Allowance

Generally, you can use the "standard meal allowance" method as an alternative to the actual cost method. It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs. The set amount varies depending on where and when you travel. In this publication, "standard meal allowance" refers to the federal rate for M&IE, discussed later under Amount of standard meal allowance. If you use the standard meal allowance, you still must keep records to prove the time, place, and business purpose of your travel. See the recordkeeping rules for travel in chapter 5.

taxmap/pubs/p463-003.htm#TXMP78afc3d8 Incidental expenses.(p5)

The term "incidental expenses" means:

• Fees and tips given to porters, baggage carriers, bellhops, hotel maids, stewards or stewardesses and others on ships, and hotel servants in foreign countries,
• Transportation between places of lodging or business and places where meals are taken, if suitable meals can be obtained at the temporary duty site, and
• Mailing costs associated with filing travel vouchers and payment of employer-sponsored charge card billings.

Incidental expenses do not include expenses for laundry, cleaning and pressing of clothing, lodging taxes, or the costs of telegrams or telephone calls.

taxmap/pubs/p463-003.htm#TXMP187d4b12 Incidental expenses only method.(p5)

You can use an optional method (instead of actual cost) for deducting incidental expenses only. The amount of the deduction is $3 a day for incidental expenses paid or incurred for travel away from home in 2007. You can use this method only if you did not pay or incur any meal expenses. You cannot use this method on any day that you use the standard meal allowance. This method is subject to the proration rules for partial days. See Travel for days you depart and return, later in this chapter.

Federal employees should refer to the Federal Travel Regulations at www.gsa.gov. Click on "Federal Travel Regulation (FTR)" for changes affecting claims for reimbursement of these expenses.

taxmap/pubs/p463-003.htm#TXMP52ca51b8 50% limit may apply.(p6)

If you use the standard meal allowance method for meal expenses and you are not reimbursed or you are reimbursed under a nonaccountable plan, you can generally deduct only 50% of the standard meal allowance. If you are reimbursed under an accountable plan and you are deducting amounts that are more than your reimbursements, you can deduct only 50% of the excess amount. The 50% limit is discussed in more detail in chapter 2, and accountable and nonaccountable plans are discussed in chapter 6.

There is no optional standard lodging amount similar to the standard meal allowance. Your allowable lodging expense deduction is your actual cost.

taxmap/pubs/p463-003.htm#TXMP05546826 Who can use the standard meal allowance.(p6)

You can use the standard meal allowance whether you are an employee or self-employed, and whether or not you are reimbursed for your traveling expenses.

taxmap/pubs/p463-003.htm#TXMP3b13042b Use of the standard meal allowance for other travel.(p6)

You can use the standard meal allowance to figure your meal expenses when you travel in connection with investment and other income-producing property. You can also use it to figure your meal expenses when you travel for qualifying educational purposes. You cannot use the standard meal allowance to figure the cost of your meals when you travel for medical or charitable purposes.

taxmap/pubs/p463-003.htm#TXMP0183f7ba Amount of standard meal allowance.(p6)

The standard meal allowance is the federal M&IE rate. For travel in 2007, the rate for most small localities in the United States is $39 a day from January 1, 2007, through December 31, 2007.

Most major cities and many other localities in the United States are designated as high-cost areas, qualifying for higher standard meal allowances. These rates are listed in Publication 1542, which is available on the Internet at www.irs.gov.

You can also find this information (organized by state) on the Internet at www.gsa.gov. Click on "Per Diem Rates," then select "2007" for the period January 1, 2007 – September 30, 2007, and select "2008" for the period October 1, 2007 – December 31, 2007. However, you can apply the rates in effect before October 1, 2007, for expenses of all travel within the United States for 2007 instead of the updated rates. You must consistently use either the rates for the first 9 months of 2007 or the updated rates for the period of October 1, 2007, through December 31, 2007.

If you travel to more than one location in one day, use the rate in effect for the area where you stop for sleep or rest. If you work in the transportation industry, however, see Special rate for transportation workers, later.

taxmap/pubs/p463-003.htm#TXMP6bc4aea7 Standard meal allowance for areas outside the continental United States.(p6)

The standard meal allowance rates above do not apply to travel in Alaska, Hawaii, or any other location outside the continental United States. The Department of Defense establishes per diem rates for Alaska, Hawaii, Puerto Rico, American Samoa, Guam, Midway, the Northern Mariana Islands, the U.S. Virgin Islands, Wake Island and other non-foreign areas outside the continental United States. The Department of State establishes per diem rates for all other foreign areas.

You can access per diem rates for non-foreign areas outside the continental United States at:  http://perdiem.hqda.pentagon.mil/perdiem/perdiemrates.html. You can access all other foreign per diem rates at:  www.state.gov/travelandbusiness.

taxmap/pubs/p463-003.htm#TXMP5883154b Special rate for transportation workers.(p6)

You can use a special standard meal allowance if you work in the transportation industry. You are in the transportation industry if your work:

• Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and
• Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates.

If this applies to you, you can claim a standard meal allowance of $52 a day ($58 for travel outside the continental United States) from January 1, 2007, through December 31, 2007.

Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. If you choose to use the special rate for any trip, you must use the special rate (and not use the regular standard meal allowance rates) for all trips you take that year.

taxmap/pubs/p463-003.htm#TXMP39676469 Travel for days you depart and return.(p6)

For both the day you depart for and the day you return from a business trip, you must prorate the standard meal allowance (figure a reduced amount for each day). You can do so by one of two methods.

• Method 1: You can claim 3/4 of the standard meal allowance.
• Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice.

taxmap/pubs/p463-003.htm#TXMP35ede94b
Example.(p6)

Jen is employed in New Orleans as a convention planner. In March, her employer sent her on a 3-day trip to Washington, DC, to attend a planning seminar. She left her home in New Orleans at 10 a.m. on Wednesday and arrived in Washington, DC, at 5:30 p.m. After spending two nights there, she flew back to New Orleans on Friday and arrived back home at 8:00 p.m. Jen's employer gave her a flat amount to cover her expenses and included it with her wages.

Under Method 1, Jen can claim 21/2 days of the standard meal allowance for Washington, DC: 3/4 of the daily rate for Wednesday and Friday (the days she departed and returned), and the full daily rate for Thursday.

Under Method 2, Jen could also use any method that she applies consistently and that is in accordance with reasonable business practice. For example, she could claim 3 days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited to only 21/2 days.

taxmap/pubs/p463-003.htm#TXMP26ae318e Travel in the United States(p6)

Travel in the United States

The following discussion applies to travel in the United States. For this purpose, the United States includes the 50 states and the District of Columbia. The treatment of your travel expenses depends on how much of your trip was business related and on how much of your trip occurred within the United States. See Part of Trip Outside the United States, later.

taxmap/pubs/p463-003.htm#TXMP1c7df928 Trip Primarily for Business(p6)

Trip Primarily for Business

You can deduct all of your travel expenses if your trip was entirely business related. If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct your business-related travel expenses. These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination.

taxmap/pubs/p463-003.htm#TXMP5ca0d463
Example.(p6)

You work in Atlanta and take a business trip to New Orleans. On your way home, you stop in Mobile to visit your parents. You spend $1,070 for the 9 days you are away from home for travel, meals, lodging, and other travel expenses. If you had not stopped in Mobile, you would have been gone only 6 days, and your total cost would have been $920. You can deduct $920 for your trip, including the cost of round-trip transportation to and from New Orleans. The deduction for your meals is subject to the 50% limit on meals mentioned earlier.

taxmap/pubs/p463-003.htm#TXMP75532a41 Trip Primarily for  Personal Reasons(p6)

Trip Primarily for Personal Reasons

If your trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. However, you can deduct any expenses you have while at your destination that are directly related to your business.

A trip to a resort or on a cruise ship may be a vacation even if the promoter advertises that it is primarily for business. The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip.

taxmap/pubs/p463-003.htm#TXMP6062b559 Part of Trip Outside  the United States(p6)

Trip, Part Outside the United States

If part of your trip is outside the United States, use the rules described later in this chapter under Travel Outside the United States for that part of the trip. For the part of your trip that is inside the United States, use the rules for travel in the United States. Travel outside the United States does not include travel from one point in the United States to another point in the United States. The following discussion can help you determine whether your trip was entirely within the United States.

taxmap/pubs/p463-003.htm#TXMP7415cafa Public transportation.(p7)

If you travel by public transportation, any place in the United States where that vehicle makes a scheduled stop is a point in the United States. Once the vehicle leaves the last scheduled stop in the United States on its way to a point outside the United States, you apply the rules under Travel Outside the United States.

taxmap/pubs/p463-003.htm#TXMP44a486c2
Example.(p7)

You fly from New York to Puerto Rico with a scheduled stop in Miami. You return to New York nonstop. The flight from New York to Miami is in the United States, so only the flight from Miami to Puerto Rico is outside the United States. Because there are no scheduled stops between Puerto Rico and New York, all of the return trip is outside the United States.

taxmap/pubs/p463-003.htm#TXMP3770aef0 Private car.(p7)

Travel by private car in the United States is travel between points in the United States, even though you are on your way to a destination outside the United States.

taxmap/pubs/p463-003.htm#TXMP375785b5
Example.(p7)

You travel by car from Denver to Mexico City and return. Your travel from Denver to the border and from the border back to Denver is travel in the United States, and the rules in this section apply. The rules under Travel Outside the United States apply to your trip from the border to Mexico City and back to the border.

taxmap/pubs/p463-003.htm#TXMP7974a7e4 Travel Outside  the United States(p7)

Travel Outside the United States

If any part of your business travel is outside the United States, some of your deductions for the cost of getting to and from your destination may be limited. For this purpose, the United States includes the 50 states and the District of Columbia.

How much of your travel expenses you can deduct depends in part upon how much of your trip outside the United States was business related.

taxmap/pubs/p463-003.htm#TXMP5c1ea1a7 Travel Entirely for Business or  Considered Entirely for Business(p7)

Travel for Business

You can deduct all your travel expenses of getting to and from your business destination if your trip is entirely for business or considered entirely for business.

taxmap/pubs/p463-003.htm#TXMP434c4860 Travel entirely for business.(p7)

If you travel outside the United States and you spend the entire time on business activities, you can deduct all of your travel expenses.

taxmap/pubs/p463-003.htm#TXMP1d353f63 Travel considered entirely for business.(p7)

Even if you did not spend your entire time on business activities, your trip is considered entirely for business if you meet at least one of the following four exceptions.

taxmap/pubs/p463-003.htm#TXMP0f7f3d4b Exception 1 - No substantial control.(p7)

Your trip is considered entirely for business if you did not have substantial control over arranging the trip. The fact that you control the timing of your trip does not, by itself, mean that you have substantial control over arranging your trip.

You do not have substantial control over your trip if you:

• Are an employee who was reimbursed or paid a travel expense allowance,
• Are not related to your employer, and
• Are not a managing executive.

"Related to your employer" is defined later in chapter 6 under Per Diem and Car Allowances.

A "managing executive" is an employee who has the authority and responsibility, without being subject to the veto of another, to decide on the need for the business travel.

A self-employed person generally has substantial control over arranging business trips.

taxmap/pubs/p463-003.htm#TXMP79f89ab3 Exception 2 - Outside United States no more than a week.(p7)

Your trip is considered entirely for business if you were outside the United States for a week or less, combining business and nonbusiness activities. One week means seven consecutive days. In counting the days, do not count the day you leave the United States, but do count the day you return to the United States.

taxmap/pubs/p463-003.htm#TXMP11d711c0
Example.(p7)

You traveled to Brussels primarily for business. You left Denver on Tuesday and flew to New York. On Wednesday, you flew from New York to Brussels, arriving the next morning. On Thursday and Friday, you had business discussions, and from Saturday until Tuesday, you were sightseeing. You flew back to New York, arriving Wednesday afternoon. On Thursday, you flew back to Denver.

Although you were away from your home in Denver for more than a week, you were not outside the United States for more than a week. This is because the day you depart does not count as a day outside the United States.

You can deduct your cost of the round-trip flight between Denver and Brussels. You can also deduct the cost of your stay in Brussels for Thursday and Friday while you conducted business. However, you cannot deduct the cost of your stay in Brussels from Saturday through Tuesday because those days were spent on nonbusiness activities.

taxmap/pubs/p463-003.htm#TXMP48bb3017 Exception 3 - Less than 25% of time on personal activities.(p7)

Your trip is considered entirely for business if:

• You were outside the United States for more than a week, and
• You spent less than 25% of the total time you were outside the United States on nonbusiness activities.

For this purpose, count both the day your trip began and the day it ended.

taxmap/pubs/p463-003.htm#TXMP0182f1e4
Example.(p7)

You flew from Seattle to Tokyo, where you spent 14 days on business and 5 days on personal matters. You then flew back to Seattle. You spent one day flying in each direction.

Because only 5/21 (less than 25%) of your total time abroad was for nonbusiness activities, you can deduct as travel expenses what it would have cost you to make the trip if you had not engaged in any nonbusiness activity. The amount you can deduct is the cost of the round-trip plane fare and 16 days of meals (subject to the 50% limit), lodging, and other related expenses.

taxmap/pubs/p463-003.htm#TXMP0b0067e9 Exception 4 - Vacation not a major consideration.(p7)

Your trip is considered entirely for business if you can establish that a personal vacation was not a major consideration, even if you have substantial control over arranging the trip.

taxmap/pubs/p463-003.htm#TXMP135913cc Travel Primarily for Business(p7)

Travel for Business

If you travel outside the United States primarily for business but spend some of your time on other activities, you generally cannot deduct all of your travel expenses. You can only deduct the business portion of your cost of getting to and from your destination. You must allocate the costs between your business and other activities to determine your deductible amount. See Travel allocation rules, later.

You do not have to allocate your travel expenses if you meet one of the four exceptions listed earlier under Travel considered entirely for business. In those cases, you can deduct the total cost of getting to and from your destination.

taxmap/pubs/p463-003.htm#TXMP4f6c4218 Travel allocation rules.(p7)

If your trip outside the United States was primarily for business, you must allocate your travel time on a day-to-day basis between business days and nonbusiness days. The days you depart from and return to the United States are both counted as days outside the United States.

To figure the deductible amount of your round-trip travel expenses, use the following fraction. The numerator (top number) is the total number of business days outside the United States. The denominator (bottom number) is the total number of travel days outside the United States.

taxmap/pubs/p463-003.htm#TXMP7028aef2 Counting business days.(p7)

Your business days include transportation days, days your presence was required, days you spent on business, and certain weekends and holidays.

taxmap/pubs/p463-003.htm#TXMP4d054514 Transportation day.(p7)

Count as a business day any day you spend traveling to or from a business destination. However, if because of a nonbusiness activity you do not travel by a direct route, your business days are the days it would take you to travel a reasonably direct route to your business destination. Extra days for side trips or nonbusiness activities cannot be counted as business days.

taxmap/pubs/p463-003.htm#TXMP4b532f58 Presence required.(p7)

Count as a business day any day your presence is required at a particular place for a specific business purpose. Count it as a business day even if you spend most of the day on nonbusiness activities.

taxmap/pubs/p463-003.htm#TXMP2f2e4f68 Day spent on business.(p7)

If your principal activity during working hours is pursuit of your trade or business, count the day as a business day. Also, count as a business day any day you are prevented from working because of circumstances beyond your control.

taxmap/pubs/p463-003.htm#TXMP44ad0896 Certain weekends and holidays.(p7)

Count weekends, holidays, and other necessary standby days as business days if they fall between business days. But if they follow your business meetings or activity and you remain at your business destination for nonbusiness or personal reasons, do not count them as business days.

taxmap/pubs/p463-003.htm#TXMP646791ba
Example 1.(p8)

Your tax home is New York City. You travel to Quebec, where you have a business appointment on Friday. You have another appointment on the following Monday. Because your presence was required on both Friday and Monday, they are business days. Because the weekend is between business days, Saturday and Sunday are counted as business days. This is true even though you use the weekend for sightseeing, visiting friends, or other nonbusiness activity.

taxmap/pubs/p463-003.htm#TXMP5befc77a
Example 2.(p8)

If, in Example 1, you had no business in Quebec after Friday, but stayed until Monday before starting home, Saturday and Sunday would be nonbusiness days.

taxmap/pubs/p463-003.htm#TXMP1c9424d1 Nonbusiness activity on the way to or from your business destination.(p8)

If you stopped for a vacation or other nonbusiness activity either on the way from the United States to your business destination, or on the way back to the United States from your business destination, you must allocate part of your travel expenses to the nonbusiness activity.

The part you must allocate is the amount it would have cost you to travel between the point where travel outside the United States begins and your nonbusiness destination and a return to the point where travel outside the United States ends.

You determine the nonbusiness portion of that expense by multiplying it by a fraction. The numerator of the fraction is the number of nonbusiness days during your travel outside the United States and the denominator is the total number of days you spend outside the United States.

taxmap/pubs/p463-003.htm#TXMP76a2a268
Example.(p8)

You live in New York. On May 4 you flew to Paris to attend a business conference that began on May 5. The conference ended at noon on May 14. That evening you flew to Dublin where you visited with friends until the afternoon of May 21, when you flew directly home to New York. The primary purpose for the trip was to attend the conference.

If you had not stopped in Dublin, you would have arrived home the evening of May 14. You did not meet any of the exceptions that would allow you to consider your travel entirely for business. May 4 through May 14 (11 days) are business days and May 15 through May 21 (7 days) are nonbusiness days.

You can deduct the cost of your meals (subject to the 50% limit), lodging, and other business-related travel expenses while in Paris.

You cannot deduct your expenses while in Dublin. You also cannot deduct 7/18 of what it would have cost you to travel round-trip between New York and Dublin.

You paid $450 to fly from New York to Paris, $200 to fly from Paris to Dublin, and $500 to fly from Dublin back to New York. Round trip airfare from New York to Dublin would have been $850.

You figure the deductible part of your air travel expenses by subtracting 7/18 of the round-trip fare and other expenses you would have had in traveling directly between New York and Dublin ($850 × 7/18 = $331) from your total expenses in traveling from New York to Paris to Dublin and back to New York ($450 + $200 + $500 = $1,150).

Your deductible air travel expense is $819 ($1,150 − $331).

taxmap/pubs/p463-003.htm#TXMP1776b129 Nonbusiness activity at, near, or beyond business destination.(p8)

If you had a vacation or other nonbusiness activity at, near, or beyond your business destination, you must allocate part of your travel expenses to the nonbusiness activity.

The part you must allocate is the amount it would have cost you to travel between the point where travel outside the United States begins and your business destination and a return to the point where travel outside the United States ends.

You determine the nonbusiness portion of that expense by multiplying it by a fraction. The numerator of the fraction is the number of nonbusiness days during your travel outside the United States and the denominator is the total number of days you spend outside the United States.

None of your travel expenses for nonbusiness activities at, near, or beyond your business destination are deductible.

taxmap/pubs/p463-003.htm#TXMP70b18bf4
Example.(p8)

Assume that the dates are the same as in the previous example but that instead of going to Dublin for your vacation, you fly to Venice, Italy, for a vacation.

You cannot deduct any part of the cost of your trip from Paris to Venice and return to Paris. In addition, you cannot deduct 7/18 of the airfare and other expenses from New York to Paris and back to New York.

You can deduct 11/18 of the round-trip plane fare and other travel expenses from New York to Paris, plus your meals (subject to the 50% limit), lodging, and any other business expenses you had in Paris. (Assume these expenses total $900). If the round-trip plane fare and other travel-related expenses (such as food during the trip) are $800 from New York to Paris, you can deduct travel costs of $489 (11/18 × $800), plus the full $900 for the expenses you had in Paris.

taxmap/pubs/p463-003.htm#TXMP6af16839 Other methods.(p8)

You can use another method of counting business days if you establish that it more clearly reflects the time spent on other than business activities outside the United States.

taxmap/pubs/p463-003.htm#TXMP75ecb255 Travel Primarily for Personal Reasons(p8)

Travel Primarily for Personal Reasons

If you travel outside the United States primarily for vacation or for investment purposes, the entire cost of the trip is a nondeductible personal expense. If you spend some time attending brief professional seminars or a continuing education program, you can deduct your registration fees and other expenses you have that are directly related to your business.

taxmap/pubs/p463-003.htm#TXMP07930374
Example.(p8)

The university from which you graduated has a continuing education program for members of its alumni association. This program consists of trips to various foreign countries where academic exercises and conferences are set up to acquaint individuals in most occupations with selected facilities in several regions of the world. However, none of the conferences are directed toward specific occupations or professions. It is up to each participant to seek out specialists and organizational settings appropriate to his or her occupational interests.

Three-hour sessions are held each day over a 5-day period at each of the selected overseas facilities where participants can meet with individual practitioners. These sessions are composed of a variety of activities including workshops, mini-lectures, role playing, skill development, and exercises. Professional conference directors schedule and conduct the sessions. Participants can choose those sessions they wish to attend.

You can participate in this program since you are a member of the alumni association. You and your family take one of the trips. You spend about 2 hours at each of the planned sessions. The rest of the time you go touring and sightseeing with your family. The trip lasts less than 1 week.

Your travel expenses for the trip are not deductible since the trip was primarily a vacation. However, registration fees and any other incidental expenses you have for the five planned sessions you attended that are directly related and beneficial to your business are deductible business expenses. These expenses should be specifically stated in your records to ensure proper allocation of your deductible business expenses.

taxmap/pubs/p463-003.htm#TXMP0fc18ee2 Luxury Water Travel(p8)

Travel, Luxury Water

If you travel by ocean liner, cruise ship, or other form of luxury water transportation for business purposes, there is a daily limit on the amount you can deduct. The limit is twice the highest federal per diem rate allowable at the time of your travel. (Generally, the federal per diem is the amount paid to federal government employees for daily living expenses when they travel away from home, but in the United States, for business purposes.)

taxmap/pubs/p463-003.htm#TXMP3cf8d832 Daily limit on luxury water travel.(p8)

The highest federal per diem rate allowed and the daily limit for luxury water travel in 2007 is shown in the following table.

	Highest		Daily Limit
2007	Federal		on Luxury
Dates	Per Diem		Water Travel
Jan. 1 – March 31	n$365nn		n$730nnnn
April 1 – April 30	nn289nn		n578nnnn
May 1 – May 31	n278nn		n556nnnn
June 1 – August 31	n288nn		n576nnnn
Sept. 1 – Sept. 30	n338nn		n676nnnn
Oct. 1 – Nov. 30	n375nn		n750nnnn
Dec. 1 – Dec. 31	n381nn		n762nnnn

taxmap/pubs/p463-003.htm#TXMP470761f1
Example.(p8)

Caroline, a travel agent, traveled by ocean liner from New York to London, England, on business in May. Her expense for the 6-day cruise was $3,900. Caroline's deduction for the cruise cannot exceed $3,336 (6 days × $556 daily limit).

taxmap/pubs/p463-003.htm#TXMP4a857acc Meals and entertainment.(p8)

If your expenses for luxury water travel include separately stated amounts for meals or entertainment, those amounts are subject to the 50% limit on meals and entertainment before you apply the daily limit. For a discussion of the 50% limit, see chapter 2.

taxmap/pubs/p463-003.htm#TXMP68d9da16
Example.(p9)

In the previous example, Caroline's luxury water travel had a total cost of $3,900. Of that amount, $1,700 was separately stated as meals and entertainment. Caroline, who is self-employed, is not reimbursed for any of her travel expenses. Caroline figures her deductible travel expenses as follows.

nMeals and entertainment	$1,700
n50% limit	× .50
nAllowable meals & entertainment	$n 850
nOther travel expenses	+ 2,200
nAllowable cost before the daily limit		$3,050
nDaily limit for May 2007	$n556
nTimes number of days	× 6
nMaximum luxury water travel deduction		$3,336
nAmount of allowable deduction		$3,050

Caroline's deduction for her cruise is limited to $3,050, even though the limit on luxury water travel is higher.

taxmap/pubs/p463-003.htm#TXMP4f981925 Not separately stated.(p9)

If your meal or entertainment charges are not separately stated or are not clearly identifiable, you do not have to allocate any portion of the total charge to meals or entertainment.

taxmap/pubs/p463-003.htm#TXMP4411fc99 Exceptions(p9)

The daily limit on luxury water travel (discussed earlier) does not apply to expenses you have to attend a convention, seminar, or meeting on board a cruise ship. See Cruise Ships under Conventions Held Outside the North American Area.

taxmap/pubs/p463-003.htm#TXMP32c1ccee Conventions(p9)

Conventions

You can deduct your travel expenses when you attend a convention if you can show that your attendance benefits your trade or business. You cannot deduct the travel expenses for your family.

If the convention is for investment, political, social, or other purposes unrelated to your trade or business, you cannot deduct the expenses.

Your appointment or election as a delegate does not, in itself, determine whether you can deduct travel expenses. You can deduct your travel expenses only if your attendance is connected to your own trade or business.

taxmap/pubs/p463-003.htm#TXMP5f2d120c Convention agenda.(p9)

The convention agenda or program generally shows the purpose of the convention. You can show your attendance at the convention benefits your trade or business by comparing the agenda with the official duties and responsibilities of your position. The agenda does not have to deal specifically with your official duties and responsibilities; it will be enough if the agenda is so related to your position that it shows your attendance was for business purposes.

taxmap/pubs/p463-003.htm#TXMP07d0810f Conventions Held Outside  the North American Area(p9)

Conventions Held Outside the North American Area

You cannot deduct expenses for attending a convention, seminar, or similar meeting held outside the North American area unless:

• The meeting is directly related to your trade or business, and
• It is as reasonable to hold the meeting outside the North American area as in it.

If the meeting meets these requirements, you also must satisfy the rules for deducting expenses for business trips in general, discussed earlier under Travel Outside the United States.

taxmap/pubs/p463-003.htm#TXMP247feb22 North American area.(p9)

The North American area includes the following locations.

American Samoa	Johnston Island
Antigua and Barbuda	Kingman Reef
Aruba	Marshall Islands
Bahamas	Mexico
Baker Island	Micronesia
Barbados	Midway Islands
Bermuda	Netherlands Antilles1
Canada	Northern Mariana
Costa Rica	Islands
Dominica	Palau
Dominican Republic	Palmyra Atoll
Grenada	Puerto Rico
Guam	Saint Lucia2
Guyana	Trinidad and Tobago
Honduras	USA
Howland Island	U.S. Virgin Islands
Jamaica	Wake Island
Jarvis Island
1For expenses in attending a convention that began after March 21, 2007. 2Not included in the North American area with respect to conventions that began after April 4, 2007, except with respect to nonrefundable contractual obligations in existence on that date.

The North American area also includes U.S. islands, cays, and reefs that are possessions of the United States and not part of the fifty states or the District of Columbia.

taxmap/pubs/p463-003.htm#TXMP47ada14b Reasonableness test.(p9)

The following factors are taken into account to determine if it was reasonable to hold the meeting outside the North American area.

• The purpose of the meeting and the activities taking place at the meeting.
• The purposes and activities of the sponsoring organizations or groups.
• The homes of the active members of the sponsoring organizations and the places at which other meetings of the sponsoring organizations or groups have been or will be held.
• Other relevant factors you may present.

taxmap/pubs/p463-003.htm#TXMP1dccbb5c Cruise Ships(p9)

Cruise Ships

You can deduct up to $2,000 per year of your expenses of attending conventions, seminars, or similar meetings held on cruise ships. All ships that sail are considered cruise ships.

You can deduct these expenses only if all of the following requirements are met.

1. The convention, seminar, or meeting is directly related to your trade or business.
2. The cruise ship is a vessel registered in the United States.
3. All of the cruise ship's ports of call are in the United States or in possessions of the United States.
4. You attach to your return a written statement signed by you that includes information about:
   1. The total days of the trip (not including the days of transportation to and from the cruise ship port),
   2. The number of hours each day that you devoted to scheduled business activities, and
   3. A program of the scheduled business activities of the meeting.
5. You attach to your return a written statement signed by an officer of the organization or group sponsoring the meeting that includes:
   1. A schedule of the business activities of each day of the meeting, and
   2. The number of hours you attended the scheduled business activities.

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