By Gary A. Hensley
Entirely on Business
If you travel abroad entirely on business as a writer, author, illustrator or literary agent, all of your travel costs are deductible; however, meal and entertainment costs are still subject to the 50-percent limit. If your trip is considered to be entirely business, then even if some time is spent sightseeing or on other personal activities, all of your transportation expenses are still deductible.
There are special rules for determining whether your trip is considered to be entirely for business. You are treated as having spent your entire trip on business if you meet any of the following four rules:
1. No substantial control. 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 arranging 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.
A self-employed person generally has substantial control over arranging business trips so it is virtually impossible to satisfy this rule. However, you may fall within one of the other rules below.
2. Outside United States no more than a week. 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 7 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.
3. Less than 25% of time on personal activities. Your trip is considered entirely for business if:
- You were outside the United States for more than one 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.
Example: You fly on Sunday from New York to London. where you spend 14 days on business and 5 days on personal matters. You spend one day flying in each direction. Your total time abroad is 21 days (14 days for business, 5 days for personal activities, and 2 days for travel). Since the time you spent on nonbusiness activities is less than 25 percent of the total travel time abroad (5 days personal/21 days total), you may treat the trip as entirely business. Therefore, the entire cost of the airfare is deductible. You treat the days of travel as business days so that 16/21 of the lodging and meal costs (subject to the 50% limit on meals) are deductible.
4. Vacation not a major consideration. 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.
Part 2 will cover foreign expenses incurred “primarily for business” as compared to “entirely,” foreign conventions and cruise ships.