I Wasn’t Traveling Away From Home – Can I Still Deduct Lodging as a Business Expense?

Your employer is putting on a seven-day training seminar for all its employees at a hotel near its corporate headquarters. Some of the company’s employees do not live near corporate headquarters and must travel out of town to attend training. Other employees, however, reside in the same city that the training will take place. Is it fair that out-of-town employees are able to take a deduction for the lodging as a business expense while local employees may not? The Internal Revenue Service thinks not. On September 20, 2014, the IRS issued final regulations allowing employees to deduct certain expenses paid or incurred for local lodging as business expenses.

Historically, you were only able to deduct lodging expenses as a business expense if you were traveling away from home. New regulations now allow you to take the same deductions even if you are not traveling away from home if you are able to satisfy one of either two provisions.

The first provision is a facts and circumstances test. The IRS will be looking at the individual facts and circumstances surrounding your deduction to determine whether you incurred the expense due to a bona fide condition or requirement imposed on you by your employer. This is a fairly subjective test.

The second provision takes a more objective approach. An expense may be treated as an ordinary and necessary business expense if it meets all of the following criteria:

• The lodging is necessary for the employee to fully participate in a bona fide business meeting, conference, training, or other business function
• The lodging lasts no more than 5 calendar days, and no more than once a calendar quarter
• Your employer requires you to remain at the activity or function overnight
• The lodging is not lavish or extravagant

As with all deductions, you must be able to substantiate or prove that the expense was incurred. You are required to prove the amount of the expense, the time and place, and the business purpose. Make sure to keep your canceled checks or credit card statements to establish the time and the amount of the expense. If your employer provided you materials for the meeting or other function, these can be used to prove business purpose.

If you have questions regarding whether your lodging expense qualifies as a business deduction, the professionals at Nielsen Law Group are ready to assist you. Call (480) 888-71111 or submit a web request here.