Taxpayer asks:
Thanks for taking the time to consider my question.
I travel extensively for my job. When I travel, I have an expense account for meals and hotels. My company recently moved to a “no alcohol” policy on expense accounts. We cannot put any alcohol on our expense accounts and we cannot apply for reimbursement for any alcoholic beverages.
My question is, if I have an occasional glass of wine for dinner, can I deduct that on my taxes as travel costs?
Taxgirl says:
I say yes, assuming that you otherwise meet the criteria for deducting your meals.
To the extent that your employer provides reimbursement for your meals, the reimbursement is not taxable to you (or deductible).
For meal and entertainment expenses which are not reimbursed by your employer, your deduction is limited to 50% of the expenses. They would be treated as unreimbursed job expenses and reported on Schedule A as a miscellaneous deduction. This means, of course, that they are subject to the dreaded 2% floor – in other words, you can only deduct those that exceed 2% of your AGI.
You can use the per diem method or the actual cost method when calculating the deduction. In your case, it makes sense to use the actual cost method since you are otherwise being reimbursed (or taking advantage of your expense account).
The normal rules of travel (business versus pleasure, etc.) still apply.
The key to your question, really, is whether your meals – and that additional glass of wine – is considered “lavish or extravagant.” The IRS will not allow a deduction for “lavish or extravagant” expenses. An expense is not considered lavish or extravagant if it is reasonable based on the facts and circumstances.
So use common sense. I think it’s reasonable to have a nice glass of wine at dinner. But I’m thinking a nice Sancerre or Shiraz – not a 1998 Petrus Pomerol. Similarly, I think you can justify a glass or two but not the cost of all night vodka shots. But really, it’s up to the discretion of the IRS as to what’s “reasonable” under the circumstances.
It’s worth noting that the IRS does not have an official position on alcohol beverages, nor a definitive amount for what’s considered “reasonable” (though the per diem amounts can be used as a guideline). What’s reasonable for one person may not be reasonable for another – just ask Hugh Heffner, who argued that very thing with the IRS.
Keep excellent receipts, use good judgment – that’s the best advice that I can offer.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl! – Now on Facebook!
Oh, if it were only that easy. Airlines fee and tax you to death these days.
Have a look:
For domestic flights, there is an “excise” tax of 7.5% of the fare. You’ll see this amount on your bill because the Department of Transportation (DOT) requires airlines to include that tax in advertised fares. What they don’t have to advertise are other government fees and taxes such as the $3.30 per flight segment (maximum of four segments charged on any round-trip ticket) plus a $2.50 security fee per departure, sometimes referred to as the September 11 fee – no doubt to make you feel less annoyed about having to pay it. Additionally, individual airports may impose airport passenger facility charges of up to $4.50 per departure (also a maximum of four fees per round-trip ticket). So, doing some quick math – a $500 ticket could cost you almost $575.
Heading to Alaska or Hawaii? Sure, we claim that they’re US states. But hopping a plane to or from either destination will result in an extra travel facilities tax of up to $13.40 per round-trip. Quite frankly, I’m not sure what that’s about – except perhaps as a revenue raiser.
And Canada? There’s now a federal immigration fee of $7.00 per round-trip, additional airport fees of $6.50 per round-trip and our friendly neighbors to the north tack on a Canada Air Traveler Security charge of $8.00 per round-trip.
It gets worse for international travel. The government charges a departure fee of $14.50 and an arrival fee of $14.50 on international flight tickets. Additionally, you’re charged $7 for immigration, $5 for customs services and $5 to fund “animal and plant inspections” (one of my favorites). Most airlines note that fees may go “up to $200″ for international travel.
Oh – and did I mention the airline fuel surcharges?
Sheesh.
And it’s about to get worse. That airport facility tax? The one that’s $4.50 right now? The Chicago Department of Aviation and other airport authorities have asked Congress for permission to boost the tax to $7.50 (a 67% increase) to help pay for airport capital-improvement projects. That’s because O’Hare, the world’s second-busiest airport (and my personal nightmare), is in the midst of an expansion – already behind schedule and over budget, much like the airlines that use it – that the airlines don’t want to pay for. Yep, the airlines who use the airport don’t want to pay to make it better. They think we should pay. And we probably will: consumers have little say when it comes to airline fees and taxes. So, keep your eyes out in the upcoming months. You’re about to the fly the fee and tax-friendly skies…
Here at b5 media, we wouldn’t think of it! There are lots of ways to incorporate work and play into your life and what better time to think about it than now, when the weather has turned nice here in the northern hemisphere? So, in honor of the nice weather, today our Business Channel bloggers are offering their thoughts on incorporating work and play into your life.
First up, is it time for a break? What are the signs that you’re working too hard? Jonathan weighs in on the signs in his post, Are You Working Smart or Dangerously Hard? over at Leadership Turn.
In a rut? Finding it hard to get your groove on? Maybe you need to consider altering your routine. Steve at StartUp Spark offers some insight on the importance of finding your morning routine at What Is Your Morning Routine?
Or maybe you’ve just forgotten how to enjoy your job… Mary Emma Allen, at Home Biz Notes, suggests we Enjoy the Journey of Your Home Business and relates how she discovered this.
Similarly, Maricel of Property Crossroads discusses the idea that Real Estate is one of the few businesses that allows you to work and have plenty of time to play.
Sean at FranchisePick reminds us that sometimes it can be all fun and games. He encourages us to think outside the box when marketing, even sometimes while poking fun at yourself a la Denny Crane in It’s Fun Being Me: The Marketing Secrets of Denny Crane – one of the most clever marketing articles I’ve read in awhile!
Scott at LinkedIntelligence offers 5 Ways to Have Fun with LinkedIn in your personal life (who knew?). I totally agree about using LinkedIn as a way to reconnect with old friends and school chums!
Kevin also chimes in about the value of social networking sites – how to work and play online – at Buzz Networker.
And clearly I’m not the only one intrigued by Second Life (though I still haven’t figured it out). Des offers some interesting commentary about Virtual Worlds and Business: Play or Work? on Business and Blogging.
And don’t feel left out simply because you’re not in the job market. Darlene offers some positive tips over at Tough Questions? Great Answers about finding employment in Unemployed? Congratulations! You’re Hired.
Rico at Contract Worker reminds us that work makes it possible to play. His post What You Should Know About Work and Play offers some valuable info about working – and playing – within your means and the importance of developing a long-term work/play strategy.
And don’t forget that geeks just want to have fun! Tris at Pimp Your Work doesn’t want tech geeks getting bored – and offers an insightful lesson about problem solving in Getting More Out of Work With Play.
Maybe it’s just time to take a break. It could be a mini-break or an actual vacation. Kris offers some Techniques to Help You Blend Work and Play over at Workboxers. His tips allow you to sneak in some quality play time and still remain efficient at work.
And, of course, when it comes to tax, you can absolutely mix work and play. You can take a working vacation and make it count at tax time, so long as you follow certain rules and keep pretty decent receipts.
Deductible business expenses for business trips and the infamous business conventions pretty much involve the use of common sense. Expenses that are clearly personal or involve lavish travel will not be deductible. For tax purposes, deductible travel expenses are defined as “the ordinary and necessary expenses of traveling away from home for your business, profession, or job.” That’s right – ordinary and necessary.
[click to continue…]
