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Book deductions for local lodging expenses

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in Small Business Tax,Small Business Tax Deduction Strategies

Usually, you have to be traveling “away from home” on business to deduct lodging expenses. But that’s not always the case.

Alert: The IRS has issued new final regulations allowing deductions for certain local lodging expenses. (IRC Reg. Sec. 1.162-32, 9/30/14) Typically, these new rules will benefit business people who stay at a local hotel overnight while attending a conference or similar occurrences.

In addition, the IRS has approved a safe-harbor rule for this purpose. Under the new regulations, you can deduct lodging expenses in your general area when dictated by all the facts and circumstances. Normally, the expense must be incurred due to a bona fide condition or requirement of employment imposed by the employer (e.g., late shift workers who are on call).

Here’s how the safe-harbor rule works. Lodging expenses are treated as ordinary and necessary business expenses if all of the following conditions are met.

  • The lodging is necessary to participate fully in, or be available for, a bona fide business meeting, conference, training activity or other business function
  • The lodging lasts no longer than five calendar days and does not recur more frequently than once per calendar quarter
  • If the taxpayer is an employee, he is required by the employer to remain at the activity or function overnight
  • The lodging is not lavish or extravagant under the circumstances nor does it provide any significant element of personal pleasure, recreation or benefit.

Tip: Presumably, meals associated with qualified lodging are deductible subject to the limit of 50% of the cost.

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