Can I deduct travel expenses even though my time abroad for work lasted over a year?

Dealing with IRS limits regarding deductible expenses for traveling abroad for work.

Question

I just returned to Cleveland after spending 15 months in Malaysia for work. My company originally told me I’d be there only nine months, but after I’d been there for 11 months the powers that be changed their minds and informed me the stint would last a total of one year and three months. I of course want to be able to deduct all the travel-related costs I can - transportation, meals, lodging, and the like - but know that being abroad a certain amount of time can scuttle those aspirations, disallowing me to claim this stuff. Am I out of luck for having been abroad on the job for more than a year? Also, does it matter that I came back to Cleveland a couple times, just for a few days both times, on vacation days during those 15 months?

Answer

You appear to be in luck - you can likely deduct the lion’s share of eligible travel-related expenses incurred during your “temporary” work abroad. The word “temporary” is operative and is relative to your concern about passing the one-year-abroad threshold.

A person away from his or her “tax home” (sounds like this is Cleveland in your case) for work purposes can deduct travel costs only if the assignment is “temporary,” as opposed to “indefinite.” It’s the former - meaning you can deduct travel costs - if you “realistically expected” the assignment to last not more than one year. That looks to be the case in your situation.

But things changed when you were informed, at the 11-month mark of your time overseas, that the assignment was going to stretch beyond one year. On that day, the posting became “indefinite” in the eyes of the IRS.

The upshot is that you can deduct all eligible travel costs up to the day before you were informed that you’d be staying for a total of longer than one year, but you can’t deduct any costs incurred after that.

As for the vacations back to Cleveland, you can’t deduct travel expenses incurred while you were actually in the Cleveland area. But you can deduct travel costs incurred on the way between Malaysia and Ohio, and going back to Malaysia as well, like meals and lodging, up to the extent that it would have cost you to have just stayed in Malaysia during that time. You can use an average of your general travel costs in settling on that limit. (Claiming a huge bill for a five-star meal in Cleveland might invite scrutiny by the IRS if the meals you claim for time spent in in Malaysia tend to be of the street-fare ilk.)

For more information on this topic, see “Deductible Expenses for International Business Travel.”

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