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June 1, 2020

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• Tax Planning

What Are Travel Expenses for Tax Purposes?

How travel expenses work, how to calculate and file travel expenses, what tax-deductible travel costs mean for individuals, frequently asked questions (faqs).

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Travel expenses are certain travel-related business costs that you can deduct for tax purposes.

Key Takeaways

• Travel expenses are tax-deductible costs associated with traveling for business, away from your main workplace.
• Travel expenses eligible for tax deduction need to be “ordinary and necessary” and have a business purpose
• You generally can’t deduct costs such as those incurred for a personal vacation.
• Only businesses, including self-employed individuals, can typically deduct travel expenses.

When filing taxes, your travel expenses are the costs associated with travel that a business can generally deduct. The Internal Revenue Service (IRS) defines these costs as “ordinary and necessary expenses of traveling away from home for your business, profession, or job.”

For example, a business owner might drive to a client’s office a few hours away and stay at a hotel overnight before driving home the next day. In that case, the business owner can often deduct travel expenses such as gas (or they might use the standard mileage rate rather than adding up actual car expenses ) and lodging.

However, not all travel costs are tax-deductible travel expenses. For one, traveling to and from your home to your main office wouldn’t count as travel, because that would just be commuting, which isn’t deductible. Also, tax-deductible travel expenses can’t be “lavish or extravagant,” per the IRS.

While these terms can be somewhat subjective, it helps to refer back to the “ordinary and necessary” guidelines. If your business is centered around blogging about luxury resorts, then perhaps staying at some higher-end hotels could be considered an ordinary part of doing your job. Yet, if you’re a self-employed graphic designer and you travel to another city to see a client, it might not be considered ordinary to stay at a $1,000-per-night hotel when plenty of other reasonable options exist at around a $200 price point.

In addition to being ordinary and necessary, travel expenses also need to be for business use to be deductible, rather than personal use. So you generally can’t deduct the cost of a family vacation as travel expenses just because you’re a business owner.

Travel expenses are reported by businesses on relevant forms when filing taxes, which can reduce taxable income. For example, a self-employed individual often uses Schedule C to report their business income and business expenses , with travel being a line item within the “Expenses” section.

Adding up travel costs can differ a bit based on the taxpayer’s preferences. For example, when it comes to accounting for travel expenses related to driving, you can use either the standard mileage rate (58.5 cents per mile for tax year 2022) or add up actual costs, such as gas, depreciation, insurance, etc. Also keep in mind that someone who has a vehicle that they drive for both business and personal use can only deduct the portion used for business.

Other nuances include the cost of meals while traveling. Generally, only 50% of business meals can be deducted, although certain exceptions apply. However, business owners might decide instead to take the standard meal allowance , which is a daily amount that covers food and incidental expenses, with the exact amount depending on where the travel takes place.

By taking generalized deductions such as the standard meal allowance when counting up travel expenses, a business owner doesn’t necessarily need to save receipts from every food purchase while on the road.

You still need to keep records to prove the business travel took place. Otherwise, if your business gets audited and has insufficient records to justify travel expenses, you could potentially face penalties.

Understanding travel expenses can be helpful for individuals who have their own businesses, including those who freelance or do gig work, thus filling out tax forms such as Schedule C . By accounting for these costs, you can reduce your taxable income, meaning you pay less in taxes than you would if you didn’t deduct these expenses. Consulting with a tax professional or other relevant expert could help you fully and accurately take advantage of these tax-saving opportunities.

However, individuals who do not have business income, such as those who are W-2 employees, generally can’t take any travel expenses on their personal returns. So, even if your employer doesn’t pay you back for business travel, you typically can’t deduct these expenses.

Which business travel expenses are tax deductible?

Expenses incurred when you travel away from your home for your job may be tax deductible. These expenses include costs of travel by airplane, train, bus or car. Transportation fare between hotel and work on the trip and cost of baggage. Eligible expenses may also include lodging, meals, drying cleaning, laundry, cost of business communication and any tips paid out while on the business trip.

What percentage of business travel expenses are tax deductible?

You can deduct 100% of your business travel expenses if they meet certain criteria. The expenses should be "ordinary and necessary" expenses incurred while traveling away form home for your job and must not be "lavish or extravagant." You cannot deduct expenses incurred in your commute to work as travel expenses. If you drive a car for both personal and business trips, only the business part of the usage is deductible. You may also be able to deduct up to 50% of your meals while traveling as business expense.

IRS. " Topic No. 511 Business Travel Expenses ."

IRS. " Schedule C (Form 1040) Profit or Loss From Business ."

IRS. " IRS Issues Standard Mileage Rates for 2022 ."

IRS. " Here’s what taxpayers need to know about business related travel deductions ."

• Travel Planning Guide

Estimating Travel Costs

As we have mentioned many times throughout this website, there are many factors that contribute to the cost of your trip. Every traveler and every trip is different. If you're on a longer trip, some people will tell you it's not possible to predict how much your trip will cost. This simply isn't true. While there are many variables that will affect how much you spend, budgeting a trip is like budgeting anything else in life. You have to account for your own personal variations and preferences. Having a budget is crucial to making sure your trip doesn't financially spin out of control. That being said, it can be hard to exactly predict a specific cost, but it is possible to get fairly close. Naturally, the shorter the trip, the easier this is, but this process is catered towards people that are planning longer trips.

How much should a trip cost?

There are too many factors that affect a travel budget , so there is no simple way give a rough estimate of cost, especially if your trip is more than just a few days or weeks. What type of hotels are you staying in? How will you get from place to place? Transportation and accommodation are two of the most expensive areas that travelers spend money on, but there are many more.

Factors that affect a travel budget:

Where you choose to visit will have the biggest impact on your budget. Europe and the U.S. are expensive, while India and Cambodia are very inexpensive. Naturally, spending a longer period of time in cheaper locations will allow you to stretch your budget and travel longer. There are some surprisingly expensive destinations that you should be aware of. Brazil and Argentina are much more expensive than some of their nearby South American neighbors. West Africa is also quite expensive due to limited hotel and restaurant options (those that are available are overpriced and of low quality). Eastern Europe remains cheaper than most of Western Europe, but prices continue to rise and Eastern Europe is no longer the extreme budget destination it once was. This is particularly true for places like Greece and Croatia, that have long been discovered by travelers and vacationers alike. Asia is a mixed bag, with more developed countries costing more, and many developing countries (particularly in Southeast Asia) being much cheaper.

Your travel style can have a significant effect on your budget. If you're on a truly tight budget then you will likely have to sacrifice some level of comfort and luxury during your trip. Using public transportation is cheaper than hiring taxis or renting cars, but often not as efficient or relaxing. Staying in hostels or budget hotels is probably the most effective way to save money. You'll need to figure out your priorities, though. Are you willing to share a bathroom, or even sleep in a shared room in order to travel for a longer time period? But with these sacrifices come some rewards. In many places, locals take public transportation so you'll have a chance to interact with the people of the community and you'll get to experience what daily life is really like. Although hostels offer less privacy, they also give you the chance to meet other travelers, many of whom are also on long term trips. These travelers are an excellent source of information and travel tips. It's also fun to have the company, particularly if you've been traveling by yourself for a while.

The time of year you travel to some places can also make a difference in cost. Traveling in the low season or shoulder season can often land you significant discounts. These discounts are not nearly as large as the savings you will get from staying in hostels or budget hotels, however. Also, be aware that some travel destinations essentially close down during the low season. This is particularly true in areas with extreme weather fluctuations. If most of the area's hotels and restaurants are closed, then those few that remain open will likely raise their price significantly. Also, if you're traveling somewhere specifically to experience the outdoor activities, then make sure you go during the best season. Places like Nepal or Patagonia are obvious trekking destinations. There are very specific seasons when it is best to travel there, and you are better off if you arrange your trip around these times, but the prices are also highest during these periods.

How quickly you travel from place to place will significantly affect your budget as well. Transportation is expensive, especially if you fly often. Taking local overland transportation tends to be the cheapest way to go, but it's not as cheap as just staying put for awhile. Besides, taking a longer time to get to know a place is when you open yourself up to the most interesting experiences. Another benefit to traveling slowly is that it gives you time to simply walk around a place. If you're only in town for a few days, then you'll likely try to visit all the museums and attractions that you can within those few days. This will dramatically increase your daily budget and, in turn, raise the total cost of your trip. Take your time and soak up the local atmosphere if you're on a tight budget. You never know what you might discover, as you will have time to get off of the beaten path.

Tours and guides are another expensive part of traveling. Often you can see the same places on your own and learn from a guide book instead of a person. While the quality of the information you might learn from a book versus a person is debatable, there's no arguing that some tours can be extremely expensive. Many tours also include transportation and meals, so it may be worthwhile to consider this before making a final decision. If you do decide to take a tour, ask other travelers who they would recommend. Personal recommendations mean a lot more than any suggestion in a guide book or on the internet.

Children will add considerable expenses to your budget. You'll probably want to travel with a little more comfort and stability if you have kids. That's understandable. Don't let that stop you though! Your entire family will benefit from the experience.

Working while you travel is always an interesting debate. Many people believe that they can work and travel at the same time so that they can offset their expenses. Some believe they can get jobs in certain countries, and while this is possible, it is not always practical or guaranteed. Also, the jobs avaialbe may or may not pay the amount that is needed to travel. Be realistic about your expectations!

Some people also believe they can be digital nomads and make money while blogging, being an influencer, or a freelancer. Make sure that you have already established yourself as such before you just take off, as many travelers attempt to do these things and are then sadly dissapointed in the financial results during their trip.

One very reliable way to make money abroad is to teach English as a second language. Many countries have frequent opportunities for native English speakers to teach at schools or companies. For more information, read this great article about the best places to teach English abroad .

Research is Key

If you want to create a detailed breakdown of how much your trip will cost, you'll need to gather some resources. Keep in mind that it is impossible to foresee every expense. Remember, long term travel is about staying flexible. If you plan out your expenses to the very last detail, then you're probably going to have to plan your actual trip to this detail, and that is definitely not "staying flexible". Instead, allow for conservative estimates. It's better to budget too much money for something than not enough. Then, if things do go as planned, you'll have a little extra cash for when you get home, or even to spend when you extend your trip.

It is possible and advisable to create a general plan. The most basic steps include:

Determine an average daily total for each country you plan to visit. Consider accommodation, food, entertainment and transportation expenses.

Reality check that total. Approximate the cost for a hotel, food, entrance fees (museums, shows, etc), and local transportation. Consult guidebooks, other travelers, and booking websites to ensure that your budget is realistic for your travel style.

Think about how many places you plan to visit. How much will each section of the trip cost? Price out as many plane and long distance train tickets as you can. Transportation costs can be a significant part of your budget, and it is relatively easy find a good estimate for these costs. Be realistic though. If you don't think you'll take night buses, then budget enough for the more comfortable and efficient option. Don't assume you'll find that once in a lifetime deal on a plane ticket. If you're traveling in peak season, expect to pay peak season prices.

Add in costs for visas, vaccinations, and new gear. Don't forget to consider health insurance and other forms of insurance. These expenses can quickly add up. If you're planning to book an around the world plane ticket then make sure you budget for any unexpected changes. Each change will likely incur a fee.

Add at least 10% to your total, probably more. This is your budget. Reality check it one more time and make sure you've leaned on the side of conservative.

Finding realistic costs for all of these items can be tricky. Sometimes you can rely on other travelers, but sometimes not. Every traveler has their own style and priorities and just because somebody else spent one amount, doesn't mean that you'll spend the same. Prices poste online are generally a good bet, but remember that prices can change and vary by date, supply & demand, and other factors. Online prices are can often vary by the website, too. Some guidebooks may be reliable, others less so. Prices rise quickly and many guidebooks are at least a few years old. Hotels that are listed in guidebooks are also known to raise their prices quickly. The recommendation of Lonely Planet or other books can put a hotel or hostel in high demand, so don't expect to pay the price that is listed in the book. With that disclaimer aside, we've outlined a few resources below to help you plan your daily travel budget.

Budget Your Trip's travel cost search allows you to find out what other travelers are spending. You can search by city, country, and budget type (more options are coming soon!).

Guidebooks and online travel guides often give you an idea of how much specific hotels, hostels, or food will cost in a city. It's important to remember that printed guidebooks are often slightly outdated. Expect to spend a little more than a price that's quoted in a book. Online prices also vary by season and demand. If you go ahead and book something, then you can lock in your price, but you still need to be prepared to pay a little extra for tips, fees, and other random costs that might creep in.

Travel forums such as Lonely Planet's Thorntree or Nomadic Matt's travel forum offer a great resource to discuss expected expenses in a area. Find a forum that stays active and you can usually expect prompt, although varied, responses.

Hotel and airline booking websites have up-to-date pricing that is usually reliable. Make sure you are confirming a price during the season you plan to travel as seasonal price variations can be significant.

Travel websites such as Seat61.com offer a fair estimate of costs for intercity public transportation. You can often check public transportation costs on a city's government transportation website (such as the NYC subway website, or Paris' Metro website).

Budget Your Trip

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Meaning of travel expenses in English

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What Are Transportation Expenses?

• How They Work

Special Considerations

• Supply Chain

Transportation Expenses: Definition, How They Work, and Taxation

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas' experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.

The term transportation expense refers to specific costs incurred by an employee or self-employed taxpayer who travels for business purposes. Transportation expenses are a subset of travel expenses, which include all of the costs associated with business travel such as taxi fare, fuel, parking fees, lodging, meals, tips, cleaning, shipping, and telephone charges that employees may incur and claim for reimbursement from their employers. Some transportation expenses may be eligible for a tax deduction on an employee's tax return .

Key Takeaways

• Transportation expenses are a subset of travel expenses that refer specifically to the cost of business transportation by car, plane, train, etc.
• Expenses such as fuel, parking fees, lodging, meals, and telephone charges incurred by employees can be claimed as transportation expenses.
• These expenses may be deducted for tax purposes subject to the appropriate restrictions and guidelines.

How Transportation Expenses Work

Transportation expenses are any costs related to business travel by company employees. An employee who travels for a business trip is generally able to claim the cost of travel, hotel, food, and any other related expense as a transportation expense. These costs may also include those associated with traveling to a temporary workplace from home under some circumstances. For instance, an employee whose travel area is not limited to their tax home can generally claim that travel as a transportation expense.

These expenses, though, are narrower in scope. They only refer to the use of or cost of maintaining a car used for business or transport by rail, air, bus, taxi, or any other means of conveyance for business purposes. These expenses may also refer to deductions for businesses and self-employed individuals when filing tax returns . Commuting to and from the office, however, does not count as a transportation expense.

The cost of commuting is not considered a deductible transportation expense.

Transportation expenses may only qualify for tax deductions if they are directly related to the primary business for which an individual works. For example, if a traveler works in the same business or trade at one or more regular work locations that are away from home such as a construction worker, it is considered a transportation expense.

Similarly, if a traveler has no set workplace but mostly works in the same metropolitan area they live in, they may claim a travel expense if they travel to a worksite outside of their metro area. On the other hand, claiming transportation costs when you have not actually done any traveling for the business is not allowed and can be viewed as a form of tax fraud .

Taxpayers must keep good records in order to claim travel expenses. Receipts and other evidence must be submitted when claiming travel-related reimbursable or tax-deductible expenses.

According to the Internal Revenue Service (IRS) travel or transportation expenses are defined as being: "...the ordinary and necessary expenses of traveling away from home for your business, profession, or job." And it further defines "traveling away from home" as duties that "...require you to be away from the general area of your tax home substantially longer than an ordinary day's work, and you need to sleep or rest to meet the demands of your work while away from home."

The IRS provides guidelines for transportation expenses, deductibility, depreciation, conditions, exceptions , reimbursement rates, and more in Publication 463 . The publication sets the per-mile reimbursement rate for operating your personal car for business. Travelers who use their vehicles for work can claim 58.5 cents per mile for the 2022 tax year , increasing to 62.5 cents for the remaining six months. That's up from 56 cents eligible for 2021. The IRS' determined rate treated as  depreciation  for the business standard mileage is 26 cents as of Jan. 1, 2021.

Internal Revenue Service. " Topic No. 511 Business Travel Expenses ."

Internal Revenue Service. " 2022 Standard Mileage Rates ," Pages 3-4.

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Blog | 10 Sep 2021

Why the era of low-cost travel is not necessarily over

Senior Economist, Tourism Economics

The cost of travel has fallen over the past two decades, with global average spending per international trip across all destinations down 17% in 2019 from its 2000 level in real prices. This has been enabled in part by cheaper air fares that have resulted in an increase in not only the volume of trips but also the proportion of shorter trips and weekend city breaks. But in the midst of a pandemic, with fewer travelers and rising costs, could the era of low-cost travel be over?

The most notable argument in support of this is that airlines will inevitably need to charge higher fares to survive. As McKinsey notes, carriers that were not bailed-out by governments have had to borrow heavily; those repayments will be made more challenging by declining credit ratings and higher financing costs. Meanwhile, the increased share accounted for by short-haul leisure—at the expense of business and premium class—will eat into profits and leave airlines little choice but to raise prices.

Prices have been declining since the dawn of the commercial air travel industry, alongside changes in products, markets becoming more liberalised and destination country visa regimes less stringent. Over the past three decades low-cost carriers have transformed business models, especially for shorter-haul air journeys. Discounting and market liberalization have driven the most recent growth cycle, accounting for nearly half of the passenger growth in the decade to 2019 with a notably weaker share from both living standards growth and trade than in previous cycles—see Tourism Economics/IATA’s Air Passenger Forecasts . This in part included some modal shift to air as well as growth in short-haul travel at the expense of domestic travel.

Given the significant role of discounting in the past decade, the key question is whether airlines will increase their fares to compensate for recent losses. The logic supporting an increase in prices might sound convincing, but so far the evidence is limited. Government support has covered some losses by airlines. Although this has been weighted strongly in favour of national flag carriers, even low-cost carriers have tended to survive and are planning “business as usual.” Comparatively normal flight schedules are returning, including some notable transatlantic announcements (such as from Jet Blue ), meaning that competition should remain healthy, limiting price increases. However, there is greater uncertainty about the market and price environment outside intra-European and transatlantic routes, with longer-haul travel generally expected to recover more slowly.

Concerns about environmental sustainability are also a consideration. New taxes, restrictions (such as limits on internal flights when a suitable rail alternative is available) and consumer preferences for cleaner travel could put upward pressure on prices, as could new requirements around cleaner fuels and operating activities. However, it is striking that there remain very few examples of new restrictions or higher fees of this sort.

While there are plenty of reasons why travel prices may increase, the evidence is not definitive. Lower prices may not stimulate growth to the same extent as in the past ten years, but it appears unlikely that the age of low-cost travel is fully over.

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Travel expenses defined.

Members of the Armed Forces.

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Individuals subject to “hours of service” limits.

Incidental costs.

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Temporary work location.

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Two places of work.

Armed Forces reservists.

Commuting expenses.

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Advertising display on car.

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Union members' trips from a union hall.

Office in the home.

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Standard mileage rate not allowed.

Five or more cars.

Personal property taxes.

Parking fees and tolls.

Sale, trade-in, or other disposition.

Business and personal use.

Employer-provided vehicle.

Interest on car loans.

Taxes paid on your car.

Sales taxes.

Fines and collateral.

Casualty and theft losses.

Depreciation and section 179 deductions.

Car defined.

Qualified nonpersonal use vehicles.

More information.

More than 50% business use requirement.

Limit on the amount of the section 179 deduction.

Limit for sport utility and certain other vehicles.

Limit on total section 179 deduction, special depreciation allowance, and depreciation deduction.

Cost of car.

Basis of car for depreciation.

When to elect.

How to elect.

Revoking an election.

Recapture of section 179 deduction.

Dispositions.

Combined depreciation.

Qualified car.

Election not to claim the special depreciation allowance.

Placed in service.

Car placed in service and disposed of in the same year.

Methods of depreciation.

More-than-50%-use test.

Qualified business use.

Use of your car by another person.

Business use changes.

Use for more than one purpose.

Change from personal to business use.

Unadjusted basis.

Improvements.

Car trade-in.

Effect of trade-in on basis.

Traded car used only for business.

Traded car used partly in business.

Modified Accelerated Cost Recovery System (MACRS).

Recovery period.

Depreciation methods.

MACRS depreciation chart.

Depreciation in future years.

Disposition of car during recovery period.

How to use the 2023 chart.

Trucks and vans.

Car used less than full year.

Reduction for personal use.

Section 179 deduction.

Deductions in years after the recovery period.

Unrecovered basis.

The recovery period.

How to treat unrecovered basis.

• Table 4-1. 2023 MACRS Depreciation Chart      (Use To Figure Depreciation for 2023)

Qualified business use 50% or less in year placed in service.

Qualified business use 50% or less in a later year.

Excess depreciation.

Deductible payments.

Fair market value.

Figuring the inclusion amount.

Leased car changed from business to personal use.

Leased car changed from personal to business use.

Reporting inclusion amounts.

Casualty or theft.

Depreciation adjustment when you used the standard mileage rate.

Depreciation deduction for the year of disposition.

Documentary evidence.

Adequate evidence.

Canceled check.

Duplicate information.

Timely kept records.

Proving business purpose.

Confidential information.

Exceptional circumstances.

Destroyed records.

Separating expenses.

Combining items.

Car expenses.

Gift expenses.

Allocating total cost.

If your return is examined.

Reimbursed for expenses.

Examples of Records

Self-employed.

Both self-employed and an employee.

Statutory employees.

Reimbursement for personal expenses.

Income-producing property.

Value reported on Form W-2.

Full value included in your income.

Less than full value included in your income.

No reimbursement.

Reimbursement, allowance, or advance.

Reasonable period of time.

Employee meets accountable plan rules.

Accountable plan rules not met.

Failure to return excess reimbursements.

Reimbursement of nondeductible expenses.

Adequate Accounting

Related to employer.

The federal rate.

Regular federal per diem rate.

The standard meal allowance.

High-low rate.

Prorating the standard meal allowance on partial days of travel.

The standard mileage rate.

Fixed and variable rate (FAVR).

Reporting your expenses with a per diem or car allowance.

Allowance less than or equal to the federal rate.

Allowance more than the federal rate.

Travel advance.

Unproven amounts.

Per diem allowance more than federal rate.

Reporting your expenses under a nonaccountable plan.

Adequate accounting.

How to report.

Contractor adequately accounts.

Contractor doesn’t adequately account.

High-low method.

Regular federal per diem rate method.

Federal per diem rate method.

Information on use of cars.

Standard mileage rate.

Actual expenses.

Car rentals.

Transportation expenses.

Employee business expenses other than nonentertainment meals.

Non-entertainment-related meal expenses.

“Hours of service” limits.

Reimbursements.

Allocating your reimbursement.

After you complete the form.

Limits on employee business expenses.

1. Limit on meals and entertainment.

2. Limit on total itemized deductions.

Member of a reserve component.

Officials Paid on a Fee Basis

Special rules for married persons.

Where to report.

Impairment-Related Work Expenses of Disabled Employees

Preparing and filing your tax return.

Free options for tax preparation.

Using online tools to help prepare your return.

Need someone to prepare your tax return?

Employers can register to use Business Services Online.

IRS social media.

Watching IRS videos.

Online tax information in other languages.

Free Over-the-Phone Interpreter (OPI) Service.

Accessibility Helpline available for taxpayers with disabilities.

Getting tax forms and publications.

Getting tax publications and instructions in eBook format.

Access your online account (individual taxpayers only).

Get a transcript of your return.

Tax Pro Account.

Using direct deposit.

Reporting and resolving your tax-related identity theft issues.

Ways to check on the status of your refund.

Making a tax payment.

What if I can’t pay now?

Filing an amended return.

Checking the status of your amended return.

Understanding an IRS notice or letter you’ve received.

Responding to an IRS notice or letter.

Contacting your local TAC.

What Is TAS?

How can you learn about your taxpayer rights, what can tas do for you, how can you reach tas, how else does tas help taxpayers, low income taxpayer clinics (litcs), appendix a-1. inclusion amounts for passenger automobiles first leased in 2018, appendix a-2. inclusion amounts for passenger automobiles first leased in 2019, appendix a-3. inclusion amounts for passenger automobiles first leased in 2020, appendix a-4. inclusion amounts for passenger automobiles first leased in 2021, appendix a-5. inclusion amounts for passenger automobiles first leased in 2022, appendix a-6. inclusion amounts for passenger automobiles first leased in 2023, publication 463 - additional material, publication 463 (2023), travel, gift, and car expenses.

For use in preparing 2023 Returns

Publication 463 - Introductory Material

For the latest information about developments related to Pub. 463, such as legislation enacted after it was published, go to IRS.gov/Pub463 .

Standard mileage rate. For 2023, the standard mileage rate for the cost of operating your car for business use is 65.5 cents ($0.655) per mile. Car expenses and use of the standard mileage rate are explained in chapter 4.

Depreciation limits on cars, trucks, and vans. The first-year limit on the depreciation deduction, special depreciation allowance, and section 179 deduction for vehicles acquired before September 28, 2017, and placed in service during 2023, is $12,200. The first-year limit on depreciation, special depreciation allowance, and section 179 deduction for vehicles acquired after September 27, 2017, and placed in service during 2023 increases to $20,200. If you elect not to claim a special depreciation allowance for a vehicle placed in service in 2023, the amount increases to $12,200. Depreciation limits are explained in chapter 4.

Section 179 deduction. The maximum amount you can elect to deduct for section 179 property (including cars, trucks, and vans) you placed in service in tax years beginning in 2023 is $1,160,000. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $2,890,000. Section 179 deduction is explained in chapter 4.Also, the maximum section 179 expense deduction for sport utility vehicles placed in service in tax years beginning in 2023 is $28,900.

Temporary deduction of 100% business meals. The 100% deduction on certain business meals expenses as amended under the Taxpayer Certainty and Disaster Tax Relief Act of 2020, and enacted by the Consolidated Appropriations Act, 2021, has expired. Generally, the cost of business meals remains deductible, subject to the 50% limitation. See 50% Limit in chapter 2 for more information.

Photographs of missing children. The IRS is a proud partner with the National Center for Missing & Exploited Children® (NCMEC) . Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 800-THE-LOST (800-843-5678) if you recognize a child.

Per diem rates. Current and prior per diem rates may be found on the U.S. General Services Administration (GSA) website at GSA.gov/travel/plan-book/per-diem-rates .

Introduction

You may be able to deduct the ordinary and necessary business-related expenses you have for:

Non-entertainment-related meals,

Transportation.

This publication explains:

What expenses are deductible,

How to report them on your return,

What records you need to prove your expenses, and

How to treat any expense reimbursements you may receive.

You should read this publication if you are an employee or a sole proprietor who has business-related travel, non-entertainment-related meals, gift, or transportation expenses.

If an employer-provided vehicle was available for your use, you received a fringe benefit. Generally, your employer must include the value of the use or availability of the vehicle in your income. However, there are exceptions if the use of the vehicle qualifies as a working condition fringe benefit (such as the use of a qualified nonpersonal use vehicle).

A working condition fringe benefit is any property or service provided to you by your employer, the cost of which would be allowable as an employee business expense deduction if you had paid for it.

A qualified nonpersonal use vehicle is one that isn’t likely to be used more than minimally for personal purposes because of its design. See Qualified nonpersonal use vehicles under Actual Car Expenses in chapter 4.

For information on how to report your car expenses that your employer didn’t provide or reimburse you for (such as when you pay for gas and maintenance for a car your employer provides), see Vehicle Provided by Your Employer in chapter 6.

Partnerships, corporations, trusts, and employers who reimburse their employees for business expenses should refer to the instructions for their required tax forms, for information on deducting travel, meals, and entertainment expenses.

If you are an employee, you won’t need to read this publication if all of the following are true.

You fully accounted to your employer for your work-related expenses.

You received full reimbursement for your expenses.

Your employer required you to return any excess reimbursement and you did so.

There is no amount shown with a code L in box 12 of your Form W-2, Wage and Tax Statement.

If you perform services as a volunteer worker for a qualified charity, you may be able to deduct some of your costs as a charitable contribution. See Out-of-Pocket Expenses in Giving Services in Pub. 526, Charitable Contributions, for information on the expenses you can deduct.

We welcome your comments about this publication and suggestions for future editions.

You can send us comments through IRS.gov/FormComments . Or, you can write to the Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224.

Although we can’t respond individually to each comment received, we do appreciate your feedback and will consider your comments and suggestions as we revise our tax forms, instructions, and publications. Don’t send tax questions, tax returns, or payments to the above address.

If you have a tax question not answered by this publication or the How To Get Tax Help section at the end of this publication, go to the IRS Interactive Tax Assistant page at IRS.gov/Help/ITA where you can find topics by using the search feature or viewing the categories listed.

Go to IRS.gov/Forms to download current and prior-year forms, instructions, and publications.

Go to IRS.gov/OrderForms to order current forms, instructions, and publications; call 800-829-3676 to order prior-year forms and instructions. The IRS will process your order for forms and publications as soon as possible. Don’t resubmit requests you’ve already sent us. You can get forms and publications faster online.

Useful Items

Publication

946 How To Depreciate Property

Form (and Instructions)

Schedule A (Form 1040) Itemized Deductions

Schedule C (Form 1040) Profit or Loss From Business (Sole Proprietorship)

Schedule F (Form 1040) Profit or Loss From Farming

2106 Employee Business Expenses

4562 Depreciation and Amortization (Including Information on Listed Property)

See How To Get Tax Help for information about getting these publications and forms.

If you temporarily travel away from your tax home, you can use this chapter to determine if you have deductible travel expenses.

This chapter discusses:

Traveling away from home,

Temporary assignment or job, and

What travel expenses are deductible.

For tax purposes, travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job.

An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your business. An expense doesn’t have to be required to be considered necessary.

You will find examples of deductible travel expenses in Table 1-1 .

Traveling Away From Home

You are traveling away from home if:

Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work, and

You need to sleep or rest to meet the demands of your work while away from home.

You are a railroad conductor. You leave your home terminal on a regularly scheduled round-trip run between two cities and return home 16 hours later. During the run, you have 6 hours off at your turnaround point where you eat two meals and rent a hotel room to get necessary sleep before starting the return trip. You are considered to be away from home.

You are a truck driver. You leave your terminal and return to it later the same day. You get an hour off at your turnaround point to eat. Because you aren’t off to get necessary sleep and the brief time off isn’t an adequate rest period, you aren’t traveling away from home.

If you are a member of the U.S. Armed Forces on a permanent duty assignment overseas, you aren’t traveling away from home. You can’t deduct your expenses for meals and lodging. You can’t deduct these expenses even if you have to maintain a home in the United States for your family members who aren’t allowed to accompany you overseas. If you are transferred from one permanent duty station to another, you may have deductible moving expenses, which are explained in Pub. 3, Armed Forces' Tax Guide.

A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a tax home (explained next) aboard the ship for travel expense purposes.

To determine whether you are traveling away from home, you must first determine the location of your tax home.

Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. It includes the entire city or general area in which your business or work is located.

If you have more than one regular place of business, your tax home is your main place of business. See Main place of business or work , later.

If you don’t have a regular or a main place of business because of the nature of your work, then your tax home may be the place where you regularly live. See No main place of business or work , later.

If you don’t have a regular or main place of business or post of duty and there is no place where you regularly live, you are considered an itinerant (a transient) and your tax home is wherever you work. As an itinerant, you can’t claim a travel expense deduction because you are never considered to be traveling away from home.

If you have more than one place of work, consider the following when determining which one is your main place of business or work.

The total time you ordinarily spend in each place.

The level of your business activity in each place.

Whether your income from each place is significant or insignificant.

You live in Cincinnati where you have a seasonal job for 8 months each year and earn $40,000. You work the other 4 months in Miami, also at a seasonal job, and earn $15,000. Cincinnati is your main place of work because you spend most of your time there and earn most of your income there.

You may have a tax home even if you don’t have a regular or main place of work. Your tax home may be the home where you regularly live.

If you don’t have a regular or main place of business or work, use the following three factors to determine where your tax home is.

You perform part of your business in the area of your main home and use that home for lodging while doing business in the area.

You have living expenses at your main home that you duplicate because your business requires you to be away from that home.

You haven’t abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging.

If you satisfy all three factors, your tax home is the home where you regularly live. If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. If you satisfy only one factor, you are an itinerant; your tax home is wherever you work and you can’t deduct travel expenses.

You are single and live in Boston in an apartment you rent. You have worked for your employer in Boston for a number of years. Your employer enrolls you in a 12-month executive training program. You don’t expect to return to work in Boston after you complete your training.

During your training, you don’t do any work in Boston. Instead, you receive classroom and on-the-job training throughout the United States. You keep your apartment in Boston and return to it frequently. You use your apartment to conduct your personal business. You also keep up your community contacts in Boston. When you complete your training, you are transferred to Los Angeles.

You don’t satisfy factor (1) because you didn’t work in Boston. You satisfy factor (2) because you had duplicate living expenses. You also satisfy factor (3) because you didn’t abandon your apartment in Boston as your main home, you kept your community contacts, and you frequently returned to live in your apartment. Therefore, you have a tax home in Boston.

You are an outside salesperson with a sales territory covering several states. Your employer's main office is in Newark, but you don’t conduct any business there. Your work assignments are temporary, and you have no way of knowing where your future assignments will be located. You have a room in your married sister's house in Dayton. You stay there for one or two weekends a year, but you do no work in the area. You don’t pay your sister for the use of the room.

You don’t satisfy any of the three factors listed earlier. You are an itinerant and have no tax home.

If you (and your family) don’t live at your tax home (defined earlier), you can’t deduct the cost of traveling between your tax home and your family home. You also can’t deduct the cost of meals and lodging while at your tax home. See Example 1 , later.

If you are working temporarily in the same city where you and your family live, you may be considered as traveling away from home. See Example 2 , later.

You are a truck driver and you and your family live in Tucson. You are employed by a trucking firm that has its terminal in Phoenix. At the end of your long runs, you return to your home terminal in Phoenix and spend one night there before returning home. You can’t deduct any expenses you have for meals and lodging in Phoenix or the cost of traveling from Phoenix to Tucson. This is because Phoenix is your tax home.

Your family home is in Pittsburgh, where you work 12 weeks a year. The rest of the year you work for the same employer in Baltimore. In Baltimore, you eat in restaurants and sleep in a rooming house. Your salary is the same whether you are in Pittsburgh or Baltimore.

Because you spend most of your working time and earn most of your salary in Baltimore, that city is your tax home. You can’t deduct any expenses you have for meals and lodging there. However, when you return to work in Pittsburgh, you are away from your tax home even though you stay at your family home. You can deduct the cost of your round trip between Baltimore and Pittsburgh. You can also deduct your part of your family's living expenses for non-entertainment-related meals and lodging while you are living and working in Pittsburgh.

Temporary Assignment or Job

You may regularly work at your tax home and also work at another location. It may not be practical to return to your tax home from this other location at the end of each workday.

If your assignment or job away from your main place of work is temporary, your tax home doesn’t change. You are considered to be away from home for the whole period you are away from your main place of work. You can deduct your travel expenses if they otherwise qualify for deduction. Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less.

However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you can’t deduct your travel expenses while there. An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than 1 year, whether or not it actually lasts for more than 1 year.

If your assignment is indefinite, you must include in your income any amounts you receive from your employer for living expenses, even if they are called “travel allowances” and you account to your employer for them. You may be able to deduct the cost of relocating to your new tax home as a moving expense. See Pub. 3 for more information.

If you are a federal employee participating in a federal crime investigation or prosecution, you aren’t subject to the 1-year rule. This means you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year provided you meet the other requirements for deductibility.

For you to qualify, the Attorney General (or their designee) must certify that you are traveling:

For the federal government;

In a temporary duty status; and

To investigate, prosecute, or provide support services for the investigation or prosecution of a federal crime.

You must determine whether your assignment is temporary or indefinite when you start work. If you expect an assignment or job to last for 1 year or less, it is temporary unless there are facts and circumstances that indicate otherwise. An assignment or job that is initially temporary may become indefinite due to changed circumstances. A series of assignments to the same location, all for short periods but that together cover a long period, may be considered an indefinite assignment.

The following examples illustrate whether an assignment or job is temporary or indefinite.

You are a construction worker. You live and regularly work in Los Angeles. You are a member of a trade union in Los Angeles that helps you get work in the Los Angeles area. Your tax home is Los Angeles. Because of a shortage of work, you took a job on a construction project in Fresno. Your job was scheduled to end in 8 months. The job actually lasted 10 months.

You realistically expected the job in Fresno to last 8 months. The job actually did last less than 1 year. The job is temporary and your tax home is still in Los Angeles.

The facts are the same as in Example 1 , except that you realistically expected the work in Fresno to last 18 months. The job was actually completed in 10 months.

Your job in Fresno is indefinite because you realistically expected the work to last longer than 1 year, even though it actually lasted less than 1 year. You can’t deduct any travel expenses you had in Fresno because Fresno became your tax home.

The facts are the same as in Example 1 , except that you realistically expected the work in Fresno to last 9 months. After 8 months, however, you were asked to remain for 7 more months (for a total actual stay of 15 months).

Initially, you realistically expected the job in Fresno to last for only 9 months. However, due to changed circumstances occurring after 8 months, it was no longer realistic for you to expect that the job in Fresno would last for 1 year or less. You can deduct only your travel expenses for the first 8 months. You can’t deduct any travel expenses you had after that time because Fresno became your tax home when the job became indefinite.

If you go back to your tax home from a temporary assignment on your days off, you aren’t considered away from home while you are in your hometown. You can’t deduct the cost of your meals and lodging there. However, you can deduct your travel expenses, including meals and lodging, while traveling between your temporary place of work and your tax home. You can claim these expenses up to the amount it would have cost you to stay at your temporary place of work.

If you keep your hotel room during your visit home, you can deduct the cost of your hotel room. In addition, you can deduct your expenses of returning home up to the amount you would have spent for meals had you stayed at your temporary place of work.

If you take a job that requires you to move, with the understanding that you will keep the job if your work is satisfactory during a probationary period, the job is indefinite. You can’t deduct any of your expenses for meals and lodging during the probationary period.

What Travel Expenses Are Deductible?

Once you have determined that you are traveling away from your tax home, you can determine what travel expenses are deductible.

You can deduct ordinary and necessary expenses you have when you travel away from home on business. The type of expense you can deduct depends on the facts and your circumstances.

Table 1-1 summarizes travel expenses you may be able to deduct. You may have other deductible travel expenses that aren’t covered there, depending on the facts and your circumstances.

If you have one expense that includes the costs of non-entertainment-related meals, entertainment, and other services (such as lodging or transportation), you must allocate that expense between the cost of non-entertainment-related meals, and entertainment and the cost of other services. You must have a reasonable basis for making this allocation. For example, you must allocate your expenses if a hotel includes one or more meals in its room charge.

If a spouse, dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, you generally can’t deduct their travel expenses.

You can deduct the travel expenses of someone who goes with you if that person:

Is your employee,

Has a bona fide business purpose for the travel, and

Would otherwise be allowed to deduct the travel expenses.

If a business associate travels with you and meets the conditions in (2) and (3) above, you can deduct the travel expenses you have for that person. A business associate is someone with whom you could reasonably expect to actively conduct business. A business associate can be a current or prospective (likely to become) customer, client, supplier, employee, agent, partner, or professional advisor.

Table 1-1. Travel Expenses You Can Deduct

A bona fide business purpose exists if you can prove a real business purpose for the individual's presence. Incidental services, such as typing notes or assisting in entertaining customers, aren’t enough to make the expenses deductible.

You drive to Chicago on business and take your spouse with you. Your spouse isn’t your employee. Your spouse occasionally types notes, performs similar services, and accompanies you to luncheons and dinners. The performance of these services doesn’t establish that your spouse’s presence on the trip is necessary to the conduct of your business. Your spouse’s expenses aren’t deductible.

You pay $199 a day for a double room. A single room costs $149 a day. You can deduct the total cost of driving your car to and from Chicago, but only $149 a day for your hotel room. If both you and your spouse use public transportation, you can only deduct your fare.

You can deduct a portion of the cost of meals if it is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business. Meal and entertainment expenses are discussed in chapter 2 .

You can't deduct expenses for meals that are lavish or extravagant. An expense isn't considered lavish or extravagant if it is reasonable based on the facts and circumstances. Meal expenses won't be disallowed merely because they are more than a fixed dollar amount or because the meals take place at deluxe restaurants, hotels, or resorts.

You can figure your meal expenses using either of the following methods.

Actual cost.

If you are reimbursed for the cost of your meals, how you apply the 50% limit depends on whether your employer's reimbursement plan was accountable or nonaccountable. If you aren’t reimbursed, the 50% limit applies even if the unreimbursed meal expense is for business travel. Chapter 2 discusses the 50% Limit in more detail, and chapter 6 discusses accountable and nonaccountable plans.

You can use the actual cost of your meals to figure the amount of your expense before reimbursement and application of the 50% deduction limit. If you use this method, you must keep records of your actual cost.

Standard Meal Allowance

Generally, you can use the “standard meal allowance” method as an alternative to the actual cost method. It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs. The set amount varies depending on where and when you travel. In this publication, “standard meal allowance” refers to the federal rate for M&IE, discussed later under Amount of standard meal allowance . If you use the standard meal allowance, you must still keep records to prove the time, place, and business purpose of your travel. See the recordkeeping rules for travel in chapter 5 .

The term “incidental expenses” means fees and tips given to porters, baggage carriers, hotel staff, and staff on ships.

Incidental expenses don’t include expenses for laundry, cleaning and pressing of clothing, lodging taxes, costs of telegrams or telephone calls, transportation between places of lodging or business and places where meals are taken, or the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings.

You can use an optional method (instead of actual cost) for deducting incidental expenses only. The amount of the deduction is $5 a day. You can use this method only if you didn’t pay or incur any meal expenses. You can’t use this method on any day that you use the standard meal allowance. This method is subject to the proration rules for partial days. See Travel for days you depart and return , later, in this chapter.

The incidental-expenses-only method isn’t subject to the 50% limit discussed below.

If you use the standard meal allowance method for non-entertainment-related meal expenses and you aren’t reimbursed or you are reimbursed under a nonaccountable plan, you can generally deduct only 50% of the standard meal allowance. If you are reimbursed under an accountable plan and you are deducting amounts that are more than your reimbursements, you can deduct only 50% of the excess amount. The 50% Limit is discussed in more detail in chapter 2, and accountable and nonaccountable plans are discussed in chapter 6.

You can use the standard meal allowance whether you are an employee or self-employed, and whether or not you are reimbursed for your traveling expenses.

You can use the standard meal allowance to figure your meal expenses when you travel in connection with investment and other income-producing property. You can also use it to figure your meal expenses when you travel for qualifying educational purposes. You can’t use the standard meal allowance to figure the cost of your meals when you travel for medical or charitable purposes.

The standard meal allowance is the federal M&IE rate. For travel in 2023, the rate for most small localities in the United States is $59 per day.

Most major cities and many other localities in the United States are designated as high-cost areas, qualifying for higher standard meal allowances.

If you travel to more than one location in one day, use the rate in effect for the area where you stop for sleep or rest. If you work in the transportation industry, however, see Special rate for transportation workers , later.

Per diem rates are listed by the federal government's fiscal year, which runs from October 1 to September 30. You can choose to use the rates from the 2022 fiscal year per diem tables or the rates from the 2023 fiscal year tables, but you must consistently use the same tables for all travel you are reporting on your income tax return for the year. See Transition Rules , later.

The standard meal allowance rates above don’t apply to travel in Alaska, Hawaii, or any other location outside the continental United States. The Department of Defense establishes per diem rates for Alaska, Hawaii, Puerto Rico, American Samoa, Guam, Midway, the Northern Mariana Islands, the U.S. Virgin Islands, Wake Island, and other non-foreign areas outside the continental United States. The Department of State establishes per diem rates for all other foreign areas.

You can use a special standard meal allowance if you work in the transportation industry. You are in the transportation industry if your work:

Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck; and

Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates.

Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. If you choose to use the special rate for any trip, you must use the special rate (and not use the regular standard meal allowance rates) for all trips you take that year.

For both the day you depart for and the day you return from a business trip, you must prorate the standard meal allowance (figure a reduced amount for each day). You can do so by one of two methods.

Method 1: You can claim 3 / 4 of the standard meal allowance.

Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice.

You are employed in New Orleans as a convention planner. In March, your employer sent you on a 3-day trip to Washington, DC, to attend a planning seminar. You left your home in New Orleans at 10 a.m. on Wednesday and arrived in Washington, DC, at 5:30 p.m. After spending 2 nights there, you flew back to New Orleans on Friday and arrived back home at 8 p.m. Your employer gave you a flat amount to cover your expenses and included it with your wages.

Under Method 1 , you can claim 2½ days of the standard meal allowance for Washington, DC: 3 / 4 of the daily rate for Wednesday and Friday (the days you departed and returned), and the full daily rate for Thursday.

Under Method 2 , you could also use any method that you apply consistently and that is in accordance with reasonable business practice. For example, you could claim 3 days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited to only 2½ days.

Travel in the United States

The following discussion applies to travel in the United States. For this purpose, the United States includes the 50 states and the District of Columbia. The treatment of your travel expenses depends on how much of your trip was business related and on how much of your trip occurred within the United States. See Part of Trip Outside the United States , later.

You can deduct all of your travel expenses if your trip was entirely business related. If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct only your business-related travel expenses. These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination.

You work in Atlanta and take a business trip to New Orleans in May. Your business travel totals 900 miles round trip. On your way home, you stop in Mobile to visit your parents. You spend $2,165 for the 9 days you are away from home for travel, non-entertainment-related meals, lodging, and other travel expenses. If you hadn’t stopped in Mobile, you would have been gone only 6 days, and your total cost would have been $1,633.50. You can deduct $1,633.50 for your trip, including the cost of round-trip transportation to and from New Orleans. The deduction for your non-entertainment-related meals is subject to the 50% limit on meals mentioned earlier.

If your trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. However, you can deduct any expenses you have while at your destination that are directly related to your business.

A trip to a resort or on a cruise ship may be a vacation even if the promoter advertises that it is primarily for business. The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, won’t change what is really a vacation into a business trip.

Part of Trip Outside the United States

If part of your trip is outside the United States, use the rules described later in this chapter under Travel Outside the United States for that part of the trip. For the part of your trip that is inside the United States, use the rules for travel in the United States. Travel outside the United States doesn’t include travel from one point in the United States to another point in the United States. The following discussion can help you determine whether your trip was entirely within the United States.

If you travel by public transportation, any place in the United States where that vehicle makes a scheduled stop is a point in the United States. Once the vehicle leaves the last scheduled stop in the United States on its way to a point outside the United States, you apply the rules under Travel Outside the United States , later.

You fly from New York to Puerto Rico with a scheduled stop in Miami. Puerto Rico isn’t considered part of the United States for purposes of travel. You return to New York nonstop. The flight from New York to Miami is in the United States, so only the flight from Miami to Puerto Rico is outside the United States. Because there are no scheduled stops between Puerto Rico and New York, all of the return trip is outside the United States.

Travel by private car in the United States is travel between points in the United States, even though you are on your way to a destination outside the United States.

You travel by car from Denver to Mexico City and return. Your travel from Denver to the border and from the border back to Denver is travel in the United States, and the rules in this section apply. The rules below under Travel Outside the United States apply to your trip from the border to Mexico City and back to the border.

Travel Outside the United States

If any part of your business travel is outside the United States, some of your deductions for the cost of getting to and from your destination may be limited. For this purpose, the United States includes the 50 states and the District of Columbia.

How much of your travel expenses you can deduct depends in part upon how much of your trip outside the United States was business related.

Travel Entirely for Business or Considered Entirely for Business

You can deduct all your travel expenses of getting to and from your business destination if your trip is entirely for business or considered entirely for business.

If you travel outside the United States and you spend the entire time on business activities, you can deduct all of your travel expenses.

Even if you didn’t spend your entire time on business activities, your trip is considered entirely for business if you meet at least one of the following four exceptions.

Your trip is considered entirely for business if you didn’t have substantial control over arranging the trip. The fact that you control the timing of your trip doesn’t, by itself, mean that you have substantial control over arranging your trip.

You don’t have substantial control over your trip if you:

Are an employee who was reimbursed or paid a travel expense allowance, and

Aren’t related to your employer, or

Aren’t a managing executive.

“Related to your employer” is defined later in chapter 6 under Per Diem and Car Allowances .

A “managing executive” is an employee who has the authority and responsibility, without being subject to the veto of another, to decide on the need for the business travel.

A self-employed person generally has substantial control over arranging business trips.

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, don’t count the day you leave the United States, but do count the day you return to the United States.

You traveled to Brussels primarily for business. You left Denver on Tuesday and flew to New York. On Wednesday, you flew from New York to Brussels, arriving the next morning. On Thursday and Friday, you had business discussions, and from Saturday until Tuesday, you were sightseeing. You flew back to New York, arriving Wednesday afternoon. On Thursday, you flew back to Denver.

Although you were away from your home in Denver for more than a week, you weren’t outside the United States for more than a week. This is because the day you depart doesn’t count as a day outside the United States.

You can deduct your cost of the round-trip flight between Denver and Brussels. You can also deduct the cost of your stay in Brussels for Thursday and Friday while you conducted business. However, you can’t deduct the cost of your stay in Brussels from Saturday through Tuesday because those days were spent on nonbusiness activities.

Your trip is considered entirely for business if:

You were outside the United States for more than a week, and

You spent less than 25% of the total time you were outside the United States on nonbusiness activities.

You flew from Seattle to Tokyo, where you spent 14 days on business and 5 days on personal matters. You then flew back to Seattle. You spent 1 day flying in each direction.

Because only 5 / 21 (less than 25%) of your total time abroad was for nonbusiness activities, you can deduct as travel expenses what it would have cost you to make the trip if you hadn’t engaged in any nonbusiness activity. The amount you can deduct is the cost of the round-trip plane fare and 16 days of non-entertainment-related meals (subject to the 50% Limit ), lodging, and other related expenses.

Your trip is considered entirely for business if you can establish that a personal vacation wasn’t a major consideration, even if you have substantial control over arranging the trip.

Travel Primarily for Business

If you travel outside the United States primarily for business but spend some of your time on other activities, you generally can’t deduct all of your travel expenses. You can only deduct the business portion of your cost of getting to and from your destination. You must allocate the costs between your business and other activities to determine your deductible amount. See Travel allocation rules , later.

If your trip outside the United States was primarily for business, you must allocate your travel time on a day-to-day basis between business days and nonbusiness days. The days you depart from and return to the United States are both counted as days outside the United States.

To figure the deductible amount of your round-trip travel expenses, use the following fraction. The numerator (top number) is the total number of business days outside the United States. The denominator (bottom number) is the total number of business and nonbusiness days of travel.

Your business days include transportation days, days your presence was required, days you spent on business, and certain weekends and holidays.

Count as a business day any day you spend traveling to or from a business destination. However, if because of a nonbusiness activity you don’t travel by a direct route, your business days are the days it would take you to travel a reasonably direct route to your business destination. Extra days for side trips or nonbusiness activities can’t be counted as business days.

Count as a business day any day your presence is required at a particular place for a specific business purpose. Count it as a business day even if you spend most of the day on nonbusiness activities.

If your principal activity during working hours is the pursuit of your trade or business, count the day as a business day. Also, count as a business day any day you are prevented from working because of circumstances beyond your control.

Count weekends, holidays, and other necessary standby days as business days if they fall between business days. But if they follow your business meetings or activity and you remain at your business destination for nonbusiness or personal reasons, don’t count them as business days.

Your tax home is New York City. You travel to Quebec, where you have a business meeting on Friday. You have another meeting on the following Monday. Because your presence was required on both Friday and Monday, they are business days. Because the weekend is between business days, Saturday and Sunday are counted as business days. This is true even though you use the weekend for sightseeing, visiting friends, or other nonbusiness activity.

If, in Example 1 , you had no business in Quebec after Friday, but stayed until Monday before starting home, Saturday and Sunday would be nonbusiness days.

If you stopped for a vacation or other nonbusiness activity either on the way from the United States to your business destination, or on the way back to the United States from your business destination, you must allocate part of your travel expenses to the nonbusiness activity.

The part you must allocate is the amount it would have cost you to travel between the point where travel outside the United States begins and your nonbusiness destination and a return to the point where travel outside the United States ends.

You determine the nonbusiness portion of that expense by multiplying it by a fraction. The numerator (top number) of the fraction is the number of nonbusiness days during your travel outside the United States, and the denominator (bottom number) is the total number of days you spend outside the United States.

You live in New York. On May 4, you flew to Paris to attend a business conference that began on May 5. The conference ended at noon on May 14. That evening, you flew to Dublin where you visited with friends until the afternoon of May 21, when you flew directly home to New York. The primary purpose for the trip was to attend the conference.

If you hadn’t stopped in Dublin, you would have arrived home the evening of May 14. You don’t meet any of the exceptions that would allow you to consider your travel entirely for business. May 4 through May 14 (11 days) are business days and May 15 through May 21 (7 days) are nonbusiness days.

You can deduct the cost of your non-entertainment-related meals (subject to the 50% Limit ), lodging, and other business-related travel expenses while in Paris.

You can’t deduct your expenses while in Dublin. You also can’t deduct 7 / 18 of what it would have cost you to travel round trip between New York and Dublin.

You paid $750 to fly from New York to Paris, $400 to fly from Paris to Dublin, and $700 to fly from Dublin back to New York. Round-trip airfare from New York to Dublin would have been $1,250.

You figure the deductible part of your air travel expenses by subtracting 7 / 18 of the round-trip airfare and other expenses you would have had in traveling directly between New York and Dublin ($1,250 × 7 / 18 = $486) from your total expenses in traveling from New York to Paris to Dublin and back to New York ($750 + $400 + $700 = $1,850).

Your deductible air travel expense is $1,364 ($1,850 − $486).

If you had a vacation or other nonbusiness activity at, near, or beyond your business destination, you must allocate part of your travel expenses to the nonbusiness activity.

The part you must allocate is the amount it would have cost you to travel between the point where travel outside the United States begins and your business destination and a return to the point where travel outside the United States ends.

None of your travel expenses for nonbusiness activities at, near, or beyond your business destination are deductible.

Assume that the dates are the same as in the previous example but that instead of going to Dublin for your vacation, you fly to Venice, Italy, for a vacation.

You can’t deduct any part of the cost of your trip from Paris to Venice and return to Paris. In addition, you can’t deduct 7 / 18 of the airfare and other expenses from New York to Paris and back to New York.

You can deduct 11 / 18 of the round-trip plane fare and other travel expenses from New York to Paris, plus your non-entertainment-related meals (subject to the 50% Limit ), lodging, and any other business expenses you had in Paris. (Assume these expenses total $4,939.) If the round-trip plane fare and other travel-related expenses (such as food during the trip) are $1,750, you can deduct travel costs of $1,069 ( 11 / 18 × $1,750), plus the full $4,939 for the expenses you had in Paris.

You can use another method of counting business days if you establish that it more clearly reflects the time spent on other than business activities outside the United States.

If you travel outside the United States primarily for vacation or for investment purposes, the entire cost of the trip is a nondeductible personal expense. However, if you spend some time attending brief professional seminars or a continuing education program, you can deduct your registration fees and other expenses you have that are directly related to your business.

The university from which you graduated has a continuing education program for members of its alumni association. This program consists of trips to various foreign countries where academic exercises and conferences are set up to acquaint individuals in most occupations with selected facilities in several regions of the world. However, none of the conferences are directed toward specific occupations or professions. It is up to each participant to seek out specialists and organizational settings appropriate to their occupational interests.

Three-hour sessions are held each day over a 5-day period at each of the selected overseas facilities where participants can meet with individual practitioners. These sessions are composed of a variety of activities including workshops, mini-lectures, roleplaying, skill development, and exercises. Professional conference directors schedule and conduct the sessions. Participants can choose those sessions they wish to attend.

You can participate in this program because you are a member of the alumni association. You and your family take one of the trips. You spend about 2 hours at each of the planned sessions. The rest of the time you go touring and sightseeing with your family. The trip lasts less than 1 week.

Your travel expenses for the trip aren’t deductible since the trip was primarily a vacation. However, registration fees and any other incidental expenses you have for the five planned sessions you attended that are directly related and beneficial to your business are deductible business expenses. These expenses should be specifically stated in your records to ensure proper allocation of your deductible business expenses.

Luxury Water Travel

If you travel by ocean liner, cruise ship, or other form of luxury water transportation for business purposes, there is a daily limit on the amount you can deduct. The limit is twice the highest federal per diem rate allowable at the time of your travel. (Generally, the federal per diem is the amount paid to federal government employees for daily living expenses when they travel away from home within the United States for business purposes.)

The highest federal per diem rate allowed and the daily limit for luxury water travel in 2023 are shown in the following table.

You are a travel agent and traveled by ocean liner from New York to London, England, on business in May. Your expense for the 6-day cruise was $6,200. Your deduction for the cruise can’t exceed $4,776 (6 days × $796 daily limit).

If your expenses for luxury water travel include separately stated amounts for meals or entertainment, those amounts are subject to the 50% limit on non-entertainment-related meals and entertainment before you apply the daily limit. For a discussion of the 50% Limit , see chapter 2.

In the previous example, your luxury water travel had a total cost of $6,200. Of that amount, $3,700 was separately stated as non-entertainment-related meals and $1,000 was separately stated as entertainment. Considering that you are self-employed, you aren’t reimbursed for any of your travel expenses. You figure your deductible travel expenses as follows.

If your meal or entertainment charges aren’t separately stated or aren’t clearly identifiable, you don’t have to allocate any portion of the total charge to meals or entertainment.

The daily limit on luxury water travel (discussed earlier) doesn’t apply to expenses you have to attend a convention, seminar, or meeting on board a cruise ship. See Cruise Ships , later, under Conventions.

Conventions

You can deduct your travel expenses when you attend a convention if you can show that your attendance benefits your trade or business. You can’t deduct the travel expenses for your family.

If the convention is for investment, political, social, or other purposes unrelated to your trade or business, you can’t deduct the expenses.

The convention agenda or program generally shows the purpose of the convention. You can show your attendance at the convention benefits your trade or business by comparing the agenda with the official duties and responsibilities of your position. The agenda doesn’t have to deal specifically with your official duties and responsibilities; it will be enough if the agenda is so related to your position that it shows your attendance was for business purposes.

Conventions Held Outside the North American Area

You can’t deduct expenses for attending a convention, seminar, or similar meeting held outside the North American area unless:

The meeting is directly related to the active conduct of your trade or business, and

It is as reasonable to hold the meeting outside the North American area as within the North American area. See Reasonableness test , later.

The North American area includes the following locations.

The following factors are taken into account to determine if it was as reasonable to hold the meeting outside the North American area as within the North American area.

The purpose of the meeting and the activities taking place at the meeting.

The purposes and activities of the sponsoring organizations or groups.

The homes of the active members of the sponsoring organizations and the places at which other meetings of the sponsoring organizations or groups have been or will be held.

Other relevant factors you may present.

You can deduct up to $2,000 per year of your expenses of attending conventions, seminars, or similar meetings held on cruise ships. All ships that sail are considered cruise ships.

You can deduct these expenses only if all of the following requirements are met.

The convention, seminar, or meeting is directly related to the active conduct of your trade or business.

The cruise ship is a vessel registered in the United States.

All of the cruise ship's ports of call are in the United States or in territories of the United States.

You attach to your return a written statement signed by you that includes information about:

The total days of the trip (not including the days of transportation to and from the cruise ship port),

The number of hours each day that you devoted to scheduled business activities, and

A program of the scheduled business activities of the meeting.

You attach to your return a written statement signed by an officer of the organization or group sponsoring the meeting that includes:

A schedule of the business activities of each day of the meeting, and

The number of hours you attended the scheduled business activities.

2. Meals and Entertainment

You can no longer take a deduction for any expense related to activities generally considered entertainment, amusement, or recreation. You can continue to deduct 50% of the cost of business meals if you (or your employee) are present and the food or beverages aren't considered lavish or extravagant.

Entertainment

Entertainment—defined.

Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; on yachts; or on hunting, fishing, vacation, and similar trips. Entertainment may also include meeting personal, living, or family needs of individuals, such as providing meals, a hotel suite, or a car to customers or their families.

Your kind of business may determine if a particular activity is considered entertainment. For example, if you are a dress designer and have a fashion show to introduce your new designs to store buyers, the show generally isn’t considered entertainment. This is because fashion shows are typical in your business. But, if you are an appliance distributor and hold a fashion show for the spouses of your retailers, the show is generally considered entertainment.

If you have one expense that includes the costs of entertainment and other services (such as lodging or transportation), you must allocate that expense between the cost of entertainment and the cost of other services. You must have a reasonable basis for making this allocation. For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge.

In general, entertainment expenses are nondeductible. However, there are a few exceptions to the general rule, including:

Entertainment treated as compensation on your originally filed tax returns (and treated as wages to your employees);

Recreational expenses for employees such as a holiday party or a summer picnic;

Expenses related to attending business meetings or conventions of certain exempt organizations such as business leagues, chambers of commerce, professional associations, etc.; and

Entertainment sold to customers. For example, if you run a nightclub, your expenses for the entertainment you furnish to your customers, such as a floor show, aren’t subject to the nondeductible rules.

Examples of Nondeductible Entertainment

Generally, you can't deduct any expense for an entertainment event. This includes expenses for entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; on yachts; or on hunting, fishing, vacation, and similar trips.

Generally, you can’t deduct any expense for the use of an entertainment facility. This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection.

An entertainment facility is any property you own, rent, or use for entertainment. Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort.

You can’t deduct dues (including initiation fees) for membership in any club organized for business, pleasure, recreation, or other social purposes.

This rule applies to any membership organization if one of its principal purposes is either:

To conduct entertainment activities for members or their guests; or

To provide members or their guests with access to entertainment facilities, discussed later.

The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. You can’t deduct dues paid to:

Country clubs,

Golf and athletic clubs,

Airline clubs,

Hotel clubs, and

Clubs operated to provide meals under circumstances generally considered to be conducive to business discussions.

Any item that might be considered either a gift or entertainment will generally be considered entertainment. However, if you give a customer packaged food or beverages that you intend the customer to use at a later date, treat it as a gift.

As discussed above, entertainment expenses are generally nondeductible. However, you may continue to deduct 50% of the cost of business meals if you (or an employee) is present and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant, or similar business contact.

Food and beverages that are provided during entertainment events are not considered entertainment if purchased separately from the entertainment, or if the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts. However, the entertainment disallowance rule may not be circumvented through inflating the amount charged for food and beverages.

Any allowed expense must be ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your business. An expense doesn't have to be required to be considered necessary. Expenses must not be lavish or extravagant. An expense isn't considered lavish or extravagant if it is reasonable based on the facts and circumstances.

For each example, assume that the food and beverage expenses are ordinary and necessary expenses under section 162(a) paid or incurred during the tax year in carrying on a trade or business and are not lavish or extravagant under the circumstances. Also assume that the taxpayer and the business contact are not engaged in a trade or business that has any relation to the entertainment activity.

Taxpayer A invites B, a business contact, to a baseball game. A purchases tickets for A and B to attend the game. While at the game, A buys hot dogs and drinks for A and B. The baseball game is entertainment as defined in Regulations section 1.274-11(b)(1)(i) and, thus, the cost of the game tickets is an entertainment expense and is not deductible by A. The cost of the hot dogs and drinks, which are purchased separately from the game tickets, is not an entertainment expense and is not subject to the section 274(a)(1) disallowance. Therefore, A may deduct 50% of the expenses associated with the hot dogs and drinks purchased at the game.

Taxpayer C invites D, a business contact, to a basketball game. C purchases tickets for C and D to attend the game in a suite, where they have access to food and beverages. The cost of the basketball game tickets, as stated on the invoice, includes the food and beverages. The basketball game is entertainment as defined in Regulations section 1.274-11(b)(1)(i) and, thus, the cost of the game tickets is an entertainment expense and is not deductible by C. The cost of the food and beverages, which are not purchased separately from the game tickets, is not stated separately on the invoice. Thus, the cost of the food and beverages is also an entertainment expense that is subject to the section 274(a)(1) disallowance. Therefore, C may not deduct any of the expenses associated with the basketball game.

Assume the same facts as in Example 2 , except that the invoice for the basketball game tickets separately states the cost of the food and beverages. As in Example 2 , the basketball game is entertainment as defined in Regulations section 1.274-2(b)(1)(i) and, thus, the cost of the game tickets, other than the cost of the food and beverages, is an entertainment expense and is not deductible by C. However, the cost of the food and beverages, which is stated separately on the invoice for the game tickets, is not an entertainment expense and is not subject to the section 274(a)(1) disallowance. Therefore, C may deduct 50% of the expenses associated with the food and beverages provided at the game.

In general, you can deduct only 50% of your business-related meal expenses, unless an exception applies. (If you are subject to the Department of Transportation's “hours of service” limits, you can deduct 80% of your business-related meal expenses. See Individuals subject to hours of service limits , later.)

The 50% limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed.

Examples of meals might include:

Meals while traveling away from home (whether eating alone or with others) on business, or

Meal at a business convention or business league meeting.

Figure A. Does the 50% Limit Apply to Your Expenses?

There are exceptions to these rules. See Exceptions to the 50% Limit for Meals , later.

Figure A. Does the 50% limit apply to Your Expenses?TAs for Figure A are: Notice 87-23; Form 2106 instructions

Summary: This is a flowchart used to determine if employees and self-employed persons need to put a 50% limit on their business expense deductions.

This is the starting of the flowchart.

Decision (1)

Were your meal and entertainment expenses reimbursed? (Count only reimbursements your employer didn’t include in box 1 of your Form W-2. If self-employed, count only reimbursements from clients or customers that aren’t included on Form 1099-MISC, Miscellaneous Income.)

Decision (2)

If an employee, did you adequately account to your employer under an accountable plan? If self-employed, did you provide the payer with adequate records? (See Chapter 6.)

Decision (3)

Did your expenses exceed the reimbursement?

Decision (4)

Process (a)

Your meal and entertainment expenses are NOT subject to the limitations. However, since the reimbursement wasn’t treated as wages or as other taxable income, you can’t deduct the expenses.

Process (b)

Your nonentertainment meal expenses ARE subject to the 50% limit. Your entertainment expenses are nondeductible.

This is the ending of the flowchart.

Please click here for the text description of the image.

Taxes and tips relating to a business meal are included as a cost of the meal and are subject to the 50% limit. However, the cost of transportation to and from the meal is not treated as part of the cost and would not be subject to the limit.

The 50% limit on meal expenses applies if the expense is otherwise deductible and isn’t covered by one of the exceptions discussed later. Figure A can help you determine if the 50% limit applies to you.

The 50% limit also applies to certain meal expenses that aren’t business related. It applies to meal expenses you have for the production of income, including rental or royalty income. It also applies to the cost of meals included in deductible educational expenses.

The 50% limit will apply after determining the amount that would otherwise qualify for a deduction. You first have to determine the amount of meal expenses that would be deductible under the other rules discussed in this publication.

If a group of business acquaintances takes turns picking up each others' meal checks primarily for personal reasons, without regard to whether any business purposes are served, no member of the group can deduct any part of the expense.

You spend $200 (including tax and tip) for a business meal. If $110 of that amount isn’t allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. Your deduction can’t be more than $45 (50% (0.50) × $90).

You purchase two tickets to a concert for $200 for you and your client. Your deduction is zero because no deduction is allowed for entertainment expenses.

Exception to the 50% Limit for Meals

Your meal expense isn’t subject to the 50% limit if the expense meets one of the following exceptions.

In general, expenses for goods, services, and facilities, to the extent the expenses are treated by the taxpayer, with respect to entertainment, amusement, or recreation, as compensation to an employee and as wages to the employee for tax purposes.

If you are an employee, you aren’t subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. Accountable plans are discussed in chapter 6.

If you are self-employed, your deductible meal expenses aren’t subject to the 50% limit if all of the following requirements are met.

You have these expenses as an independent contractor.

Your customer or client reimburses you or gives you an allowance for these expenses in connection with services you perform.

You provide adequate records of these expenses to your customer or client. (See chapter 5 .)

In this case, your client or customer is subject to the 50% limit on the expenses.

You are a self-employed attorney who adequately accounts for meal expenses to a client who reimburses you for these expenses. You aren’t subject to the limitation on meal expenses. If the client can deduct the expenses, the client is subject to the 50% limit.

If you (as an independent contractor) have expenses for meals related to providing services for a client but don’t adequately account for and seek reimbursement from the client for those expenses, you are subject to the 50% limit on non-entertainment-related meals and the entertainment-related meal expenses are nondeductible to you.

You aren't subject to the 50% limit for expenses for recreational, social, or similar activities (including facilities) such as a holiday party or a summer picnic.

You aren’t subject to the 50% limit if you provide meals to the general public as a means of advertising or promoting goodwill in the community. For example, neither the expense of sponsoring a television or radio show nor the expense of distributing free food and beverages to the general public is subject to the 50% limit.

You aren’t subject to the 50% limit if you actually sell meals to the public. For example, if you run a restaurant, your expense for the food you furnish to your customers isn’t subject to the 50% limit.

You can deduct a higher percentage of your meal expenses while traveling away from your tax home if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. The percentage is 80%.

Individuals subject to the Department of Transportation's “hours of service” limits include the following persons.

Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations.

Interstate truck operators and bus drivers who are under Department of Transportation regulations.

Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations.

Certain merchant mariners who are under Coast Guard regulations.

If you give gifts in the course of your trade or business, you may be able to deduct all or part of the cost. This chapter explains the limits and rules for deducting the costs of gifts.

You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift.

If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. This rule doesn’t apply if you have a bona fide, independent business connection with that family member and the gift isn’t intended for the customer's eventual use.

If you and your spouse both give gifts, both of you are treated as one taxpayer. It doesn’t matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. If a partnership gives gifts, the partnership and the partners are treated as one taxpayer.

You sell products to a local company. You and your spouse gave the local company three gourmet gift baskets to thank them for their business. You and your spouse paid $80 for each gift basket, or $240 total. Three of the local company's executives took the gift baskets home for their families' use. You and your spouse have no independent business relationship with any of the executives' other family members. You and your spouse can deduct a total of $75 ($25 limit × 3) for the gift baskets.

Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit.

A cost is incidental only if it doesn’t add substantial value to the gift. For example, the cost of gift wrapping is an incidental cost. However, the purchase of an ornamental basket for packaging fruit isn’t an incidental cost if the value of the basket is substantial compared to the value of the fruit.

The following items aren’t considered gifts for purposes of the $25 limit.

An item that costs $4 or less and:

Has your name clearly and permanently imprinted on the gift, and

Is one of a number of identical items you widely distribute. Examples include pens, desk sets, and plastic bags and cases.

Signs, display racks, or other promotional material to be used on the business premises of the recipient.

Figure B. When Are Transportation Expenses Deductible?

Most employees and self-employed persons can use this chart. (Don’t use this chart if your home is your principal place of business. See Office in the home , later.)

Figure B. When Are Local Transportation Expenses Deductible?TAs for Figure B are: Reg 1.162-1(a); RR 55–109; RR 94–47

Summary: This illustration depicts the rules used to determine if transportation expenses are deductible.

The image then lists definitions for words used in the graphic:

Any item that might be considered either a gift or entertainment will generally be considered entertainment. However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift.

4. Transportation

This chapter discusses expenses you can deduct for business transportation when you aren’t traveling away from home , as defined in chapter 1. These expenses include the cost of transportation by air, rail, bus, taxi, etc., and the cost of driving and maintaining your car.

Transportation expenses include the ordinary and necessary costs of all of the following.

Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Tax home is defined in chapter 1.

Visiting clients or customers.

Going to a business meeting away from your regular workplace.

Getting from your home to a temporary workplace when you have one or more regular places of work. These temporary workplaces can be either within the area of your tax home or outside that area.

Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. However, there may be exceptions to this general rule. You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. Also, daily transportation expenses can be deducted if (1) you have one or more regular work locations away from your residence; or (2) your residence is your principal place of business and you incur expenses going between the residence and another work location in the same trade or business, regardless of whether the work is temporary or permanent and regardless of the distance.

Illustration of transportation expenses.

Figure B above illustrates the rules that apply for deducting transportation expenses when you have a regular or main job away from your home. You may want to refer to it when deciding whether you can deduct your transportation expenses.

If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance.

If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise.

If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment isn’t temporary, regardless of whether it actually lasts for more than 1 year.

If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. It won’t be treated as temporary after the date you determine it will last more than 1 year.

If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. You may have deductible travel expenses, as discussed in chapter 1 .

If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area.

Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area.

You can’t deduct daily transportation costs between your home and temporary work sites within your metropolitan area. These are nondeductible commuting expenses.

If you work at two places in 1 day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. However, if for some personal reason you don’t go directly from one location to the other, you can’t deduct more than the amount it would have cost you to go directly from the first location to the second.

Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. You can’t deduct them.

A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work .

You usually can’t deduct the expense if the reserve meeting is held on a day on which you don’t work at your regular job. In this case, your transportation is generally a nondeductible commuting expense. However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work.

If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses.

If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. These expenses are discussed in chapter 1 .

If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to gross income rather than as an itemized deduction. For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules in chapter 6.

You can’t deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. These costs are personal commuting expenses. You can’t deduct commuting expenses no matter how far your home is from your regular place of work. You can’t deduct commuting expenses even if you work during the commuting trip.

You sometimes use your cell phone to make business calls while commuting to and from work. Sometimes business associates ride with you to and from work, and you have a business discussion in the car. These activities don’t change the trip from personal to business. You can’t deduct your commuting expenses.

Fees you pay to park your car at your place of business are nondeductible commuting expenses. You can, however, deduct business-related parking fees when visiting a customer or client.

Putting display material that advertises your business on your car doesn’t change the use of your car from personal use to business use. If you use this car for commuting or other personal uses, you still can’t deduct your expenses for those uses.

You can’t deduct the cost of using your car in a nonprofit car pool. Don’t include payments you receive from the passengers in your income. These payments are considered reimbursements of your expenses. However, if you operate a car pool for a profit, you must include payments from passengers in your income. You can then deduct your car expenses (using the rules in this publication).

Hauling tools or instruments in your car while commuting to and from work doesn’t make your car expenses deductible. However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car).

If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located.

If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. (See Pub. 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business.)

The following examples show when you can deduct transportation expenses based on the location of your work and your home.

You regularly work in an office in the city where you live. Your employer sends you to a 1-week training session at a different office in the same city. You travel directly from your home to the training location and return each day. You can deduct the cost of your daily round-trip transportation between your home and the training location.

Your principal place of business is in your home. You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business.

You have no regular office, and you don’t have an office in your home. In this case, the location of your first business contact inside the metropolitan area is considered your office. Transportation expenses between your home and this first contact are nondeductible commuting expenses. Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. While you can’t deduct the costs of these trips, you can deduct the costs of going from one client or customer to another.

Car Expenses

If you use your car for business purposes, you may be able to deduct car expenses. You can generally use one of the two following methods to figure your deductible expenses.

Actual car expenses.

The cost of using your car as an employee, whether measured using actual expenses or the standard mileage rate, will no longer be allowed to be claimed as an unreimbursed employee travel expense as a miscellaneous itemized deduction due to the suspension of miscellaneous itemized deductions that are subject to the 2% floor under section 67(a). The suspension applies to tax years beginning after December 2017 and before January 2026. Deductions for expenses that are deductible in determining adjusted gross income are not suspended. For example, Armed Forces reservists, qualified performing artists, and fee-basis state or local government officials are allowed to deduct unreimbursed employee travel expenses as an adjustment to total income on Schedule 1 (Form 1040), line 12.

If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. See Leasing a Car , later.

In this publication, “car” includes a van, pickup, or panel truck. For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses , later.

Standard Mileage Rate

For 2023, the standard mileage rate for the cost of operating your car for business use is 65.5 cents ($0.655) per mile.

You can generally use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. See chapter 6 for more information on reimbursements .

If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then, in later years, you can choose to use either the standard mileage rate or actual expenses.

If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after 1997.

You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. You can’t revoke the choice. However, in later years, you can switch from the standard mileage rate to the actual expenses method. If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation for the car’s remaining estimated useful life, subject to depreciation limits (discussed later).

For more information about depreciation included in the standard mileage rate, see Exception under Methods of depreciation , later.

You can’t use the standard mileage rate if you:

Use five or more cars at the same time (such as in fleet operations);

Claimed a depreciation deduction for the car using any method other than straight line for the car’s estimated useful life;

Used the Modified Accelerated Cost Recovery System (MACRS) (as discussed later under Depreciation Deduction );

Claimed a section 179 deduction (discussed later) on the car;

Claimed the special depreciation allowance on the car; or

Claimed actual car expenses after 1997 for a car you leased.

You can elect to use the standard mileage rate if you used a car for hire (such as a taxi) unless the standard mileage rate is otherwise not allowed, as discussed above.

If you own or lease five or more cars that are used for business at the same time, you can’t use the standard mileage rate for the business use of any car. However, you may be able to deduct your actual expenses for operating each of the cars in your business. See Actual Car Expenses , later, for information on how to figure your deduction.

You aren’t using five or more cars for business at the same time if you alternate using (use at different times) the cars for business.

The following examples illustrate the rules for when you can and can’t use the standard mileage rate for five or more cars.

A salesperson owns three cars and two vans that they alternate using for calling on their customers. The salesperson can use the standard mileage rate for the business mileage of the three cars and the two vans because they don’t use them at the same time.

You and your employees use your four pickup trucks in your landscaping business. During the year, you traded in two of your old trucks for two newer ones. You can use the standard mileage rate for the business mileage of all six of the trucks you owned during the year.

You own a repair shop and an insurance business. You and your employees use your two pickup trucks and van for the repair shop. You alternate using your two cars for the insurance business. No one else uses the cars for business purposes. You can use the standard mileage rate for the business use of the pickup trucks, the van, and the cars because you never have more than four vehicles used for business at the same time.

You own a car and four vans that are used in your housecleaning business. Your employees use the vans, and you use the car to travel to various customers. You can’t use the standard mileage rate for the car or the vans. This is because all five vehicles are used in your business at the same time. You must use actual expenses for all vehicles.

If you are an employee, you can’t deduct any interest paid on a car loan. This applies even if you use the car 100% for business as an employee.

However, if you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car. For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). You can’t deduct the part of the interest expense that represents your personal use of the car.

If you itemize your deductions on Schedule A (Form 1040), you can deduct on line 5c state and local personal property taxes on motor vehicles. You can take this deduction even if you use the standard mileage rate or if you don’t use the car for business.

If you are self-employed and use your car in your business, you can deduct the business part of state and local personal property taxes on motor vehicles on Schedule C (Form 1040), or Schedule F (Form 1040). If you itemize your deductions, you can include the remainder of your state and local personal property taxes on the car on Schedule A (Form 1040).

In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses.)

If you sell, trade in, or otherwise dispose of your car, you may have a gain or loss on the transaction or an adjustment to the basis of your new car. See Disposition of a Car , later.

Actual Car Expenses

If you don’t use the standard mileage rate, you may be able to deduct your actual car expenses.

Actual car expenses include:

If you have fully depreciated a car that you still use in your business, you can continue to claim your other actual car expenses. Continue to keep records, as explained later in chapter 5 .

If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. You can divide your expense based on the miles driven for each purpose.

You are a contractor and drive your car 20,000 miles during the year: 12,000 miles for business use and 8,000 miles for personal use. You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense.

If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. You can’t use the standard mileage rate. See Vehicle Provided by Your Employer in chapter 6.

If you are an employee, you can’t deduct any interest paid on a car loan. This interest is treated as personal interest and isn’t deductible. If you are self-employed and use your car in that business, see Interest , earlier, under Standard Mileage Rate.

If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. Enter the amount paid on Schedule A (Form 1040), line 5c.

Generally, sales taxes on your car are part of your car's basis and are recovered through depreciation, discussed later.

You can’t deduct fines you pay or collateral you forfeit for traffic violations.

If your car is damaged, destroyed, or stolen, you may be able to deduct part of the loss not covered by insurance. See Pub. 547, Casualties, Disasters, and Thefts, for information on deducting a loss on your car.

Generally, the cost of a car, plus sales tax and improvements, is a capital expense. Because the benefits last longer than 1 year, you generally can’t deduct a capital expense. However, you can recover this cost through the section 179 deduction (the deduction allowed by section 179 of the Internal Revenue Code), special depreciation allowance, and depreciation deductions. Depreciation allows you to recover the cost over more than 1 year by deducting part of it each year. The section 179 deduction , special depreciation allowance , and depreciation deductions are discussed later.

Generally, there are limits on these deductions. Special rules apply if you use your car 50% or less in your work or business.

You can claim a section 179 deduction and use a depreciation method other than straight line only if you don’t use the standard mileage rate to figure your business-related car expenses in the year you first place a car in service.

If, in the year you first place a car in service, you claim either a section 179 deduction or use a depreciation method other than straight line for its estimated useful life, you can’t use the standard mileage rate on that car in any future year.

For depreciation purposes, a car is any four-wheeled vehicle (including a truck or van) made primarily for use on public streets, roads, and highways. Its unloaded gross vehicle weight (for trucks and vans, gross vehicle weight) must not be more than 6,000 pounds. A car includes any part, component, or other item physically attached to it or usually included in the purchase price.

A car doesn’t include:

An ambulance, hearse, or combination ambulance-hearse used directly in a business;

A vehicle used directly in the business of transporting persons or property for pay or hire; or

A truck or van that is a qualified nonpersonal use vehicle.

These are vehicles that by their nature aren’t likely to be used more than a minimal amount for personal purposes. They include trucks and vans that have been specially modified so that they aren’t likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles.

See Depreciation Deduction , later, for more information on how to depreciate your vehicle.

Section 179 Deduction

You can elect to recover all or part of the cost of a car that is qualifying section 179 property, up to a limit, by deducting it in the year you place the property in service. This is the section 179 deduction. If you elect the section 179 deduction, you must reduce your depreciable basis in the car by the amount of the section 179 deduction.

You can claim the section 179 deduction only in the year you place the car in service. For this purpose, a car is placed in service when it is ready and available for a specifically assigned use in a trade or business. Even if you aren’t using the property, it is in service when it is ready and available for its specifically assigned use.

A car first used for personal purposes can’t qualify for the deduction in a later year when its use changes to business.

In 2022, you bought a new car and used it for personal purposes. In 2023, you began to use it for business. Changing its use to business use doesn’t qualify the cost of your car for a section 179 deduction in 2023. However, you can claim a depreciation deduction for the business use of the car starting in 2023. See Depreciation Deduction , later.

You must use the property more than 50% for business to claim any section 179 deduction. If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. The result is the cost of the property that can qualify for the section 179 deduction.

You purchased a new car in April 2023 for $24,500 and used it 60% for business. Based on your business usage, the total cost of your car that qualifies for the section 179 deduction is $14,700 ($24,500 cost × 60% (0.60) business use). But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later.

There are limits on:

The amount of the section 179 deduction;

The section 179 deduction for sport utility and certain other vehicles; and

The total amount of the section 179 deduction, special depreciation allowance, and depreciation deduction (discussed later ) you can claim for a qualified property.

For tax years beginning in 2023, the total amount you can elect to deduct under section 179 can’t be more than $1,160,000.

If the cost of your section 179 property placed in service in tax years beginning in 2023 is over $2,890,000, you must reduce the $1,160,000 dollar limit (but not below zero) by the amount of cost over $2,890,000. If the cost of your section 179 property placed in service during tax years beginning in 2023 is $4,050,000 or more, you can’t take a section 179 deduction.

The total amount you can deduct under section 179 each year after you apply the limits listed above cannot be more than the taxable income from the active conduct of any trade or business during the year.

If you are married and file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service.

If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit. You must allocate the dollar limit (after any reduction) between you.

For more information on the above section 179 deduction limits, see Pub. 946, How To Depreciate Property.

You cannot elect to deduct more than $28,900 of the cost of any heavy sport utility vehicle (SUV) and certain other vehicles placed in service during the tax years beginning in 2023. This rule applies to any four-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways that isn’t subject to any of the passenger automobile limits explained under Depreciation Limits , later, and that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. However, the $28,900 limit doesn’t apply to any vehicle:

Designed to have a seating capacity of more than nine persons behind the driver's seat;

Equipped with a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and isn’t readily accessible directly from the passenger compartment; or

That has an integral enclosure, fully enclosing the driver compartment and load carrying device, doesn’t have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield.

The first-year limit on the depreciation deduction, special depreciation allowance, and section 179 deduction for vehicles acquired before September 28, 2017, and placed in service during 2023, is $12,200. The first-year limit on depreciation, special depreciation allowance, and section 179 deduction for vehicles acquired after September 27, 2017, and placed in service during 2023 increases to $20,200. If you elect not to claim a special depreciation allowance for a vehicle placed in service in 2023, the amount increases to $12,200. The limit is reduced if your business use of the vehicle is less than 100%. See Depreciation Limits , later, for more information.

In the earlier example under More than 50% business use requirement , you had a car with a cost (for purposes of the section 179 deduction) of $14,700. However, based on your business usage of the car, the total of your section 179 deduction, special depreciation allowance, and depreciation deductions is limited to $12,120 ($20,200 limit x 60% (0.60) business use) because the car was acquired after September 27, 2017, and placed in service during 2023.

For purposes of the section 179 deduction, the cost of the car doesn’t include any amount figured by reference to any other property held by you at any time. For example, if you buy a car as a replacement for a car that was stolen or that was destroyed in a casualty loss, and you use section 1033 to determine the basis in your replacement vehicle, your cost for purposes of the section 179 deduction doesn’t include your adjusted basis in the relinquished car. In that case, your cost includes only the cash you paid.

The amount of the section 179 deduction reduces your basis in your car. If you choose the section 179 deduction, you must subtract the amount of the deduction from the cost of your car. The resulting amount is the basis in your car you use to figure your depreciation deduction.

If you want to take the section 179 deduction, you must make the election in the tax year you place the car in service for business or work.

Employees use Form 2106, Employee Business Expenses, to make the election and report the section 179 deduction. All others use Form 4562, Depreciation and Amortization, to make an election.

File the appropriate form with either of the following.

Your original tax return filed for the year the property was placed in service (whether or not you file it timely).

An amended return filed within the time prescribed by law. An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. The amended return must also include any resulting adjustments to taxable income.

An election (or any specification made in the election) to take a section 179 deduction for 2023 can only be revoked with the Commissioner's approval.

To be eligible to claim the section 179 deduction, you must use your car more than 50% for business or work in the year you acquired it. If your business use of the car is 50% or less in a later tax year during the recovery period, you have to recapture (include in income) in that later year any excess depreciation. Any section 179 deduction claimed on the car is included in figuring the excess depreciation. For information on this calculation, see Excess depreciation , later in this chapter under Car Used 50% or Less for Business. For more information on recapture of a section 179 deduction, see Pub. 946.

If you dispose of a car on which you had claimed the section 179 deduction, the amount of that deduction is treated as a depreciation deduction for recapture purposes. You treat any gain on the disposition of the property as ordinary income up to the amount of the section 179 deduction and any allowable depreciation (unless you establish the amount actually allowed). For information on the disposition of a car, see Disposition of a Car , later. For more information on recapture of a section 179 deduction, see Pub. 946.

Special Depreciation Allowance

You may be able to claim the special depreciation allowance for your car, truck, or van if it is qualified property and was placed in service in 2023. The allowance for 2023 is an additional depreciation deduction for 100% of the car's depreciable basis (after any section 179 deduction, but before figuring your regular depreciation deduction under MACRS) if the vehicle was acquired after September 27, 2017, and placed in service during 2023. Further, while it applies to a new vehicle, it also applies to a used vehicle only if the vehicle meets the used property requirements. For more information on the used property requirements, see section 168(k)(2)(E)(ii). To qualify for the allowance, more than 50% of the use of the car must be in a qualified business use (as defined under Depreciation Deduction , later).

The first-year limit on the depreciation deduction, special depreciation allowance, and section 179 deduction for vehicles acquired before September 28, 2017, and placed in service during 2023, is $12,200. Your combined section 179 depreciation, special depreciation allowance, and regular MACRS depreciation deduction is limited to the maximum allowable depreciation deduction for vehicles acquired after September 27, 2017, and placed in service during 2023 is $20,200. If you elect not to claim a special depreciation allowance for a vehicle placed in service in 2023, the amount is $12,200. See Depreciation Limits , later in this chapter.

To be qualified property, the car (including the truck or van) must meet all of the following tests.

You acquired the car after September 27, 2017, but only if no written binding contract to acquire the car existed before September 28, 2017.

You acquired the car new or used.

You placed the car in service in your trade or business before January 1, 2027.

You used the car more than 50% in a qualified business use during the tax year.

You can elect not to claim the special depreciation allowance for your car, truck, or van that is qualified property. If you make this election, it applies to all 5-year property placed in service during the year.

To make this election, attach a statement to your timely filed return (including extensions) indicating the class of property (5-year for cars) for which you are making the election and that you are electing not to claim the special depreciation allowance for qualified property in that class of property.

Depreciation Deduction

If you use actual car expenses to figure your deduction for a car you own and use in your business, you can claim a depreciation deduction. This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car.

You generally need to know the following things about the car you intend to depreciate.

Your basis in the car.

The date you place the car in service.

The method of depreciation and recovery period you will use.

Your basis in a car for figuring depreciation is generally its cost. This includes any amount you borrow or pay in cash, other property, or services.

Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis , later). However, in some situations, you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). For one of these situations, see Exception under Methods of depreciation , later.

If you change the use of a car from personal to business, your basis for depreciation is the lesser of the fair market value or your adjusted basis in the car on the date of conversion. Additional rules concerning basis are discussed later in this chapter under Unadjusted basis .

You generally place a car in service when it is available for use in your work or business, in an income-producing activity, or in a personal activity. Depreciation begins when the car is placed in service for use in your work or business or for the production of income.

For purposes of figuring depreciation, if you first start using the car only for personal use and later convert it to business use, you place the car in service on the date of conversion.

If you place a car in service and dispose of it in the same tax year, you can’t claim any depreciation deduction for that car.

Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery (MACRS) discussed later in this chapter.

If you used the standard mileage rate in the first year of business use and change to the actual expenses method in a later year, you can’t depreciate your car under the MACRS rules. You must use straight line depreciation over the estimated remaining useful life of the car. The amount you depreciate can’t be more than the depreciation limit that applies for that year. See Depreciation Limits , later.

To figure depreciation under the straight line method, you must reduce your basis in the car (but not below zero) by a set rate per mile for all miles for which you used the standard mileage rate. The rate per mile varies depending on the year(s) you used the standard mileage rate. For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car , later.

This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis . You must use your adjusted basis in your car to figure your depreciation deduction. For additional information on the straight line method of depreciation, see Pub. 946.

Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car.

If your business use is 50% or less, you must use the straight line method to depreciate your car. This is explained later under Car Used 50% or Less for Business .

A qualified business use is any use in your trade or business. It doesn’t include use for the production of income (investment use), or use provided under lease to, or as compensation to, a 5% owner or related person. However, you do combine your business and investment use to figure your depreciation deduction for the tax year.

Don’t treat any use of your car by another person as use in your trade or business unless that use meets one of the following conditions.

It is directly connected with your business.

It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income).

It results in a payment of fair market rent. This includes any payment to you for the use of your car.

If you used your car more than 50% in qualified business use in the year you placed it in service, but 50% or less in a later year (including the year of disposition), you have to change to the straight line method of depreciation. See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business , later.

If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. You do this on the basis of mileage. Figure the percentage of qualified business use by dividing the number of miles you drive your car for business purposes during the year by the total number of miles you drive the car during the year for any purpose.

If you change the use of a car from 100% personal use to business use during the tax year, you may not have mileage records for the time before the change to business use. In this case, you figure the percentage of business use for the year as follows.

Determine the percentage of business use for the period following the change. Do this by dividing business miles by total miles driven during that period.

Multiply the percentage in (1) by a fraction. The numerator (top number) is the number of months the car is used for business, and the denominator (bottom number) is 12.

You use a car only for personal purposes during the first 6 months of the year. During the last 6 months of the year, you drive the car a total of 15,000 miles of which 12,000 miles are for business. This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. Your business use for the year is 40% (80% (0.80) × 6 / 12 ).

The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. The maximum amount you can claim depends on the year in which you placed your car in service. You have to reduce the maximum amount if you did not use the car exclusively for business. See Depreciation Limits , later.

You use your unadjusted basis (often referred to as your basis or your basis for depreciation) to figure your depreciation using the MACRS depreciation chart, explained later under Modified Accelerated Cost Recovery System (MACRS) . Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts.

To figure your unadjusted basis, begin with your car's original basis, which is generally its cost. Cost includes sales taxes (see Sales taxes , earlier), destination charges, and dealer preparation. Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. Decrease your basis by any section 179 deduction, special depreciation allowance, gas guzzler tax, and vehicle credits claimed. See Pub. 551, Basis of Assets, for further details.

If you acquired the car by gift or inheritance, see Pub. 551, Basis of Assets, for information on your basis in the car.

A major improvement to a car is treated as a new item of 5-year recovery property. It is treated as placed in service in the year the improvement is made. It doesn’t matter how old the car is when the improvement is added. Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. Your car's depreciation deduction for the year (plus any section 179 deduction, special depreciation allowance, and depreciation on any improvements) can’t be more than the depreciation limit that applies for that year. See Depreciation Limits , later.

If you traded one car (the “old car”) for another car (the “new car”) in 2023, you must treat the transaction as a disposition of the old car and the purchase of the new car. You must treat the old car as disposed of at the time of the trade-in. The depreciable basis of the new car is the adjusted basis of the old car (figured as if 100% of the car’s use had been for business purposes) plus any additional amount you paid for the new car. You then figure your depreciation deduction for the new car beginning with the date you placed it in service. You must also complete Form 2106, Part II, Section D. This method is explained later, beginning at Effect of trade-in on basis .

The discussion that follows applies to trade-ins of cars in 2023, where the election was made to treat the transaction as a disposition of the old car and the purchase of the new car. For information on how to figure depreciation for cars involved in a like-kind exchange (trade-in) in 2023, for which the election wasn’t made, see Pub. 946 and Regulations section 1.168(i)-6(d)(3).

Like‐kind exchanges completed after December 31, 2017, are generally limited to exchanges of real property not held primarily for sale. Regulations section 1.168(i)-6 doesn't reflect this change in law.

If you trade in a car you used only in your business for another car that will be used only in your business, your original basis in the new car is your adjusted basis in the old car, plus any additional amount you pay for the new car.

You trade in a car that has an adjusted basis of $5,000 for a new car. In addition, you pay cash of $20,000 for the new car. Your original basis of the new car is $25,000 (your $5,000 adjusted basis in the old car plus the $20,000 cash paid). Your unadjusted basis is $25,000 unless you claim the section 179 deduction, special depreciation allowance, or have other increases or decreases to your original basis, discussed under Unadjusted basis , earlier.

If you trade in a car you used partly in your business for a new car you will use in your business, you must make a “trade-in” adjustment for the personal use of the old car. This adjustment has the effect of reducing your basis in your old car, but not below zero, for purposes of figuring your depreciation deduction for the new car. (This adjustment isn’t used, however, when you determine the gain or loss on the later disposition of the new car. See Pub. 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car.)

To figure the unadjusted basis of your new car for depreciation, first add to your adjusted basis in the old car any additional amount you pay for the new car. Then subtract from that total the excess, if any, of:

The total of the amounts that would have been allowable as depreciation during the tax years before the trade if 100% of the use of the car had been business and investment use, over

The total of the amounts actually allowed as depreciation during those years.

MACRS is the name given to the tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income.

The maximum amount you can deduct is limited, depending on the year you placed your car in service. See Depreciation Limits , later.

Under MACRS, cars are classified as 5-year property. You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. This is because your car is generally treated as placed in service in the middle of the year, and you claim depreciation for one-half of both the first year and the sixth year.

For more information on the qualifications for this shorter recovery period and the percentages to use in figuring the depreciation deduction, see chapter 4 of Pub. 946.

You can use one of the following methods to depreciate your car.

The 200% declining balance method (200% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction.

The 150% declining balance method (150% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction.

The straight line method (SL) over a 5-year recovery period.

Before choosing a method, you may wish to consider the following facts.

Using the straight line method provides equal yearly deductions throughout the recovery period.

Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year.

A 2023 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1 . Using this table will make it easy for you to figure the 2023 depreciation deduction for your car. A similar chart appears in the Instructions for Form 2106.

You must use the Depreciation Tables in Pub. 946 rather than the 2023 MACRS Depreciation Chart in this publication if any one of the following three conditions applies to you.

You file your return on a fiscal year basis.

You file your return for a short tax year (less than 12 months).

During the year, all of the following conditions apply.

You placed some property in service from January through September.

You placed some property in service from October through December.

Your basis in the property you placed in service from October through December (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) was more than 40% of your total bases in all property you placed in service during the year.

If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. However, you can’t continue to use the chart if your basis in your car is adjusted because of a casualty. In that case, for the year of the adjustment and the remaining recovery period, figure the depreciation without the chart using your adjusted basis in the car at the end of the year of the adjustment and over the remaining recovery period. See Figuring the Deduction Without Using the Tables in chapter 4 of Pub. 946.

If you dispose of the car before the last year of the recovery period, you are generally allowed a half-year of depreciation in the year of disposition. This rule applies unless the mid-quarter convention applies to the vehicle being disposed of. See Depreciation deduction for the year of disposition under Disposition of a Car , later, for information on how to figure the depreciation allowed in the year of disposition.

To figure your depreciation deduction for 2023, find the percentage in the column of Table 4-1 based on the date that you first placed the car in service and the depreciation method that you are using. Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. If you prefer to figure your depreciation deduction without the help of the chart, see Pub. 946.

You bought a used truck in February 2022 to use exclusively in your landscape business. You paid $9,200 for the truck with no trade-in. You didn’t claim any section 179 deduction, the truck didn’t qualify for the special depreciation allowance, and you chose to use the 200% DB method to get the largest depreciation deduction in the early years.

You used the MACRS Depreciation Chart in 2022 to find your percentage. The unadjusted basis of the truck equals its cost because you used it exclusively for business. You multiplied the unadjusted basis of the truck, $9,200, by the percentage that applied, 20%, to figure your 2022 depreciation deduction of $1,840.

In 2023, you used the truck for personal purposes when you repaired your parent’s cabin. Your records show that the business use of the truck was 90% in 2023. You used Table 4-1 to find your percentage. Reading down the first column for the date placed in service and across to the 200% DB column, you locate your percentage, 32%. You multiply the unadjusted basis of the truck, $8,280 ($9,200 cost × 90% (0.90) business use), by 32% (0.32) to figure your 2023 depreciation deduction of $2,650.

Depreciation Limits

There are limits on the amount you can deduct for depreciation of your car, truck, or van. The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. The maximum amount you can deduct each year depends on the date you acquired the passenger automobile and the year you place the passenger automobile in service. These limits are shown in the following tables for 2023.

Maximum Depreciation Deduction for Passenger Automobiles (Including Trucks and Vans) Acquired Before September 28, 2017, and Placed in Service During 2018–2023

Maximum depreciation deduction for passenger automobiles (including trucks and vans) acquired after september 27, 2017, and placed in service during 2018 or later.

The maximum amount you can deduct each year depends on the year you place the car in service. These limits are shown in the following tables for prior years.

Maximum Depreciation Deduction for Cars Placed in Service Prior to 2018

For tax years prior to 2018, the maximum depreciation deductions for trucks and vans are generally higher than those for cars. A truck or van is a passenger automobile that is classified by the manufacturer as a truck or van and rated at 6,000 pounds gross vehicle weight or less.

Maximum Depreciation Deduction for Trucks and Vans Placed in Service Prior to 2018

The depreciation limits aren’t reduced if you use a car for less than a full year. This means that you don’t reduce the limit when you either place a car in service or dispose of a car during the year. However, the depreciation limits are reduced if you don’t use the car exclusively for business and investment purposes. See Reduction for personal use next.

The depreciation limits are reduced based on your percentage of personal use. If you use a car less than 100% in your business or work, you must determine the depreciation deduction limit by multiplying the limit amount by the percentage of business and investment use during the tax year.

The section 179 deduction is treated as a depreciation deduction. If you acquired a passenger automobile (including trucks and vans) after September 27, 2017, and placed it in service in 2023, use it only for business, and choose the section 179 deduction, the special depreciation allowance and depreciation deduction for that vehicle for 2023 is limited to $20,200.

On September 4, 2023, you bought and placed in service a used car for $15,000. You used it 80% for your business, and you choose to take a section 179 deduction for the car. The car isn’t qualified property for purposes of the special depreciation allowance.

Before applying the limit, you figure your maximum section 179 deduction to be $12,000. This is the cost of your qualifying property (up to the maximum $1,160,000 amount) multiplied by your business use ($15,000 × 80% (0.80)).

You then figure that your section 179 deduction for 2023 is limited to $9,760 (80% of $12,200). You then figure your unadjusted basis of $2,440 (($15,000 × 80% (0.80)) − $9,760) for determining your depreciation deduction. You have reached your maximum depreciation deduction for 2023. For 2024, you will use your unadjusted basis of $2,440 to figure your depreciation deduction.

If the depreciation deductions for your car are reduced under the passenger automobile limits (discussed earlier), you will have unrecovered basis in your car at the end of the recovery period. If you continue to use your car for business, you can deduct that unrecovered basis (subject to depreciation limits) after the recovery period ends.

This is your cost or other basis in the car reduced by any clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), alternative motor vehicle credit, electric vehicle credit, gas guzzler tax, and depreciation (including any special depreciation allowance , discussed earlier, unless you elect not to claim it) and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use.

For 5-year property, your recovery period is 6 calendar years. A part year's depreciation is allowed in the first calendar year, a full year's depreciation is allowed in each of the next 4 calendar years, and a part year's depreciation is allowed in the 6th calendar year.

Under MACRS, your recovery period is the same whether you use declining balance or straight line depreciation. You determine your unrecovered basis in the 7th year after you placed the car in service.

If you continue to use your car for business after the recovery period, you can claim a depreciation deduction in each succeeding tax year until you recover your basis in the car. The maximum amount you can deduct each year is determined by the date you placed the car in service and your business-use percentage. For example, no deduction is allowed for a year you use your car 100% for personal purposes.

In April 2017, you bought and placed in service a car you used exclusively in your business. The car cost $31,500. You didn’t claim a section 179 deduction or the special depreciation allowance for the car. You continued to use the car 100% in your business throughout the recovery period (2017 through 2022). For those years, you used the MACRS Depreciation Chart (200% DB method), the Maximum Depreciation Deduction for Cars Placed in Service Prior to 2018 table and Maximum Depreciation Deduction for Passenger Automobiles (Including Trucks and Vans) Acquired Before September 28, 2017, and Placed in Service During 2018–2023 table, earlier, for the applicable tax year to figure your depreciation deductions during the recovery period. Your depreciation deductions were subject to the depreciation limits, so you will have unrecovered basis at the end of the recovery period as shown in the following table.

At the end of 2022, you had an unrecovered basis in the car of $14,626 ($31,500 – $16,874). If you continued to use the car 100% for business in 2023 and later years, you can claim a depreciation deduction equal to the lesser of $1,875 or your remaining unrecovered basis.

If your business use of the car was less than 100% during any year, your depreciation deduction would be less than the maximum amount allowable for that year. However, in determining your unrecovered basis in the car, you would still reduce your original basis by the maximum amount allowable as if the business use had been 100%. For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $10,124 ($16,874 × 60% (0.60)), but you still would have to reduce your basis by $16,874 to determine your unrecovered basis.

Table 4-1. 2023 MACRS Depreciation Chart (Use To Figure Depreciation for 2023)

Car used 50% or less for business.

If you use your car 50% or less for qualified business use (defined earlier under Depreciation Deduction ) either in the year the car is placed in service or in a later year, special rules apply. The rules that apply in these two situations are explained in the following paragraphs. (For this purpose, “car” was defined earlier under Actual Car Expenses and includes certain trucks and vans.)

If you use your car 50% or less for qualified business use, the following rules apply.

You can’t take the section 179 deduction.

You can’t take the special depreciation allowance.

You must figure depreciation using the straight line method over a 5-year recovery period. You must continue to use the straight line method even if your percentage of business use increases to more than 50% in a later year.

Instead of making the computation yourself, you can use column (c) of Table 4-1 to find the percentage to use.

In May 2023, you bought and placed in service a car for $17,500. You used it 40% for your consulting business. Because you didn’t use the car more than 50% for business, you can’t take any section 179 deduction or special depreciation allowance, and you must use the straight line method over a 5-year recovery period to recover the cost of your car.

You deduct $700 in 2023. This is the lesser of:

$700 (($17,500 cost × 40% (0.40) business use) × 10% (0.10) recovery percentage (from column (c) of Table 4-1 )), or

$4,880 ($12,200 maximum limit × 40% (0.40) business use).

If you use your car more than 50% in qualified business use in the tax year it is placed in service but the business use drops to 50% or less in a later year, you can no longer use an accelerated depreciation method for that car.

For the year the business use drops to 50% or less and all later years in the recovery period, you must use the straight line depreciation method over a 5-year recovery period. In addition, for the year your business use drops to 50% or less, you must recapture (include in your gross income) any excess depreciation (discussed later). You also increase the adjusted basis of your car by the same amount.

In June 2020, you purchased a car for exclusive use in your business. You met the more-than-50%-use test for the first 3 years of the recovery period (2020 through 2022) but failed to meet it in the fourth year (2023). You determine your depreciation for 2023 using 20% (from column (c) of Table 4-1 ). You will also have to determine and include in your gross income any excess depreciation, discussed next.

You must include any excess depreciation in your gross income and add it to your car's adjusted basis for the first tax year in which you don’t use the car more than 50% in qualified business use. Use Form 4797, Sales of Business Property, to figure and report the excess depreciation in your gross income.

Excess depreciation is:

The amount of the depreciation deductions allowable for the car (including any section 179 deduction claimed and any special depreciation allowance claimed) for tax years in which you used the car more than 50% in qualified business use, minus

The amount of the depreciation deductions that would have been allowable for those years if you hadn’t used the car more than 50% in qualified business use for the year you placed it in service. This means the amount of depreciation figured using the straight line method.

In September 2019, you bought a car for $20,500 and placed it in service. You didn’t claim the section 179 deduction or the special depreciation allowance. You used the car exclusively in qualified business use for 2019, 2020, 2021, and 2022. For those years, you used the appropriate MACRS Depreciation Chart to figure depreciation deductions totaling $13,185 ($3,160 for 2019, $5,100 for 2020, $3,050 for 2021, and $1,875 for 2022) under the 200% DB method.

During 2023, you used the car 30% for business and 70% for personal purposes. Since you didn’t meet the more-than-50%-use test, you must switch from the 200% DB depreciation method to the straight line depreciation method for 2023, and include in gross income for 2023 your excess depreciation determined as follows.

In 2023, using Form 4797, you figure and report the $2,110 excess depreciation you must include in your gross income. Your adjusted basis in the car is also increased by $2,110. Your 2023 depreciation is $1,230 ($20,500 (unadjusted basis) × 30% (0.30) (business-use percentage) × 20% (0.20) (from column (c) of Table 4-1 on the line for Jan. 1–Sept. 30, 2019)). However, your depreciation deduction is limited to $563 ($1,875 x 30% (0.30) business use).

Leasing a Car

If you lease a car, truck, or van that you use in your business, you can use the standard mileage rate or actual expenses to figure your deductible expense. This section explains how to figure actual expenses for a leased car, truck, or van.

If you choose to use actual expenses, you can deduct the part of each lease payment that is for the use of the vehicle in your business. You can’t deduct any part of a lease payment that is for personal use of the vehicle, such as commuting.

You must spread any advance payments over the entire lease period. You can’t deduct any payments you make to buy a car, truck, or van even if the payments are called “lease payments.”

If you lease a car, truck, or van for 30 days or more, you may have to reduce your lease payment deduction by an “inclusion amount,” explained next.

Inclusion Amounts

If you lease a car, truck, or van that you use in your business for a lease term of 30 days or more, you may have to include an inclusion amount in your income for each tax year you lease the vehicle. To do this, you don’t add an amount to income. Instead, you reduce your deduction for your lease payment. (This reduction has an effect similar to the limit on the depreciation deduction you would have on the vehicle if you owned it.)

The inclusion amount is a percentage of part of the fair market value of the leased vehicle multiplied by the percentage of business and investment use of the vehicle for the tax year. It is prorated for the number of days of the lease term in the tax year.

The inclusion amount applies to each tax year that you lease the vehicle if the fair market value (defined next) when the lease began was more than the amounts shown in the following tables.

All vehicles are subject to a single inclusion amount threshold for passenger automobiles leased and put into service in 2023. You may have an inclusion amount for a passenger automobile if:

Passenger Automobiles (Including Trucks and Vans)

For years prior to 2018, see the inclusion tables below. You may have an inclusion amount for a passenger automobile if:

Cars (Except for Trucks and Vans)

Trucks and Vans

Fair market value is the price at which the property would change hands between a willing buyer and seller, neither having to buy or sell, and both having reasonable knowledge of all the necessary facts. Sales of similar property around the same date may be helpful in figuring the fair market value of the property.

Figure the fair market value on the first day of the lease term. If the capitalized cost of a car is specified in the lease agreement, use that amount as the fair market value.

Inclusion amounts for tax years 2018–2023 are listed in Appendices A-1 through A-6 for passenger vehicles (including trucks and vans). If the fair market value of the vehicle is $100,000 or less, use the appropriate appendix (depending on the year you first placed the vehicle in service) to determine the inclusion amount. If the fair market value is more than $100,000, see the revenue procedure(s) identified in the footnote of that year’s appendix for the inclusion amount.

For each tax year during which you lease the car for business, determine your inclusion amount by following these three steps.

Locate the appendix that applies to you. To find the inclusion amount, do the following.

Find the line that includes the fair market value of the car on the first day of the lease term.

Go across the line to the column for the tax year in which the car is used under the lease to find the dollar amount. For the last tax year of the lease, use the dollar amount for the preceding year.

Prorate the dollar amount from (1b) for the number of days of the lease term included in the tax year.

Multiply the prorated amount from (2) by the percentage of business and investment use for the tax year. This is your inclusion amount.

On January 17, 2023, you leased a car for 3 years and placed it in service for use in your business. The car had a fair market value of $62,500 on the first day of the lease term. You use the car 75% for business and 25% for personal purposes during each year of the lease. Assuming you continue to use the car 75% for business, you use Appendix A-6 to arrive at the following inclusion amounts for each year of the lease. For the last tax year of the lease, 2026, you use the amount for the preceding year.

2024 is a leap year and includes an extra calendar day, February 29, 2024.

For each year of the lease that you deduct lease payments, you must reduce your deduction by the inclusion amount figured for that year.

If you lease a car for business use and, in a later year, change it to personal use, follow the rules explained earlier under Figuring the inclusion amount . For the tax year in which you stop using the car for business, use the dollar amount for the previous tax year. Prorate the dollar amount for the number of days in the lease term that fall within the tax year.

On August 16, 2022, you leased a car with a fair market value of $64,500 for 3 years. You used the car exclusively in your data processing business. On November 6, 2023, you closed your business and went to work for a company where you aren’t required to use a car for business. Using Appendix A-5 , you figured your inclusion amount for 2022 and 2023 as shown in the following table and reduced your deductions for lease payments by those amounts.

If you lease a car for personal use and, in a later year, change it to business use, you must determine the car's fair market value on the date of conversion. Then figure the inclusion amount using the rules explained earlier under Figuring the inclusion amount . Use the fair market value on the date of conversion.

In March 2021, you leased a truck for 4 years for personal use. On June 1, 2023, you started working as a self-employed advertising consultant and started using the leased truck for business purposes. Your records show that your business use for June 1 through December 31 was 60%. To figure your inclusion amount for 2023, you obtained an appraisal from an independent car leasing company that showed the fair market value of your 2021 truck on June 1, 2023, was $62,650. Using Appendix A-6 , you figured your inclusion amount for 2023 as shown in the following table.

For information on reporting inclusion amounts, employees should see Car rentals under Completing Forms 2106 in chapter 6. Sole proprietors should see the Instructions for Schedule C (Form 1040), and farmers should see the Instructions for Schedule F (Form 1040).

Disposition of a Car

If you dispose of your car, you may have a taxable gain or a deductible loss. The portion of any gain that is due to depreciation (including any section 179 deduction, clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), and special depreciation allowance) that you claimed on the car will be treated as ordinary income. However, you may not have to recognize a gain or loss if you dispose of the car because of a casualty or theft.

This section gives some general information about dispositions of cars. For information on how to report the disposition of your car, see Pub. 544.

Like‐kind exchanges completed after December 31, 2017, are generally limited to exchanges of real property not held primarily for sale.

For a casualty or theft, a gain results when you receive insurance or other reimbursement that is more than your adjusted basis in your car. If you then spend all of the proceeds to acquire replacement property (a new car or repairs to the old car) within a specified period of time, you don’t recognize any gain. Your basis in the replacement property is its cost minus any gain that isn’t recognized. See Pub. 547 for more information.

When you trade in an old car for a new one, the transaction is considered a like-kind exchange. Generally, no gain or loss is recognized. (For exceptions, see chapter 1 of Pub. 544.) In a trade-in situation, your basis in the new property is generally your adjusted basis in the old property plus any additional amount you pay. (See Unadjusted basis , earlier.)

If you used the standard mileage rate for the business use of your car, depreciation was included in that rate. The rate of depreciation that was allowed in the standard mileage rate is shown in the Rate of Depreciation Allowed in Standard Mileage Rate table, later. You must reduce your basis in your car (but not below zero) by the amount of this depreciation.

If your basis is reduced to zero (but not below zero) through the use of the standard mileage rate, and you continue to use your car for business, no adjustment (reduction) to the standard mileage rate is necessary. Use the full standard mileage rate (65.5 cents ($0.655) per mile from January 1–December 31 for 2023) for business miles driven.

Rate of Depreciation Allowed in Standard Mileage Rate

In 2018, you bought and placed in service a car for exclusive use in your business. The car cost $25,500. From 2018 through 2023, you used the standard mileage rate to figure your car expense deduction. You drove your car 14,100 miles in 2018, 16,300 miles in 2019, 15,600 miles in 2020, 16,700 miles in 2021, 15,100 miles in 2022, and 14,900 miles in 2023. The depreciation portion of your car expense deduction is figured as follows.

If you deduct actual car expenses and you dispose of your car before the end of the recovery period (years 2 through 5), you are allowed a reduced depreciation deduction in the year of disposition.

Use the depreciation tables in Pub. 946 to figure the reduced depreciation deduction for a car disposed of in 2023.

The depreciation amounts computed using the depreciation tables in Pub. 946 for years 2 through 5 that you own your car are for a full year’s depreciation. Years 1 and 6 apply the half-year or mid-quarter convention to the computation for you. If you dispose of the vehicle in years 2 through 5 and the half-year convention applies, then the full year’s depreciation amount must be divided by 2. If the mid-quarter convention applies, multiply the full year’s depreciation by the percentage from the following table for the quarter that you disposed of the car.

If the car is subject to the Depreciation Limits , discussed earlier, reduce (but do not increase) the computed depreciation to this amount. See Sale or Other Disposition Before the Recovery Period Ends in chapter 4 of Pub. 946 for more information.

5. Recordkeeping

If you deduct travel, gift, or transportation expenses, you must be able to prove (substantiate) certain elements of expense. This chapter discusses the records you need to keep to prove these expenses.

How To Prove Expenses

Table 5-1 is a summary of records you need to prove each expense discussed in this publication. You must be able to prove the elements listed across the top portion of the chart. You prove them by having the information and receipts (where needed) for the expenses listed in the first column.

You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. You must generally prepare a written record for it to be considered adequate. This is because written evidence is more reliable than oral evidence alone. However, if you prepare a record on a computer, it is considered an adequate record.

What Are Adequate Records?

You should keep the proof you need in an account book, diary, log, statement of expense, trip sheets, or similar record. You should also keep documentary evidence that, together with your record, will support each element of an expense.

You must generally have documentary evidence such as receipts, canceled checks, or bills, to support your expenses.

Documentary evidence isn’t needed if any of the following conditions apply.

You have meals or lodging expenses while traveling away from home for which you account to your employer under an accountable plan, and you use a per diem allowance method that includes meals and/or lodging. ( Accountable plans and per diem allowances are discussed in chapter 6.)

Your expense, other than lodging, is less than $75.

You have a transportation expense for which a receipt isn’t readily available.

Documentary evidence will ordinarily be considered adequate if it shows the amount, date, place, and essential character of the expense.

For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information.

The name and location of the hotel.

The dates you stayed there.

Separate amounts for charges such as lodging, meals, and telephone calls.

A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information.

The name and location of the restaurant.

The number of people served.

The date and amount of the expense.

A canceled check, together with a bill from the payee, ordinarily establishes the cost. However, a canceled check by itself doesn’t prove a business expense without other evidence to show that it was for a business purpose.

You don‘t have to record information in your account book or other record that duplicates information shown on a receipt as long as your records and receipts complement each other in an orderly manner.

You don’t have to record amounts your employer pays directly for any ticket or other travel item. However, if you charge these items to your employer, through a credit card or otherwise, you must keep a record of the amounts you spend.

You should record the elements of an expense or of a business use at or near the time of the expense or use and support it with sufficient documentary evidence. A timely kept record has more value than a statement prepared later when there is generally a lack of accurate recall.

You don’t need to write down the elements of every expense on the day of the expense. If you maintain a log on a weekly basis that accounts for use during the week, the log is considered a timely kept record.

If you give your employer, client, or customer an expense account statement, it can also be considered a timely kept record. This is true if you copy it from your account book, diary, log, statement of expense, trip sheets, or similar record.

You must generally provide a written statement of the business purpose of an expense. However, the degree of proof varies according to the circumstances in each case. If the business purpose of an expense is clear from the surrounding circumstances, then you don’t need to give a written explanation.

If you are a sales representative who calls on customers on an established sales route, you don’t have to give a written explanation of the business purpose for traveling that route. You can satisfy the requirements by recording the length of the delivery route once, the date of each trip at or near the time of the trips, and the total miles you drove the car during the tax year. You could also establish the date of each trip with a receipt, record of delivery, or other documentary evidence.

You don’t need to put confidential information relating to an element of a deductible expense (such as the place, business purpose, or business relationship) in your account book, diary, or other record. However, you do have to record the information elsewhere at or near the time of the expense and have it available to fully prove that element of the expense.

What if I Have Incomplete Records?

If you don’t have complete records to prove an element of an expense, then you must prove the element with:

Your own written or oral statement containing specific information about the element, and

Other supporting evidence that is sufficient to establish the element.

If the element is the description of a gift, or the cost, time, place, or date of an expense, the supporting evidence must be either direct evidence or documentary evidence. Direct evidence can be written statements or the oral testimony of your guests or other witnesses setting forth detailed information about the element. Documentary evidence can be receipts, paid bills, or similar evidence.

If the element is either the business relationship of your guests or the business purpose of the amount spent, the supporting evidence can be circumstantial rather than direct. For example, the nature of your work, such as making deliveries, provides circumstantial evidence of the use of your car for business purposes. Invoices of deliveries establish when you used the car for business.

Table 5-1. How To Prove Certain Business Expenses

You can keep an adequate record for parts of a tax year and use that record to prove the amount of business or investment use for the entire year. You must demonstrate by other evidence that the periods for which an adequate record is kept are representative of the use throughout the tax year.

You use your car to visit the offices of clients, meet with suppliers and other subcontractors, and pick up and deliver items to clients. There is no other business use of the car, but you and your family use the car for personal purposes. You keep adequate records during the first week of each month that show that 75% of the use of the car is for business. Invoices and bills show that your business use continues at the same rate during the later weeks of each month. Your weekly records are representative of the use of the car each month and are sufficient evidence to support the percentage of business use for the year.

You can satisfy the substantiation requirements with other evidence if, because of the nature of the situation in which an expense is made, you can’t get a receipt. This applies if all the following are true.

You were unable to obtain evidence for an element of the expense or use that completely satisfies the requirements explained earlier under What Are Adequate Records .

You are unable to obtain evidence for an element that completely satisfies the two rules listed earlier under What if I Have Incomplete Records .

You have presented other evidence for the element that is the best proof possible under the circumstances.

If you can’t produce a receipt because of reasons beyond your control, you can prove a deduction by reconstructing your records or expenses. Reasons beyond your control include fire, flood, and other casualties.

Separating and Combining Expenses

This section explains when expenses must be kept separate and when expenses can be combined.

Each separate payment is generally considered a separate expense. For example, if you entertain a customer or client at dinner and then go to the theater, the dinner expense and the cost of the theater tickets are two separate expenses. You must record them separately in your records.

You can make one daily entry in your record for reasonable categories of expenses. Examples are taxi fares, telephone calls, or other incidental travel costs. Nonentertainment meals should be in a separate category. You can include tips for meal-related services with the costs of the meals.

Expenses of a similar nature occurring during the course of a single event are considered a single expense.

You can account for several uses of your car that can be considered part of a single use, such as a round trip or uninterrupted business use, with a single record. Minimal personal use, such as a stop for lunch on the way between two business stops, isn’t an interruption of business use.

You make deliveries at several different locations on a route that begins and ends at your employer's business premises and that includes a stop at the business premises between two deliveries. You can account for these using a single record of miles driven.

You don’t always have to record the name of each recipient of a gift. A general listing will be enough if it is evident that you aren’t trying to avoid the $25 annual limit on the amount you can deduct for gifts to any one person. For example, if you buy a large number of tickets to local high school basketball games and give one or two tickets to each of many customers, it is usually enough to record a general description of the recipients.

If you can prove the total cost of travel or entertainment but you can’t prove how much it costs for each person who participated in the event, you may have to allocate the total cost among you and your guests on a pro rata basis. To do so, you must establish the number of persons who participated in the event.

If your return is examined, you may have to provide additional information to the IRS. This information could be needed to clarify or to establish the accuracy or reliability of information contained in your records, statements, testimony, or documentary evidence before a deduction is allowed.

How Long To Keep Records and Receipts

You must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep records that support your deduction (or an item of income) for 3 years from the date you file the income tax return on which the deduction is claimed. A return filed early is considered filed on the due date. For a more complete explanation of how long to keep records, see Pub. 583, Starting a Business and Keeping Records.

You must keep records of the business use of your car for each year of the recovery period. See More-than-50%-use test in chapter 4 under Depreciation Deduction.

Employees who give their records and documentation to their employers and are reimbursed for their expenses generally don’t have to keep copies of this information. However, you may have to prove your expenses if any of the following conditions apply.

You claim deductions for expenses that are more than reimbursements.

Your expenses are reimbursed under a nonaccountable plan.

Your employer doesn’t use adequate accounting procedures to verify expense accounts.

You are related to your employer as defined under Per Diem and Car Allowances in chapter 6.

Table 5-2 and Table 5-3 are examples of worksheets that can be used for tracking business expenses.

Table 5-2. Daily Business Mileage and Expense Log

Table 5-3. Weekly Traveling Expense Record

6. How To Report

This chapter explains where and how to report the expenses discussed in this publication. It discusses reimbursements and how to treat them under accountable and nonaccountable plans. It also explains rules for independent contractors and clients, fee-basis officials, certain performing artists, Armed Forces reservists, and certain disabled employees. The chapter ends with illustrations of how to report travel, gift, and car expenses on Forms 2106.

Where To Report

This section provides general information on where to report the expenses discussed in this publication.

You must report your income and expenses on Schedule C (Form 1040) if you are a sole proprietor, or on Schedule F (Form 1040) if you are a farmer. You don’t use Form 2106.

If you claim car or truck expenses, you must provide certain information on the use of your vehicle. You provide this information on Schedule C (Form 1040) or Form 4562.

If you file Schedule C (Form 1040):

Report your travel expenses, except meals, on line 24a;

Report your deductible non-entertainment-related meals (actual cost or standard meal allowance) on line 24b;

Report your gift expenses and transportation expenses, other than car expenses, on line 27a; and

Report your car expenses on line 9. Complete Part IV of the form unless you have to file Form 4562 for depreciation or amortization.

If you file Schedule F (Form 1040), do the following.

Report your car expenses on line 10. Attach Form 4562 and provide information on the use of your car in Part V of Form 4562.

Report all other business expenses discussed in this publication on line 32. You can only include 50% of your non-entertainment-related meals on that line.

If you are both self-employed and an employee, you must keep separate records for each business activity. Report your business expenses for self-employment on Schedule C (Form 1040), or Schedule F (Form 1040), as discussed earlier. Report your business expenses for your work as an employee on Form 2106, as discussed next.

If you are an employee, you must generally complete Form 2106 to deduct your travel and transportation expenses.

You are an employee deducting expenses attributable to your job.

You weren’t reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 aren’t considered reimbursements).

If you claim car expenses, you use the standard mileage rate.

For more information on how to report your expenses on Form 2106, see Completing Form 2106 , later.

If you didn’t receive any reimbursements (or the reimbursements were all included in box 1 of your Form W-2), the only business expense you are claiming is for gifts, and the special rules discussed later don’t apply to you, don’t complete Form 2106.

If you received a Form W-2 and the “Statutory employee” box in box 13 was checked, report your income and expenses related to that income on Schedule C (Form 1040). Don’t complete Form 2106.

Statutory employees include full-time life insurance salespersons, certain agent or commission drivers, traveling salespersons, and certain homeworkers.

If your employer reimburses you for nondeductible personal expenses, such as for vacation trips, your employer must report the reimbursement as wage income in box 1 of your Form W-2. You can’t deduct personal expenses.

If you have travel or transportation expenses related to income-producing property, report your deductible expenses on the form appropriate for that activity.

For example, if you have rental real estate income and expenses, report your expenses on Schedule E (Form 1040), Supplemental Income and Loss. See Pub. 527, Residential Rental Property, for more information on the rental of real estate.

Vehicle Provided by Your Employer

If your employer provides you with a car, you may be able to deduct the actual expenses of operating that car for business purposes. The amount you can deduct depends on the amount that your employer included in your income and the business and personal miles you drove during the year. You can’t use the standard mileage rate.

Your employer can figure and report either the actual value of your personal use of the car or the value of the car as if you used it only for personal purposes (100% income inclusion). Your employer must separately state the amount if 100% of the annual lease value was included in your income. If you are unsure of the amount included on your Form W-2, ask your employer.

You may be able to deduct the value of the business use of an employer-provided car if your employer reported 100% of the value of the car in your income. On your 2023 Form W-2, the amount of the value will be included in box 1, Wages, tips, other compensation; and box 14, Other.

To claim your expenses, complete Form 2106, Part II, Sections A and C. Enter your actual expenses on line 23 of Section C and include the entire value of the employer-provided car on line 25. Complete the rest of the form.

If less than the full annual lease value of the car was included on your Form W-2, this means that your Form W-2 only includes the value of your personal use of the car. Don’t enter this value on your Form 2106 because it isn’t deductible.

If you paid any actual costs (that your employer didn’t provide or reimburse you for) to operate the car, you can deduct the business portion of those costs. Examples of costs that you may have are gas, oil, and repairs. Complete Form 2106, Part II, Sections A and C. Enter your actual costs on line 23 of Section C and leave line 25 blank. Complete the rest of the form.

Reimbursements

This section explains what to do when you receive an advance or are reimbursed for any of the employee business expenses discussed in this publication.

If you received an advance, allowance, or reimbursement for your expenses, how you report this amount and your expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan.

This section explains the two types of plans, how per diem and car allowances simplify proving the amount of your expenses, and the tax treatment of your reimbursements and expenses. It also covers rules for independent contractors.

You aren’t reimbursed or given an allowance for your expenses if you are paid a salary or commission with the understanding that you will pay your own expenses. In this situation, you have no reimbursement or allowance arrangement, and you don’t have to read this section on reimbursements. Instead, see Completing Form 2106 , later, for information on completing your tax return.

A reimbursement or other expense allowance arrangement is a system or plan that an employer uses to pay, substantiate, and recover the expenses, advances, reimbursements, and amounts charged to the employer for employee business expenses. Arrangements include per diem and car allowances.

A per diem allowance is a fixed amount of daily reimbursement your employer gives you for your lodging and M&IE when you are away from home on business. (The term “incidental expenses” is defined in chapter 1 under Standard Meal Allowance. ) A car allowance is an amount your employer gives you for the business use of your car.

Your employer should tell you what method of reimbursement is used and what records you must provide.

If you are an employer and you reimburse employee business expenses, how you treat this reimbursement on your employee's Form W-2 depends in part on whether you have an accountable plan. Reimbursements treated as paid under an accountable plan, as explained next, aren’t reported as pay. Reimbursements treated as paid under nonaccountable plans , as explained later, are reported as pay. See Pub. 15 (Circular E), Employer's Tax Guide, for information on employee pay.

Accountable Plans

To be an accountable plan, your employer's reimbursement or allowance arrangement must include all of the following rules.

Your expenses must have a business connection—that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer.

You must adequately account to your employer for these expenses within a reasonable period of time.

You must return any excess reimbursement or allowance within a reasonable period of time.

Adequate accounting and returning excess reimbursements are discussed later.

An excess reimbursement or allowance is any amount you are paid that is more than the business-related expenses that you adequately accounted for to your employer.

The definition of reasonable period of time depends on the facts and circumstances of your situation. However, regardless of the facts and circumstances of your situation, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time.

You receive an advance within 30 days of the time you have an expense.

You adequately account for your expenses within 60 days after they were paid or incurred.

You return any excess reimbursement within 120 days after the expense was paid or incurred.

You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement.

If you meet the three rules for accountable plans, your employer shouldn’t include any reimbursements in your income in box 1 of your Form W-2. If your expenses equal your reimbursements, you don’t complete Form 2106. You have no deduction since your expenses and reimbursements are equal.

Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules. All reimbursements that fail to meet all three rules for accountable plans are generally treated as having been reimbursed under a nonaccountable plan (discussed later).

If you are reimbursed under an accountable plan, but you fail to return, within a reasonable time, any amounts in excess of the substantiated amounts, the amounts paid in excess of the substantiated expenses are treated as paid under a nonaccountable plan. See Reasonable period of time , earlier, and Returning Excess Reimbursements , later.

You may be reimbursed under your employer's accountable plan for expenses related to that employer's business, some of which would be allowable as employee business expense deductions and some of which would not. The reimbursements you receive for the nondeductible expenses don’t meet rule (1) for accountable plans, and they are treated as paid under a nonaccountable plan.

Your employer's plan reimburses you for travel expenses while away from home on business and also for meals when you work late at the office, even though you aren’t away from home. The part of the arrangement that reimburses you for the nondeductible meals when you work late at the office is treated as paid under a nonaccountable plan.

One of the rules for an accountable plan is that you must adequately account to your employer for your expenses. You adequately account by giving your employer a statement of expense, an account book, a diary, or a similar record in which you entered each expense at or near the time you had it, along with documentary evidence (such as receipts) of your travel, mileage, and other employee business expenses. (See Table 5-1 in chapter 5 for details you need to enter in your record and documents you need to prove certain expenses.) A per diem or car allowance satisfies the adequate accounting requirement under certain conditions. See Per Diem and Car Allowances , later.

You must account for all amounts you received from your employer during the year as advances, reimbursements, or allowances. This includes amounts you charged to your employer by credit card or other method. You must give your employer the same type of records and supporting information that you would have to give to the IRS if the IRS questioned a deduction on your return. You must pay back the amount of any reimbursement or other expense allowance for which you don’t adequately account or that is more than the amount for which you accounted.

Per Diem and Car Allowances

If your employer reimburses you for your expenses using a per diem or a car allowance, you can generally use the allowance as proof for the amount of your expenses. A per diem or car allowance satisfies the adequate accounting requirements for the amount of your expenses only if all the following conditions apply.

Your employer reasonably limits payments of your expenses to those that are ordinary and necessary in the conduct of the trade or business.

The allowance is similar in form to and not more than the federal rate (defined later).

You prove the time (dates), place, and business purpose of your expenses to your employer (as explained in Table 5-1 ) within a reasonable period of time.

You aren’t related to your employer (as defined next). If you are related to your employer, you must be able to prove your expenses to the IRS even if you have already adequately accounted to your employer and returned any excess reimbursement.

You are related to your employer if:

Your employer is your brother or sister, half brother or half sister, spouse, ancestor, or lineal descendant;

Your employer is a corporation in which you own, directly or indirectly, more than 10% in value of the outstanding stock; or

Certain relationships (such as grantor, fiduciary, or beneficiary) exist between you, a trust, and your employer.

The federal rate can be figured using any one of the following methods.

For per diem amounts:

The regular federal per diem rate.

The high-low rate.

For car expenses:

A fixed and variable rate (FAVR).

The regular federal per diem rate is the highest amount that the federal government will pay to its employees for lodging and M&IE (or M&IE only) while they are traveling away from home in a particular area. The rates are different for different localities. Your employer should have these rates available. You can also find federal per diem rates at GSA.gov/travel/plan-book/per-diem-rates .

The standard meal allowance is the federal M&IE rate. For travel in 2023, the rate for most small localities in the United States is $59 per day. Most major cities and many other localities qualify for higher rates. You can find this information at GSA.gov/travel/plan-book/per-diem-rates .

You receive an allowance only for M&IE when your employer does one of the following.

Provides you with lodging (furnishes it in kind).

Reimburses you, based on your receipts, for the actual cost of your lodging.

Pays the hotel, motel, etc., directly for your lodging.

Doesn’t have a reasonable belief that you had (or will have) lodging expenses, such as when you stay with friends or relatives or sleep in the cab of your truck.

Figures the allowance on a basis similar to that used in figuring your compensation, such as number of hours worked or miles traveled.

This is a simplified method of figuring the federal per diem rate for travel within the continental United States. It eliminates the need to keep a current list of the per diem rates for each city.

Under the high-low method, the per diem amount for travel during January through September of 2023 is $297 (which includes $74 for M&IE) for certain high-cost locations. All other areas have a per diem amount of $204 (which includes $64 for M&IE). For more information, see Notice 2022-44, which can be found at IRS.gov/irb/2022-41_IRB#NOT-2022-44 .

Effective October 1, 2023, the per diem rate for certain high-cost locations increased to $309 (which includes $74 for M&IE). The rate for all other locations increased to $214 (which includes $64 for M&IE). For more information, see Notice 2023-68, which can be found at IRS.gov/irb/2023-41_IRB#NOT-2023-68 , and Revenue Procedure 2019-48 at IRS.gov/irb/2019-51_IRB#REV-PROC-2019-48 .

The standard meal allowance is for a full 24-hour day of travel. If you travel for part of a day, such as on the days you depart and return, you must prorate the full-day M&IE rate. This rule also applies if your employer uses the regular federal per diem rate or the high-low rate.

You can use either of the following methods to figure the federal M&IE for that day.

For the day you depart, add 3 / 4 of the standard meal allowance amount for that day.

For the day you return, add 3 / 4 of the standard meal allowance amount for the preceding day.

Method 2: Prorate the standard meal allowance using any method you consistently apply in accordance with reasonable business practice. For example, an employer can treat 2 full days of per diem (that includes M&IE) paid for travel away from home from 9 a.m. of one day to 5 p.m. of the next day as being no more than the federal rate. This is true even though a federal employee would be limited to a reimbursement of M&IE for only 1½ days of the federal M&IE rate.

This is a set rate per mile that you can use to figure your deductible car expenses. For 2023, the standard mileage rate for the cost of operating your car for business use is 65.5 cents ($0.655) per mile.

This is an allowance your employer may use to reimburse your car expenses. Under this method, your employer pays an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your variable operating costs (such as gas, oil, etc.) plus a flat amount to cover your fixed costs (such as depreciation (or lease payments), insurance, etc.). If your employer chooses to use this method, your employer will request the necessary records from you.

If your reimbursement is in the form of an allowance received under an accountable plan, the following facts affect your reporting.

Whether the allowance or your actual expenses were more than the federal rate.

If your allowance is less than or equal to the federal rate, the allowance won’t be included in box 1 of your Form W-2. You don’t need to report the related expenses or the allowance on your return if your expenses are equal to or less than the allowance.

However, if your actual expenses are more than your allowance, you can complete Form 2106. If you are using actual expenses, you must be able to prove to the IRS the total amount of your expenses and reimbursements for the entire year. If you are using the standard meal allowance or the standard mileage rate, you don’t have to prove that amount.

In April, a member of a reserve component of the Armed Forces takes a 2-day business trip to Denver. The federal rate for Denver is $278 ($199 lodging + $79 M&IE) per day. As required by their employer's accountable plan, they account for the time (dates), place, and business purpose of the trip. Their employer reimburses them $278 a day ($556 total) for living expenses. Their living expenses in Denver aren’t more than $278 a day.

Their employer doesn’t include any of the reimbursement on their Form W-2 and they don’t deduct the expenses on their return.

In June, a fee-basis local government official takes a 2-day business trip to Boston. Their employer uses the high-low method to reimburse employees. Because Boston is a high-cost area, they are given an advance of $297 (which includes $74 for M&IE) a day ($594 total) for their lodging and M&IE. Their actual expenses totaled $700.

Since their $700 of expenses are more than their $594 advance, they include the excess expenses when they itemize their deductions. They complete Form 2106 (showing all of their expenses and reimbursements). They must also allocate their reimbursement between their meals and other expenses as discussed later under Completing Form 2106 .

A fee-basis state government official drives 10,000 miles during 2023 for business. Under their employer's accountable plan, they account for the time (dates), place, and business purpose of each trip. Their employer pays them a mileage allowance of 40 cents ($0.40) a mile.

Because their $6,550 expense figured under the standard mileage rate (10,000 miles x 65.5 cents ($0.655) per mile) is more than their $4,000 reimbursement (10,000 miles × 40 cents ($0.40)), they itemize their deductions to claim the excess expense. They complete Form 2106 (showing all their expenses and reimbursements) and enter $2,550 ($6,550 − $4,000) as an itemized deduction.

If your allowance is more than the federal rate, your employer must include the allowance amount up to the federal rate under code L in box 12 of your Form W-2. This amount isn’t taxable. However, the excess allowance will be included in box 1 of your Form W-2. You must report this part of your allowance as if it were wage income.

If your actual expenses are less than or equal to the federal rate, you don’t complete Form 2106 or claim any of your expenses on your return.

However, if your actual expenses are more than the federal rate, you can complete Form 2106 and deduct those excess expenses. You must report on Form 2106 your reimbursements up to the federal rate (as shown under code L in box 12 of your Form W-2) and all your expenses. You should be able to prove these amounts to the IRS.

Sasha, a performing artist, lives and works in Austin. In July, the employer sent Sasha to Albuquerque for 4 days on business. The employer paid the hotel directly for Sasha’s lodging and reimbursed $80 a day ($320 total) for M&IE. Sasha’s actual meal expenses weren’t more than the federal rate for Albuquerque, which is $69 per day.

The employer included the $44 that was more than the federal rate (($80 − $69) × 4) in box 1 of Sasha’s Form W-2. The employer shows $276 ($69 a day × 4) under code L in box 12 of Form W-2. This amount isn’t included in income. Sasha doesn’t have to complete Form 2106; however, Sasha must include the $44 in gross income as wages (by reporting the total amount shown in box 1 of their Form W-2).

Another performing artist, Ari, also lives in Austin and works for the same employer as in Example 1 . In May, the employer sent Ari to San Diego for 4 days and paid the hotel directly for the hotel bill. The employer reimbursed Ari $75 a day for M&IE. The federal rate for San Diego is $74 a day.

Ari can prove that actual non-entertainment-related meal expenses totaled $380. The employer's accountable plan won’t pay more than $75 a day for travel to San Diego, so Ari doesn’t give the employer the records that prove that the amount actually spent was $380. However, Ari does account for the time (dates), place, and business purpose of the trip. This is Ari’s only business trip this year.

Ari was reimbursed $300 ($75 × 4 days), which is $4 more than the federal rate of $296 ($74 × 4 days). The employer includes the $4 as income on the employee’s Form W-2 in box 1. The employer also enters $296 under code L in box 12 of the employee’s Form W-2.

Ari completes Form 2106 to figure deductible expenses and enters the total of actual expenses for the year ($380) on Form 2106. Ari also enters the reimbursements that weren’t included in income ($296). Ari’s total deductible meals and beverages expense, before the 50% limit, is $96. Ari will include $48 as an itemized deduction.

Palmer, a fee-basis state government official, drives 10,000 miles during 2023 for business. Under the employer's accountable plan, Palmer gets reimbursed 70 cents ($0.70) a mile, which is more than the standard mileage rate. The total reimbursement is $7,000.

The employer must include the reimbursement amount up to the standard mileage rate, $6,550 (10,000 miles x 65.5 cents ($0.655) per mile), under code L in box 12 of the employee’s Form W-2. That amount isn’t taxable. The employer must also include $450 ($7,000 − $6,550) in box 1 of the employee's Form W-2. This is the reimbursement that is more than the standard mileage rate.

If the expenses are equal to or less than the standard mileage rate, Palmer wouldn’t complete Form 2106. If the expenses are more than the standard mileage rate, Palmer would complete Form 2106 and report total expenses and reimbursement (shown under code L in box 12 of their Form W-2). Palmer would then claim the excess expenses as an itemized deduction.

Returning Excess Reimbursements

Under an accountable plan, you are required to return any excess reimbursement or other expense allowances for your business expenses to the person paying the reimbursement or allowance. Excess reimbursement means any amount for which you didn’t adequately account within a reasonable period of time. For example, if you received a travel advance and you didn’t spend all the money on business-related expenses or you don’t have proof of all your expenses, you have an excess reimbursement.

Adequate accounting and reasonable period of time were discussed earlier in this chapter.

You receive a travel advance if your employer provides you with an expense allowance before you actually have the expense, and the allowance is reasonably expected to be no more than your expense. Under an accountable plan, you are required to adequately account to your employer for this advance and to return any excess within a reasonable period of time.

If you don’t adequately account for or don't return any excess advance within a reasonable period of time, the amount you don’t account for or return will be treated as having been paid under a nonaccountable plan (discussed later).

If you don’t prove that you actually traveled on each day for which you received a per diem or car allowance (proving the elements described in Table 5-1 ), you must return this unproven amount of the travel advance within a reasonable period of time. If you don’t do this, the unproven amount will be considered paid under a nonaccountable plan (discussed later).

If your employer's accountable plan pays you an allowance that is higher than the federal rate, you don’t have to return the difference between the two rates for the period you can prove business-related travel expenses. However, the difference will be reported as wages on your Form W-2. This excess amount is considered paid under a nonaccountable plan (discussed later).

Your employer sends you on a 5-day business trip to Phoenix in March 2023 and gives you a $400 ($80 × 5 days) advance to cover your M&IE. The federal per diem for M&IE for Phoenix is $69. Your trip lasts only 3 days. Under your employer's accountable plan, you must return the $160 ($80 × 2 days) advance for the 2 days you didn’t travel. For the 3 days you did travel, you don’t have to return the $33 difference between the allowance you received and the federal rate for Phoenix (($80 − $69) × 3 days). However, the $33 will be reported on your Form W-2 as wages.

Nonaccountable Plans

A nonaccountable plan is a reimbursement or expense allowance arrangement that doesn’t meet one or more of the three rules listed earlier under Accountable Plans .

In addition, even if your employer has an accountable plan, the following payments will be treated as being paid under a nonaccountable plan.

Excess reimbursements you fail to return to your employer.

Reimbursement of nondeductible expenses related to your employer's business. See Reimbursement of nondeductible expenses , earlier, under Accountable Plans.

If you aren’t sure if the reimbursement or expense allowance arrangement is an accountable or nonaccountable plan, ask your employer.

Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay. Your employer will report the total in box 1 of your Form W-2.

You must complete Form 2106 and itemize your deductions to deduct your expenses for travel, transportation, or non-entertainment-related meals. Your meal and entertainment expenses will be subject to the 50% Limit discussed in chapter 2.

Your employer gives you $1,000 a month ($12,000 total for the year) for your business expenses. You don’t have to provide any proof of your expenses to your employer, and you can keep any funds that you don’t spend.

You are a performing artist and are being reimbursed under a nonaccountable plan. Your employer will include the $12,000 on your Form W-2 as if it were wages. If you want to deduct your business expenses, you must complete Form 2106 and itemize your deductions.

You are paid $2,000 a month by your employer. On days that you travel away from home on business, your employer designates $50 a day of your salary as paid to reimburse your travel expenses. Because your employer would pay your monthly salary whether or not you were traveling away from home, the arrangement is a nonaccountable plan. No part of the $50 a day designated by your employer is treated as paid under an accountable plan.

Rules for Independent Contractors and Clients

This section provides rules for independent contractors who incur expenses on behalf of a client or customer. The rules cover the reporting and substantiation of certain expenses discussed in this publication, and they affect both independent contractors and their clients or customers.

You are considered an independent contractor if you are self-employed and you perform services for a customer or client.

Accounting to Your Client

If you received a reimbursement or an allowance for travel, or gift expenses that you incurred on behalf of a client, you should provide an adequate accounting of these expenses to your client. If you don’t account to your client for these expenses, you must include any reimbursements or allowances in income. You must keep adequate records of these expenses whether or not you account to your client for these expenses.

If you don’t separately account for and seek reimbursement for meal and entertainment expenses in connection with providing services for a client, you are subject to the 50% limit on those expenses. See 50% Limit in chapter 2.

As a self-employed person, you adequately account by reporting your actual expenses. You should follow the recordkeeping rules in chapter 5 .

For information on how to report expenses on your tax return, see Self-employed at the beginning of this chapter.

Required Records for Clients or Customers

If you are a client or customer, you generally don’t have to keep records to prove the reimbursements or allowances you give, in the course of your business, to an independent contractor for travel or gift expenses incurred on your behalf. However, you must keep records if:

You reimburse the contractor for entertainment expenses incurred on your behalf, and

The contractor adequately accounts to you for these expenses.

If the contractor adequately accounts to you for non-entertainment-related meal expenses, you (the client or customer) must keep records documenting each element of the expense, as explained in chapter 5 . Use your records as proof for a deduction on your tax return. If non-entertainment-related meal expenses are accounted for separately, you are subject to the 50% limit on meals. If the contractor adequately accounts to you for reimbursed amounts, you don’t have to report the amounts on an information return.

If the contractor doesn’t adequately account to you for allowances or reimbursements of non-entertainment-related meal expenses, you don’t have to keep records of these items. You aren’t subject to the 50% limit on meals in this case. You can deduct the reimbursements or allowances as payment for services if they are ordinary and necessary business expenses. However, you must file Form 1099-MISC to report amounts paid to the independent contractor if the total of the reimbursements and any other fees is $600 or more during the calendar year.

How To Use Per Diem Rate Tables

This section contains information about the per diem rate substantiation methods available and the choice of rates you must make for the last 3 months of the year.

The Two Substantiation Methods

IRS Notices list the localities that are treated under the high-low substantiation method as high-cost localities for all or part of the year. Notice 2022-44, available at IRS.gov/irb/2022-41_IRB#NOT-2022-44 , lists the high-cost localities that are eligible for $297 (which includes $74 for meals and incidental expenses (M&IE)) per diem, effective October 1, 2022. For travel on or after October 1, 2022, all other localities within the continental United States (CONUS) are eligible for $204 (which includes $64 for M&IE) per diem under the high-low method.

Notice 2023-68, available at IRS.gov/irb/2023-41_IRB#NOT-2023-68 , lists the high-cost localities that are eligible for $309 (which includes $74 for M&IE) per diem, effective October 1, 2023. For travel on or after October 1, 2023, the per diem for all other localities increased to $214 (which includes $64 for M&IE).

Regular federal per diem rates are published by the General Services Administration (GSA). Both tables include the separate rate for M&IE for each locality. The rates listed for FY2023 at GSA.gov/travel/plan-book/per-diem-rates are effective October 1, 2022, and those listed for FY2024 are effective October 1, 2023. The standard rate for all locations within CONUS not specifically listed for FY2023 is $157 ($98 for lodging and $59 for M&IE). For FY2024, this rate increases to $166 ($107 for lodging and $59 for M&IE).

Transition Rules

The transition period covers the last 3 months of the calendar year, from the time that new rates are effective (generally, October 1) through December 31. During this period, you may generally change to the new rates or finish out the year with the rates you had been using.

If you use the high-low substantiation method, when new rates become effective (generally, October 1), you can either continue with the rates you used for the first part of the year or change to the new rates. However, you must continue using the high-low method for the rest of the calendar year (through December 31). If you are an employer, you must use the same rates for all employees reimbursed under the high-low method during that calendar year.

The new rates and localities for the high-low method are included each year in a notice that is generally published in mid to late September. You can find the notice in the weekly Internal Revenue Bulletin (IRB) at IRS.gov/IRB , or visit IRS.gov and enter “Special Per Diem Rates” in the search box.

New CONUS per diem rates become effective on October 1 of each year and remain in effect through September 30 of the following year. Employees being reimbursed under the per diem rate method during the first 9 months of a year (January 1–September 30) must continue under the same method through the end of that calendar year (December 31). However, for travel by these employees from October 1 through December 31, you can choose to continue using the same per diem rates or use the new rates.

The new federal CONUS per diem rates are published each year, generally early in September. Go to GSA.gov/travel/plan-book/per-diem-rates .

Completing Form 2106

For tax years beginning after 2017, the Form 2106 will be used by Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses. Due to the suspension of miscellaneous itemized deductions subject to the 2% floor under section 67(a), employees who do not fit into one of the listed categories may not use Form 2106.

This section briefly describes how employees complete Forms 2106. Table 6-1 explains what the employer reports on Form W-2 and what the employee reports on Form 2106. The instructions for the forms have more information on completing them.

Table 6-1. Reporting Travel, Nonentertainment Meal, Gift, and Car Expenses and Reimbursements

If you used a car to perform your job as an employee, you may be able to deduct certain car expenses. These are generally figured on Form 2106, Part II, and then claimed on Form 2106, Part I, line 1, column A.

If you claim any deduction for the business use of a car, you must answer certain questions and provide information about the use of the car. The information relates to the following items.

Date placed in service.

Mileage (total, business, commuting, and other personal mileage).

Percentage of business use.

After-work use.

Use of other vehicles.

Whether you have evidence to support the deduction.

Whether or not the evidence is written.

If you claim a deduction based on the standard mileage rate instead of your actual expenses, you must complete Form 2106, Part II, Section B. The amount on line 22 (Section B) is carried to Form 2106, Part I, line 1. In addition, on Part I, line 2, you can deduct parking fees and tolls that apply to the business use of the car. See Standard Mileage Rate in chapter 4 for information on using this rate.

If you claim a deduction based on actual car expenses, you must complete Form 2106, Part II, Section C. In addition, unless you lease your car, you must complete Section D to show your depreciation deduction and any section 179 deduction you claim.

If you are still using a car that is fully depreciated, continue to complete Section C. Since you have no depreciation deduction, enter zero on line 28. In this case, don’t complete Section D.

If you claim car rental expenses on Form 2106, line 24a, you may have to reduce that expense by an inclusion amount , as described in chapter 4. If so, you can show your car expenses and any inclusion amount as follows.

Figure the inclusion amount without taking into account your business-use percentage for the tax year.

Report the inclusion amount from (1) on Form 2106, Part II, line 24b.

Report on line 24c the net amount of car rental expenses (total car rental expenses minus the inclusion amount figured in (1)).

Show your transportation expenses that didn’t involve overnight travel on Form 2106, line 2, column A. Also include on this line business expenses you have for parking fees and tolls. Don’t include expenses of operating your car or expenses of commuting between your home and work.

Show your other employee business expenses on Form 2106, lines 3 and 4, column A. Don’t include expenses for nonentertainment meals on those lines. Line 4 is for expenses such as gifts, educational expenses (tuition and books), office-in-the-home expenses, and trade and professional publications.

Show the full amount of your expenses for nonentertainment business-related meals on Form 2106, line 5, column B. Include meals while away from your tax home overnight and other business meals. Enter 50% of the line 8, column B, meal expenses on line 9, column B.

If you are subject to the Department of Transportation's “hours of service” limits (as explained earlier under Individuals subject to hours of service limits in chapter 2), use 80% instead of 50% for meals while away from your tax home.

Enter on Form 2106, line 7, the amounts your employer (or third party) reimbursed you that weren’t reported to you in box 1 of your Form W-2. This includes any amount reported under code L in box 12 of Form W-2.

If you were reimbursed under an accountable plan and want to deduct excess expenses that weren’t reimbursed, you may have to allocate your reimbursement. This is necessary when your employer pays your reimbursement in the following manner.

Pays you a single amount that covers non-entertainment-related meals and/or entertainment, as well as other business expenses.

Doesn’t clearly identify how much is for deductible non-entertainment-related meals.

Your employer paid you an expense allowance of $12,000 this year under an accountable plan. The $12,000 payment consisted of $5,000 for airfare and $7,000 for non-entertainment-related meals, and car expenses. Your employer didn’t clearly show how much of the $7,000 was for the cost of deductible non-entertainment-related meals. You actually spent $14,000 during the year ($5,500 for airfare, $4,500 for non-entertainment-related meals, and $4,000 for car expenses).

Since the airfare allowance was clearly identified, you know that $5,000 of the payment goes in column A, line 7, of Form 2106. To allocate the remaining $7,000, you use the worksheet from the Instructions for Form 2106. Your completed worksheet follows.

Reimbursement Allocation Worksheet (Keep for your records.)

If you are a government official paid on a fee basis, a performing artist, an Armed Forces reservist, or a disabled employee with impairment-related work expenses, see Special Rules , later.

Your employee business expenses may be subject to either of the limits described next. They are figured in the following order on the specified form.

Certain non-entertainment-related meal expenses are subject to a 50% limit. Generally, entertainment expenses are nondeductible if paid or incurred after December 2017. If you are an employee, you figure this limit on line 9 of Form 2106. (See 50% Limit in chapter 2.)

Limitations on itemized deductions are suspended for tax years beginning after 2017 and before tax year January 2026, per section 68(g).

Special Rules

This section discusses special rules that apply only to Armed Forces reservists, government officials who are paid on a fee basis, performing artists, and disabled employees with impairment-related work expenses. For tax years beginning after 2017, they are the only taxpayers who can use Form 2106.

Armed Forces Reservists Traveling More Than 100 Miles From Home

If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging and M&IE) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. See Per Diem and Car Allowances , earlier, for more information.

You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve; the Army National Guard of the United States; the Air National Guard of the United States; or the Reserve Corps of the Public Health Service.

If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106. Then include your expenses for reserve travel over 100 miles from home, up to the federal rate, from Form 2106, line 10, in the total on Schedule 1 (Form 1040), line 12.

You can’t deduct expenses of travel that doesn’t take you more than 100 miles from home as an adjustment to gross income.

Certain fee-basis officials can claim their employee business expenses on Form 2106.

Fee-basis officials are persons who are employed by a state or local government and who are paid in whole or in part on a fee basis. They can deduct their business expenses in performing services in that job as an adjustment to gross income rather than as a miscellaneous itemized deduction.

If you are a fee-basis official, include your employee business expenses from Form 2106, line 10, in the total on Schedule 1 (Form 1040), line 12.

Expenses of Certain Performing Artists

If you are a performing artist, you may qualify to deduct your employee business expenses as an adjustment to gross income. To qualify, you must meet all of the following requirements.

During the tax year, you perform services in the performing arts as an employee for at least two employers.

You receive at least $200 each from any two of these employers.

Your related performing-arts business expenses are more than 10% of your gross income from the performance of those services.

Your adjusted gross income isn’t more than $16,000 before deducting these business expenses.

If you are married, you must file a joint return unless you lived apart from your spouse at all times during the tax year. If you file a joint return, you must figure requirements (1), (2), and (3) separately for both you and your spouse. However, requirement (4) applies to your and your spouse's combined adjusted gross income.

If you meet all of the above requirements, you should first complete Form 2106. Then you include your performing-arts-related expenses from Form 2106, line 10, in the total on Schedule 1 (Form 1040), line 12.

If you don’t meet all of the above requirements, you don’t qualify to deduct your expenses as an adjustment to gross income.

If you are an employee with a physical or mental disability, your impairment-related work expenses aren’t subject to the 2%-of-adjusted-gross-income limit that applies to most other employee business expenses. After you complete Form 2106, enter your impairment-related work expenses from Form 2106, line 10, on Schedule A (Form 1040), line 16, and identify the type and amount of this expense on the line next to line 16.

Impairment-related work expenses are your allowable expenses for attendant care at your workplace and other expenses in connection with your workplace that are necessary for you to be able to work.

You are disabled if you have:

A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed; or

A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working.

You can deduct impairment-related expenses as business expenses if they are:

Necessary for you to do your work satisfactorily;

For goods and services not required or used, other than incidentally, in your personal activities; and

Not specifically covered under other income tax laws.

You are blind. You must use a reader to do your work. You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. The reader's services are only for your work. You can deduct your expenses for the reader as business expenses.

You are deaf. You must use a sign language interpreter during meetings while you are at work. The interpreter's services are used only for your work. You can deduct your expenses for the interpreter as business expenses.

How To Get Tax Help

If you have questions about a tax issue; need help preparing your tax return; or want to download free publications, forms, or instructions, go to IRS.gov to find resources that can help you right away.

After receiving all your wage and earnings statements (Forms W-2, W-2G, 1099-R, 1099-MISC, 1099-NEC, etc.); unemployment compensation statements (by mail or in a digital format) or other government payment statements (Form 1099-G); and interest, dividend, and retirement statements from banks and investment firms (Forms 1099), you have several options to choose from to prepare and file your tax return. You can prepare the tax return yourself, see if you qualify for free tax preparation, or hire a tax professional to prepare your return.

Your options for preparing and filing your return online or in your local community, if you qualify, include the following.

Free File. This program lets you prepare and file your federal individual income tax return for free using software or Free File Fillable Forms. However, state tax preparation may not be available through Free File. Go to IRS.gov/FreeFile to see if you qualify for free online federal tax preparation, e-filing, and direct deposit or payment options.

VITA. The Volunteer Income Tax Assistance (VITA) program offers free tax help to people with low-to-moderate incomes, persons with disabilities, and limited-English-speaking taxpayers who need help preparing their own tax returns. Go to IRS.gov/VITA , download the free IRS2Go app, or call 800-906-9887 for information on free tax return preparation.

TCE. The Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 years of age and older. TCE volunteers specialize in answering questions about pensions and retirement-related issues unique to seniors. Go to IRS.gov/TCE or download the free IRS2Go app for information on free tax return preparation.

MilTax. Members of the U.S. Armed Forces and qualified veterans may use MilTax, a free tax service offered by the Department of Defense through Military OneSource. For more information, go to MilitaryOneSource ( MilitaryOneSource.mil/MilTax ).

Also, the IRS offers Free Fillable Forms, which can be completed online and then e-filed regardless of income.

Go to IRS.gov/Tools for the following.

The Earned Income Tax Credit Assistant ( IRS.gov/EITCAssistant ) determines if you’re eligible for the earned income credit (EIC).

The Online EIN Application ( IRS.gov/EIN ) helps you get an employer identification number (EIN) at no cost.

The Tax Withholding Estimator ( IRS.gov/W4App ) makes it easier for you to estimate the federal income tax you want your employer to withhold from your paycheck. This is tax withholding. See how your withholding affects your refund, take-home pay, or tax due.

The First Time Homebuyer Credit Account Look-up ( IRS.gov/HomeBuyer ) tool provides information on your repayments and account balance.

The Sales Tax Deduction Calculator ( IRS.gov/SalesTax ) figures the amount you can claim if you itemize deductions on Schedule A (Form 1040).

Go to IRS.gov/Help : A variety of tools to help you get answers to some of the most common tax questions.

Go to IRS.gov/ITA : The Interactive Tax Assistant, a tool that will ask you questions and, based on your input, provide answers on a number of tax topics.

Go to IRS.gov/Forms : Find forms, instructions, and publications. You will find details on the most recent tax changes and interactive links to help you find answers to your questions.

You may also be able to access tax information in your e-filing software.

There are various types of tax return preparers, including enrolled agents, certified public accountants (CPAs), accountants, and many others who don’t have professional credentials. If you choose to have someone prepare your tax return, choose that preparer wisely. A paid tax preparer is:

Primarily responsible for the overall substantive accuracy of your return,

Required to sign the return, and

Required to include their preparer tax identification number (PTIN).

The Social Security Administration (SSA) offers online service at SSA.gov/employer for fast, free, and secure W-2 filing options to CPAs, accountants, enrolled agents, and individuals who process Form W-2, Wage and Tax Statement, and Form W-2c, Corrected Wage and Tax Statement.

Go to IRS.gov/SocialMedia to see the various social media tools the IRS uses to share the latest information on tax changes, scam alerts, initiatives, products, and services. At the IRS, privacy and security are our highest priority. We use these tools to share public information with you. Don’t post your social security number (SSN) or other confidential information on social media sites. Always protect your identity when using any social networking site.

The following IRS YouTube channels provide short, informative videos on various tax-related topics in English, Spanish, and ASL.

Youtube.com/irsvideos .

Youtube.com/irsvideosmultilingua .

Youtube.com/irsvideosASL .

The IRS Video portal ( IRSVideos.gov ) contains video and audio presentations for individuals, small businesses, and tax professionals.

You can find information on IRS.gov/MyLanguage if English isn’t your native language.

The IRS is committed to serving taxpayers with limited-English proficiency (LEP) by offering OPI services. The OPI Service is a federally funded program and is available at Taxpayer Assistance Centers (TACs), most IRS offices, and every VITA/TCE tax return site. The OPI Service is accessible in more than 350 languages.

Taxpayers who need information about accessibility services can call 833-690-0598. The Accessibility Helpline can answer questions related to current and future accessibility products and services available in alternative media formats (for example, braille, large print, audio, etc.). The Accessibility Helpline does not have access to your IRS account. For help with tax law, refunds, or account-related issues, go to IRS.gov/LetUsHelp .

Form 9000, Alternative Media Preference, or Form 9000(SP) allows you to elect to receive certain types of written correspondence in the following formats.

Standard Print.

Large Print.

Audio (MP3).

Plain Text File (TXT).

Braille Ready File (BRF).

Go to IRS.gov/DisasterRelief to review the available disaster tax relief.

Go to IRS.gov/Forms to view, download, or print all the forms, instructions, and publications you may need. Or, you can go to IRS.gov/OrderForms to place an order.

Download and view most tax publications and instructions (including the Instructions for Form 1040) on mobile devices as eBooks at IRS.gov/eBooks .

IRS eBooks have been tested using Apple's iBooks for iPad. Our eBooks haven’t been tested on other dedicated eBook readers, and eBook functionality may not operate as intended.

Go to IRS.gov/Account to securely access information about your federal tax account.

View the amount you owe and a breakdown by tax year.

See payment plan details or apply for a new payment plan.

Make a payment or view 5 years of payment history and any pending or scheduled payments.

Access your tax records, including key data from your most recent tax return, and transcripts.

View digital copies of select notices from the IRS.

Approve or reject authorization requests from tax professionals.

View your address on file or manage your communication preferences.

With an online account, you can access a variety of information to help you during the filing season. You can get a transcript, review your most recently filed tax return, and get your adjusted gross income. Create or access your online account at IRS.gov/Account .

This tool lets your tax professional submit an authorization request to access your individual taxpayer IRS online account. For more information, go to IRS.gov/TaxProAccount .

The safest and easiest way to receive a tax refund is to e-file and choose direct deposit, which securely and electronically transfers your refund directly into your financial account. Direct deposit also avoids the possibility that your check could be lost, stolen, destroyed, or returned undeliverable to the IRS. Eight in 10 taxpayers use direct deposit to receive their refunds. If you don’t have a bank account, go to IRS.gov/DirectDeposit for more information on where to find a bank or credit union that can open an account online.

Tax-related identity theft happens when someone steals your personal information to commit tax fraud. Your taxes can be affected if your SSN is used to file a fraudulent return or to claim a refund or credit.

The IRS doesn’t initiate contact with taxpayers by email, text messages (including shortened links), telephone calls, or social media channels to request or verify personal or financial information. This includes requests for personal identification numbers (PINs), passwords, or similar information for credit cards, banks, or other financial accounts.

Go to IRS.gov/IdentityTheft , the IRS Identity Theft Central webpage, for information on identity theft and data security protection for taxpayers, tax professionals, and businesses. If your SSN has been lost or stolen or you suspect you’re a victim of tax-related identity theft, you can learn what steps you should take.

Get an Identity Protection PIN (IP PIN). IP PINs are six-digit numbers assigned to taxpayers to help prevent the misuse of their SSNs on fraudulent federal income tax returns. When you have an IP PIN, it prevents someone else from filing a tax return with your SSN. To learn more, go to IRS.gov/IPPIN .

Go to IRS.gov/Refunds .

Download the official IRS2Go app to your mobile device to check your refund status.

Call the automated refund hotline at 800-829-1954.

Payments of U.S. tax must be remitted to the IRS in U.S. dollars. Digital assets are not accepted. Go to IRS.gov/Payments for information on how to make a payment using any of the following options.

IRS Direct Pay : Pay your individual tax bill or estimated tax payment directly from your checking or savings account at no cost to you.

Debit Card, Credit Card, or Digital Wallet : Choose an approved payment processor to pay online or by phone.

Electronic Funds Withdrawal : Schedule a payment when filing your federal taxes using tax return preparation software or through a tax professional.

Electronic Federal Tax Payment System : Best option for businesses. Enrollment is required.

Check or Money Order : Mail your payment to the address listed on the notice or instructions.

Cash : You may be able to pay your taxes with cash at a participating retail store.

Same-Day Wire : You may be able to do same-day wire from your financial institution. Contact your financial institution for availability, cost, and time frames.

Note. The IRS uses the latest encryption technology to ensure that the electronic payments you make online, by phone, or from a mobile device using the IRS2Go app are safe and secure. Paying electronically is quick, easy, and faster than mailing in a check or money order.

Go to IRS.gov/Payments for more information about your options.

Apply for an online payment agreement ( IRS.gov/OPA ) to meet your tax obligation in monthly installments if you can’t pay your taxes in full today. Once you complete the online process, you will receive immediate notification of whether your agreement has been approved.

Use the Offer in Compromise Pre-Qualifier to see if you can settle your tax debt for less than the full amount you owe. For more information on the Offer in Compromise program, go to IRS.gov/OIC .

Go to IRS.gov/Form1040X for information and updates.

Go to IRS.gov/WMAR to track the status of Form 1040-X amended returns.

Go to IRS.gov/Notices to find additional information about responding to an IRS notice or letter.

You can now upload responses to all notices and letters using the Document Upload Tool. For notices that require additional action, taxpayers will be redirected appropriately on IRS.gov to take further action. To learn more about the tool, go to IRS.gov/Upload .

You can use Schedule LEP (Form 1040), Request for Change in Language Preference, to state a preference to receive notices, letters, or other written communications from the IRS in an alternative language. You may not immediately receive written communications in the requested language. The IRS’s commitment to LEP taxpayers is part of a multi-year timeline that began providing translations in 2023. You will continue to receive communications, including notices and letters, in English until they are translated to your preferred language.

Keep in mind, many questions can be answered on IRS.gov without visiting a TAC. Go to IRS.gov/LetUsHelp for the topics people ask about most. If you still need help, TACs provide tax help when a tax issue can’t be handled online or by phone. All TACs now provide service by appointment, so you’ll know in advance that you can get the service you need without long wait times. Before you visit, go to IRS.gov/TACLocator to find the nearest TAC and to check hours, available services, and appointment options. Or, on the IRS2Go app, under the Stay Connected tab, choose the Contact Us option and click on “Local Offices.”

The Taxpayer Advocate Service (TAS) Is Here To Help You

TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. TAS strives to ensure that every taxpayer is treated fairly and that you know and understand your rights under the Taxpayer Bill of Rights .

The Taxpayer Bill of Rights describes 10 basic rights that all taxpayers have when dealing with the IRS. Go to TaxpayerAdvocate.IRS.gov to help you understand what these rights mean to you and how they apply. These are your rights. Know them. Use them.

TAS can help you resolve problems that you can’t resolve with the IRS. And their service is free. If you qualify for their assistance, you will be assigned to one advocate who will work with you throughout the process and will do everything possible to resolve your issue. TAS can help you if:

Your problem is causing financial difficulty for you, your family, or your business;

You face (or your business is facing) an immediate threat of adverse action; or

You’ve tried repeatedly to contact the IRS but no one has responded, or the IRS hasn’t responded by the date promised.

TAS has offices in every state, the District of Columbia, and Puerto Rico . To find your advocate’s number:

Go to TaxpayerAdvocate.IRS.gov/Contact-Us ;

Download Pub. 1546, The Taxpayer Advocate Service Is Your Voice at the IRS, available at IRS.gov/pub/irs-pdf/p1546.pdf ;

Call the IRS toll free at 800-TAX-FORM (800-829-3676) to order a copy of Pub. 1546;

Check your local directory; or

Call TAS toll free at 877-777-4778.

TAS works to resolve large-scale problems that affect many taxpayers. If you know of one of these broad issues, report it to TAS at IRS.gov/SAMS . Be sure to not include any personal taxpayer information.

LITCs are independent from the IRS and TAS. LITCs represent individuals whose income is below a certain level and who need to resolve tax problems with the IRS. LITCs can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court. In addition, LITCs can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Services are offered for free or a small fee. For more information or to find an LITC near you, go to the LITC page at TaxpayerAdvocate.IRS.gov/LITC or see IRS Pub. 4134, Low Income Taxpayer Clinic List , at IRS.gov/pub/irs-pdf/p4134.pdf .

Appendices A-1 through A-6 show the lease inclusion amounts that you may need to report if you first leased a passenger automobile (including a truck and van) in 2018 through 2023 for 30 days or more.

If any of these apply to you, use the appendix for the year you first leased the car. (See Leasing a Car in chapter 4.)

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UNCLASSIFIED (U)

14 FAM 500  EMPLOYEE LOGISTICS - TRAVEL

FOREIGN SERVICE TRAVEL REGULATIONS' AUTHORITY AND APPLICABILITY

(CT:LOG-389;   02-15-2024) (Office of Origin:  A/LM)

14 FAM 511  SCOPE AND STATUTORY AUTHORITY

14 FAM 511.1  Policy

14 FAM 511.1-1  Authorization and Pay for Official Travel and Related Expenses

(CT:LOG-126;   06-01-2012) (State/USAID/Commerce/Agriculture) (Foreign Service)

It is Department of State policy, as authorized by section 901 of the Foreign Service Act (22 U.S.C. 4081) that the Secretary authorize and pay for the official travel and related expenses of members of the Foreign Service and their families, including costs or expenses incurred for:

(1)  Proceeding to and returning from assigned posts of duty;

(2)  Authorized or required home leave;

(3)  Family members to accompany, precede, or follow a member of the Service to a place of temporary duty;

(4)  Representational travel;

(5)  Medical travel (other than for routine follow-up care);

(6)  Rest and recuperation travel;

(7)  Evacuation travel;

(8)  Visitation travel;

(9)  Return remains of member of the Service or of a family member of the Service who dies abroad or while assigned within the United States; and

(10) Other travel as authorized and necessary to accomplish the Department's mission.

14 FAM 511.1-2  Transitional Provisions

Foreign Service travel, transportation, and related expenses under travel orders issued prior to the effective date of these regulations, but incurred after the effective date, are payable:

(1)  Under these regulations; or

(2)  Under regulations in effect at the time the travel order was issued.

14 FAM 511.2  Applicability

14 FAM 511.2-1  In General

(CT:LOG-195;   06-03-2015) (State/USAID/Commerce/Agriculture) (Foreign Service)

a. Except as provided in 14 FAM 531.4 and 14 FAM 531.7 , these regulations cover travel of Foreign Service (FS) employees and the members of their families, storage and shipment of their effects and motor vehicles, and apply to travel and transportation within the United States as well as abroad.

b. Except where indicated otherwise in the section heading, the travel and transportation regulations for Civil Service (CS) employees are contained in the Federal Travel Regulation (FTR) at 41 CFR 300 through 41 CFR 304.  The FTR is issued by the General Services Administration (GSA) under the authority of 5 U.S.C. 5701 through 5 U.S.C. 5709, and 31 U.S.C. 1353.

c.  For USAID, these regulations also cover Foreign Compensation (FC) Schedule employees of participating agencies, including commissioned officers of the Uniformed Services assigned to USAID programs abroad.  These regulations do not apply to USAID third-country national employees as defined in pertinent USAID handbooks.  Expenses are allowed in accordance with the regulations in effect at the time expenses are actually incurred, except as provided by 14 FAM 511.1-2 .

14 FAM 511.2-2  Relation to Federal Travel Regulation

The Federal Travel Regulation (FTR) does not apply to travel authorized under the Foreign Service Act except as specifically referenced by Department regulations.

14 FAM 511.3  Definitions

(CT:LOG-389;   02-15-2024) (State/USAID/Commerce/Agriculture) (Foreign Service)

Actual expense :  Payment of authorized actual expenses incurred, up to the limit prescribed by the agency.  Entitlement to reimbursement is contingent upon entitlement to per diem, and is subject to the same definitions and rules governing per diem.  This expense is sometimes called "actual subsistence expense."

Agency :  For the purpose of this regulation, Agency means the Department of State, USAID, Department of Commerce and/or Department of Agriculture.

Air gateway :  The point at which an air shipment enters the United States.

Approval :  Written approval for travel performed and related expenses incurred without prior authorization.

Authorization :  Written authority for travel and related expenses issued prior to commencement of travel.

Authorizing officer :  Any officer who has been delegated the authority to approve travel.

Baggage :  See luggage. Official and/or personal property needed by the traveler for use en route or immediately upon arrival at destination.  (See 14 FAM 568. )

Blanket travel authorization :  A travel authorization (open authorization) that allows for travel over an extended period of time and/or for multiple trips.  (See 14 FAM 521.3 )

Bulkhead seating :  A seat at the front of the coach class cabin that is separated from business and/or first class by a wall or curtain.

Business class air accommodations :  A premium class of accommodations offered by airlines that is higher than coach and lower than first-class, in both cost and amenities.  This class of accommodation may be referred to as “business," "business elite," "business first," "world business," "connoisseur,” or “envoy,” depending on the airline.

Calendar day :  The 24-hour period beginning at one second after midnight (12:00:01 a.m.) and ending at midnight.

Charter flight :  The rental of an aircraft to transport passengers or freight, rather than purchasing individual airline tickets or freight space.  Charters are handled as a transportation matter, rather than as a procurement action.  See Chapter 10 of the Overseas Contracting and Simplified Acquisition Guidebook.

Chief of mission :  Chiefs of mission as defined by the Foreign Service Act (22 U.S.C. 3902) , and principal officers at posts not subject to the administrative jurisdiction of another post.

Civilian Board of Contract Appeals (CBCA) :  The Civilian Board of Contract Appeals (CBCA), formerly the GSA Board of Contract Appeals.  The CBCA was established to hear and decide contract disputes between government contractors and executive agencies.  The CBCA also hears and decides various other classes of cases, including claims by Federal employees under 31 U.S.C. 3702 for reimbursement of expenses incurred while on official temporary duty travel or in connection with relocation to a new duty station; and claims by carriers of freight forwarders under 31 U.S.C. 3726(i)(1) involving actions of the General Services Administration regarding payment for  transportation services.  Typically employees may appeal decisions of the Exceptions Committee (see 14 FAM 514 ) of the Department or other foreign affairs agency to the CBCA.

Coach-class air accommodations :  The basic class of accommodations offered by an air carrier to passengers that includes a level of service available to all passengers regardless of the fare paid.  The terms "tourist” or “economy class” are used sometimes for this class of accommodation.

Coach-class train accommodations :  The basic class of train accommodations offered by rail carriers to passengers that includes a level of service that is available to all passengers regardless of fare paid.  The term "coach-class train accommodations" includes reserved coach accommodations, as well as slumber coach accommodations, when overnight travel is involved.

Code-share flight :  A U.S.-flag air carrier service resulting from an agreement between a U.S. carrier and a foreign carrier which allows the U.S. carrier to lease seating space on an aircraft belonging to (and operated by) a foreign carrier.  A code-share flight qualifies as a U.S.-certificated service and complies with the Fly America Act, 49 U.S.C. 40118, and the FTR at 41 CFR 301-10.134, provided the ticket, or documentation for an electronic ticket, identifies the U.S. carrier’s code and flight number.

Common carrier :  Private-sector supplier of air, rail or bus transportation for passengers, and air, rail, surface (overland or over ocean) or a combination thereof for freight and/or personal effects shipments.

Construction materials :  Items of a nature and in volumes that would normally be used to construct or renovate a portion of a dwelling, or to construct a product exceeding the size of an ordinary item of furniture for personal use.  Examples of construction materials include:  wooden planks, boards, ceiling tiles, floor tiles or flooring, roofing materials, windows or doors or framing thereof, masonry, bricks, blocks, cement, sand, paneling, drywall boards, or hardware (e.g., nails) in volumes greater than would normally be used in an ordinary household workshop.  Those materials that are part of artwork or crafts in total weight of less than 200 pounds may be regarded as household effects as determined by inspection as required.  Construction materials are not authorized for transport or storage as part of an employee’s household effects (HHE) shipment.  (See 14 FAM 611.5 .)  Employees or GSOs who are in doubt whether items qualify as HHE should contact the Office of Logistics Management (A/LM) in advance of making the shipment.

Constructive cost :  A cost that reflects the total amount of per diem, travel, transportation, and incidental expenses the U.S. Government would pay for an employee’s direct travel.  For cost constructing purposes, only the travel and transportation costs may be used as a basis for the cost construct.

Continental United States (CONUS) :  The contiguous 48 States and the District of Columbia.  See also the definition for United States.

Continuous storage :  The permanent storage of household effects while an employee is assigned to or is at an official station or duty post to which the employee is not authorized to take a portion of the regulatory HHE weight entitlement due to post specific weight or other post specific restrictions, or which is authorized in the public interest.  (This term has the same meaning as non-temporary storage.)

CONUS :  The continental United States consisting of the 48 contiguous States and the District of Columbia.

Contract carriers :  U.S. certified air carriers that are under contract with the Government to furnish Federal employees and other persons authorized to travel at Government expense with passenger transportation service.  This also includes General Services Administration’s (GSA's) scheduled airline passenger service between selected U.S. cities/airports and between selected U.S. and international cities/airports at reduced fares.

Cost-constructed travel :  Travel based on a cost comparison between the cost of official (i.e., direct) travel and the cost of personal (i.e., indirect) travel.  When cost constructing travel, the traveler can only claim the cost of the fare(s) the U.S. Government would have paid to the contract and/or common carrier or the cost of the commercial fare(s) the traveler actually paid to common carriers, whichever is less.  Cost-constructed travel is subject to the provisions of 14 FAM 546 , 14 FAM 585.2 , and other Department travel regulations and policies.

Cruise vessel :  Any ocean vessel that provides accommodations for passenger travel.  The term "steamer" does not include local commuter launches.  (See 14 FAM 567.1 regarding class of accommodations).

Department :  When used alone with no other modifier, refers to the Department of State.

Destination rate :  The per diem rate applicable to the next location where the employee will perform temporary duty or where the employee makes an en route stopover to obtain overnight lodging.

Direct route :  The usually traveled route consistent with the most expeditious mode of transportation and the established scheduled services of contract and other common carriers.  A direct route takes into consideration the provisions of 14 FAM 585.1 , and other provisions of the Department travel regulations.  It is also known as a usually traveled route .

Direct travel :  Official travel from authorized origin to authorized destination that uses the mode of travel authorized in the orders and consistent with the established scheduled services of contract and other common carriers.  Direct travel is subject to the provisions of 14 FAM 585.1 as well as other provisions of Department travel regulations.

DOC :  Department of Commerce, a foreign affairs agency.

DOS :  Department of State, a foreign affairs agency.

Duty station :  The station to which an employee is officially assigned.  Also, see definitions of official station and post in this section.

Educational Allowance Travel :  Travel authorized for EFM children to attend elementary or secondary school away from post.  Periodic roundtrip travel is allowed to coincide with school breaks and holidays as long as there is sufficient funding in the allowance grant (see DSSR 277.2(c)).

Educational Travel :  An allowance to provide EFM children roundtrip transportation to and from post when attending full-time post-secondary school away from post.  Educational travel is managed and funded at post and is for one round-trip within a 12 month period.  It is permissible up to the EFM's 23rd birthday, except when the education is delayed by military service.  Travel must begin or end at post and is based on the anniversary date of the first leg of travel (see DSSR 280).

Effects :  See definition of household effects in this section.

Eligible family members (EFM) :

(1)  Children who are unmarried and under 21 years of age or, regardless of age, are unmarried and due to mental and/or physical limitations are incapable of self support.  The term “children” must include natural offspring, step-children, adopted children, and those under permanent legal guardianship (at least until age 18), or comparable permanent custody arrangement, of the employee or spouse or domestic partner as defined in 3 FAM 1610 when dependent upon and normally residing with the guardian or custodial party, and U.S. citizen children placed for adoption if a U.S. court grants temporary guardianship of the child to the employee and specifically authorizes the child to reside with the employee in the country of assignment before the adoption is finalized;

(2)  Parents (including stepparents and legally adoptive parents) of the employee or of the spouse or of the domestic partner as defined in 3 FAM 1610 , under the following conditions and when the employee provides such documentation as the Department may require (parents do not receive benefits under the Department's Medical Program as outlined in 16 FAM 211.1 ):

(a)  The parent has resided with the employee for at least 6 of the 12 months immediately preceding the date when the employee applies for EFM status for such parent, except that:

(i)     When an employee completes an assignment, as defined in 3 FAH-1 H-2423 , paragraph c, to an unaccompanied post and is then re-assigned on a post-to-post transfer overseas, the 12-month figure in subparagraph (2)(a) of this definition will be extended by the length of the employee’s actual service at the unaccompanied post;

(ii)    For purposes of computing ISMA (DSSR Section 260), in cases where an employee is assigned to an unaccompanied post, the 12-month figure in subparagraph (2)(a) of this definition will be extended by the length of the employee’s tour of duty at the post; and

(iii)    The Director General (DG) may waive this co-residence requirement, upon application by an employee, in cases in which a parent was not residing with the employee for the period required in subparagraph (2)(a) of this definition, and [1] has experienced an unexpected and sudden deterioration in his or her physical or mental health during this same period and is no longer able to perform at least two activities of assisted daily living (ADL) or requires supervision due to severe cognitive impairment.  Activities of Daily Living from the FSA/FEDS Glossary are the basic activities of caring for oneself by eating; dressing; bathing; toileting (using the bathroom); transferring (moving back and forth from a bed to a chair); and continence (the ability of the body to control urination or bowel movements or both).  Insurance companies use the inability to perform a specified number of these ADLs to help determine eligibility for long-term care insurance benefits.  MED must confirm to the Director General that such deterioration has been satisfactorily documented by an accredited medical professional or [2] has been widowed during this same period;

(b)  Necessary living expenses and gross income:

(i)     The employee and/or spouse or domestic partner as defined in 3 FAM 1610 provide at least 51 percent of the parent’s necessary living expenses calculated against the parent’s gross income, and have done so for at least 12 months prior to the date when the employee applies for EFM status for such parent; and

(ii)    The parent’s own gross income, as defined in subparagraph (2)(c)(ii) of this definition, does not exceed a threshold amount as determined by the Director General on an annual basis.  For purposes of this subsection only, the calculation of gross income excludes the contributions made by an employee and/or spouse or domestic partner as defined in 3 FAM 1610 to the parent’s gross income as well as subparagraph (2)(c)(ii), item [3], and subparagraph (2)(c)(ii), item [4], of this definition;

(c)  For purposes of subparagraph (2)(b) of this definition:

(i)     “Necessary living expenses,” means the parent’s total expenditure for food, clothing, shelter, and medical care; and

(ii)    “Gross income" means the sum of [1] all wages, earnings, payments in the form of dividends, capital gains, U.S. Government and private pensions, and similar payments from foreign governments' annuities, and similar income from whatever source, as the Department may specify, but excluding Social Security Disability Income Benefits (U.S. and foreign government equivalent), life insurance proceeds, and inheritances; [2] potential income, calculated according to a formula determined by the Department, from assets that the parent has voluntarily elected to make nonincome producing; [3] cash, or direct payments to a provider, for necessary living expenses, that an employee or spouse or domestic partner as defined in 3 FAM 1610 provides to the parent; or [4] the imputed value of housing, as may be defined by the Department, provided to the parent by the employee and spouse;

(d)  The sole purpose of allowing EFM status is so they may reside abroad with the employee.  The Department’s approval of EFM status for a parent is valid for only a single tour of duty abroad ( 3 FAH-1 H-2425.5 (2)).  The Department must reauthorize such status for a parent when an employee is assigned from one post to another without an intervening domestic assignment.  EFM status for a parent automatically terminates once an employee returns to the United States to assume a domestic assignment or if the parent voluntarily departs post and that departure has exceeded or will exceed a total of 90 days during one 12 month period.  Any departure by a parent is considered to be voluntary except as ordered by the post or the Department;

(e)  EFM status for a qualified parent may continue when the employee is assigned from an accompanied post to an unaccompanied post and the parent resided with the employee at the accompanied and would reside at the new post if not prevented from doing so by Department rules and regulations;

(f)   For purposes of this section, the Department will consider an application submitted by an employee for EFM status during a tour of duty, as defined in subparagraph (2)(d) of this definition, for up to but not more than two parents for any employee and up to but not more than two parents-in-law for an employee’s spouse or domestic partner as defined in 3 FAM 1610 ; and

(g)  This definition must apply to all EFM determinations made subsequent to its effective date.  It must not, however, apply in cases of existing assignments, including assignments for which the Department has already approved EFM status for a parent but the employee has not yet departed for post;

(3)  Sisters and brothers (including stepsisters or stepbrothers, or adoptive sisters or brothers) of the employee, or of the spouse when such sisters and brothers are at least 51 percent dependent on the employee for support, unmarried and under 21 years of age, or regardless of age, are physically and/or mentally incapable of self-support (these sisters and brothers are not authorized medical travel; see 16 FAM 312 ); and

(4)  Spouse.

ELSO (European Logistical Support Office)—Antwerp :  Located in Antwerp, Belgium, ELSO provides for the handling of household effects (HHE) to specified posts abroad.

Emergency Visitation Travel :  A benefit to an eligible employee or family member to travel at U.S. Government expense from post to the United States or other location in certain situations of family emergency.  For EVT policy and eligibility, see 3 FAM 3740 and 3 FAH-1 H-3740 .

Employee :  A U.S. citizen appointed in any one of the categories listed in section 103 of the Foreign Service Act of 1980 (22 U.S.C. 3903), or appointed pursuant to other statute deriving employment authority from the Act, but excluding USAID third-country national employees.

Employee with a disability :  See also special needs.  An employee who has a disability as defined in the Rehabilitation Act of 1973, as amended (29 U.S.C. 701 through 29 U.S.C. 796(l) and implementing regulations.

Exceptions Committee (EC ):  A committee established to review requests from employees for relief from costs incurred due to travel, transportation, or storage of effects that are truly exceptional in nature.  For EC policy and requirements, see 14 FAM 514 .

Excess luggage :  The extra weight or number of pieces of accompanied baggage (luggage) that exceed the checked luggage allowance outlined in 14 FAM 568.1 .

Extra-fare train :  A train that operates at an increased fare due to the extra performance of the train (i.e., faster speed or fewer stops).  The term "extra-fare train" does not mean first-class train accommodations, even though an extra-fare train may offer first-class accommodations (see 14 FAM 567.1-4 for rules governing extra-fare service).

FAS :  Foreign Agricultural Service, the foreign affairs arm of the Department of Agriculture.

FCS :  Foreign Commercial Service, the foreign affairs arm of the Department of Commerce.

First-class air accommodations :  Generally, the highest class of accommodations offered by the airlines in terms of both cost and amenities.  It is termed “first-class” by the airlines and by any reservation system.

First-class cruise vessel accommodations :  Includes all accommodation classes above the lowest class, including, but not limited to, suites.

First-class train accommodations :  Includes bedroom, roomettes, club service, parlor car accommodations, business-class, or other premium accommodations.

Foreign air carrier :  An air carrier that is not holding a certificate issued by the United States under 49 U.S.C. 41102.

Foreign area :  Any area, including the Trust Territories of the Pacific islands, situated both outside CONUS and outside the nonforeign areas.  See also nonforeign area .

Foreign-flag vessel :  Vessel registered under the laws of a foreign country.

Global distribution system (GDS ):  A worldwide computerized travel reservation network used as a single point of access for reserving airline tickets, hotel rooms, rental cars, and other travel-related items by travel agents, online reservation sites, and large corporations.

Government contractor-issued individually-billed account (IBA) charge card for travel :  A Government contractor-issued charge card, also known as a travel card, issued to an employee to pay for official travel and transportation related expenses, such as meals, lodging, and rental cars while on official travel.  The contractor bills the employee for use of the travel card and the Department reimburses the employee for authorized official travel-related expenses.

Government Transportation Request (GTR) (SF- or OF-1169) :  A Government procurement form used to procure common carrier transportation services when no other option (i.e., centrally billed account (CBA) or individually billed account (IBA) charge cards can be used.  This purchase form may be used to procure directly from either a Travel Management Center (TMC) or a travel agent, and obligates the Government to pay for travel and transportation services provided.

Gross weight :  Obtained by adding to the net weight the weight of lift vans, outside shipping containers, and the weight of dunnage or bracing material used to secure articles in such vans or containers.

Head of an executive department or agency :  Means the Secretary of State, Secretary of Commerce, Secretary of Agriculture, or USAID Administrator, or a person exercising authority delegated by the agency or executive department head.

Heads of agency at establishments abroad :  The highest ranking person at an agency establishment abroad authorized to make determinations on behalf of the agency.  Includes, but is not limited to, the USAID mission director or USAID representative; officers in charge of radio relay stations or radio program centers; and officers in charge of regional service centers.

Household effects (HHE) :  Property, unless specifically excluded, associated with the home and all personal effects belonging to an employee and immediate family members that legally may be accepted and transported by a commercial carrier.  (See 14 FAM 611.5 for a representative list of what is included in and excluded from HHE.)

Incidental expenses :  See the definition of per diem .

Indirect route :  The portion of any journey that deviates from a usually traveled route .

Indirect travel :  Personal travel done on a cost-constructive basis against official (i.e., direct) travel.  Indirect travel is subject to the provisions of 14 FAM 585.2 as well as other Department travel regulations and policies.

Inherited personal effects :  Personal effects that come into an employee’s possession upon the death of a family member of the employee or the employee’s spouse or domestic partner as defined in 3 FAM 1610 , or when the family member is placed into a custodial care facility.

Innovative Mobility Technology Company (IMTC ):  An entity, other than a TNC, that applies technology to expand and enhance available transportation choices and better manage demand for transportation services.  Examples of IMTCs include ZipCar, Car2Go, bike-share programs, and scooter-share programs.

Layover :  The period of time between connecting flights during travel.  Per diem including lodging may be authorized for layovers that encompass any hours of darkness during which it could normally be expected that the traveler would need to sleep between flights.  Per diem including lodging may be authorized for extended daytime layovers in circumstances during which it could normally be expected that the traveler would need bed-rest; for example, travelers with special needs or families with infants.  (See the definition of per diem .)

Locality rates :  The maximum per diem rates prescribed for specific localities.

Lodging :  See the definition of per diem .

Lodging-plus per diem system :  A single worldwide computation system that includes two components:

(1)  A fixed maximum rate for commercial or other lodging as prescribed by the appropriate agency's regulations (the authorizing officer may specify a lesser rate under certain circumstances); and

(2)  A fixed locality rate for meals and incidental expenses that requires no receipts or traveler certification.  These rates are prescribed by the appropriate agency's regulations (the authorizing officer may specify a lesser rate under certain circumstances).

Lowest-class cruise vessel accommodations :  The least expensive class of reserved accommodations available on a steamer.

Luggage :  Official and/or personal property needed by the traveler for use en route or immediately upon arrival at destination.  See 14 FAM 568 .

Meals :  See the definition of per diem .

Mobile home :  Any type of house trailer or mobile dwelling constructed for use as a residence and designed to be moved overland, either by self-propulsion or towing.  (See 14 FAM 632.1 (d) regarding transportation of mobile homes during domestic transfers.)

myData :  Previously, eForms.  The Department's online form repository providing access to Department DS travel forms (previously DS, JF, and SF forms).

Net weight :  Consists of actual effects plus cartons, barrels, fiber drums, crates and boxes, as well the necessary wrapping and cushioning material, used to pack small or fragile articles for shipment or storage.  Such articles include clothing, linens, books, pictures, mirrors, lampshades and bases, bric-a-brac, glassware, chinaware, and other small articles that normally require preliminary packing before removal from the residence.

New appointees :  Includes not only individuals when first appointed to U.S. Government service but also individuals appointed after a break in service except that employees separated as a result of reduction-in-force or transfer of function may be treated as transferees instead of new appointees.  New appointees do not include individuals who transfer from one Federal Government personnel system to another Federal Government personnel system where there is no break in service.  (See 14 FAM 571.2 (c) for per diem for new appointees.)

Non-foreign area :  The States of Alaska and Hawaii, the Commonwealths of Puerto Rico, Guam and the Northern Mariana Islands, and the territories and possessions of the United States (excludes the Trust Territories of the Pacific Islands).

Nontemporary storage :  The permanent storage of household effects while an employee is assigned to or is at an official station or duty post to which the employee is not authorized to take a portion of the regulatory HHE weight entitlement due to post specific weight or other post specific restrictions, or which is authorized in the public interest.  (This term has the same meaning as continuous storage.)

OCONUS :  Outside the continental United States (CONUS).

Official rest stop :  An official rest stop is defined as a U.S. Government-funded rest period, not to exceed 24 hours, plus necessary time to obtain the earliest transportation to the authorized destination.  Full per diem (lodging and miscellaneous and incidental expenses (M&IE)) at the official rest-stop location rate is authorized in these circumstances.  (See 14 FAM 584.4 and 14 FAM 567.2-4 , for official rest-stop authorization criteria.)

Official station :  The official station of an employee is the location of the employee's permanent work assignment.  The geographic limits of the official station are:

(1)  The corporate limits of the city or town where stationed; or

(2)  If not in an incorporated city or town, the reservation, station, or other established area (including established subdivisions of large reservations) having definite boundaries where the employee is stationed.

Overnight :  The period during which lodging for sleeping facilities is authorized, usually during the hours of darkness between sunset and sunrise.

Per diem :  The per diem allowance (also referred to as subsistence allowance) is a daily payment instead of reimbursement for actual expenses for lodging, meals, and related incidental expenses.  (See 14 FAM 562 and 14 FAM 563. )  The per diem allowance is separate from transportation expenses and other miscellaneous expenses.  The per diem allowance covers all charges, including taxes and service charges where applicable for:

(1)  Lodging.  Includes expenses for overnight sleeping facilities, baths, personal use of the room during daytime, telephone access fee, and service charges for fans, air conditioners, heaters and fires furnished in the room when such charges are not included in the room rate.  Lodging does not include accommodations on airplanes, trains, buses, or ships.  Such cost is included in the transportation cost and is not considered a lodging expense.  (See definitions for layover and overnight ) ;

(2)  Meals.  Expenses for breakfast, lunch, dinner and related tips and taxes (specifically excluded are alcoholic beverage and entertainment expenses, and any expenses incurred for other persons) ; and

(3)  Incidental expenses:

(a)  Fees and tips given to porters, baggage carriers, bellhops, hotel maids, stewards or stewardesses and others on ships, and hotel servants in foreign countries;

(b)  Transportation between places of lodging or business and places where meals are taken, (except as specified in 14 FAM 562.2 , subparargraph a(8)); and

(c)  Mailing cost associated with filing travel vouchers and payment of Government sponsored charge card billings.

Post of duty :  The duty station to which an employee is assigned, OCONUS or CONUS.

Privately owned motor vehicle (POV) :  A privately owned motor vehicle is a motor vehicle owned by the employee or a member of the employee's family who is authorized to travel, and used by the employee and/or employee's immediate family for the primary purpose of providing personal transportation (see 14 FAM 615.7 for limitations at specific posts).

Proceed on or about :  The date indicated on the travel authorization that the official travel is expected to begin.  Official travel may begin as many as two (2) days before or two (2) days after the indicated proceed-to-travel date, but the length of the official travel must not exceed the total number of days of the temporary duty.  (See 4 FAH-3 H-465.3-3 )

Seat selection policy :  Each official traveler, regardless of age, is entitled to occupy a seat on and airplane as listed in ( 14 FAM 567.2-1 ).  This policy does not include premium seating products (i.e., business or first-class seating).

Separate maintenance allowance (SMA) :  An allowance intended to offset the additional expenses incurred by an employee who is compelled by the circumstances described in subparagraphs (1) through (3) of this definition, to maintain a separate household for the family or a member of the family:

(1)  Involuntary SMA (for the convenience of the U.S. Government):  When adverse, dangerous, or notably unhealthy conditions warrant the exclusion of members of family from an area or when the agency determines a need to exclude members of a family from accompanying an employee to an area;

(2)  Transitional SMA (following termination of an evacuation and conversion of a post to an unaccompanied status):  The purpose of transitional SMA is to assist an employee with additional costs incurred when eligible family members are required to occupy commercial housing while establishing permanent housing following an evacuation; and

(3)  Voluntary SMA (for special needs or hardship of an employee):  When an employee requests SMA for special needs or hardship prior to or after arrival at post for reasons including but not limited to career, health, education, or family considerations for the spouse or domestic partner as defined in 3 FAM 1610 , children, or other family member (children, including sisters and brothers, unless attending secondary school must be under age 18 or incapable of self support).

Single-class air accommodations :  This term applies when an airline offers only one class of accommodation to all travelers.

Slumber coach :  Includes, in the United States, slumber coach accommodations on trains offering such accommodations, or, in general, the lowest level of economy sleeping accommodations available on a train.

Special needs :  Physical characteristics of a traveler that do not necessarily meet the definition of “disability” under the Rehabilitation Act of 1973.  Such physical characteristics could include, but are not limited to, the weight or height of the traveler, or a temporary medical condition.  (See also employee with a disability .)

Standard CONUS rate :  Generally, the standard CONUS per diem rate is prescribed for any location within CONUS that is not included in one of the defined localities or areas for which a specific rate is prescribed in FTR, Chapter 301, Appendix A.

Temporary detail :  Temporary duty at a place other than the employee's official duty station or post of assignment.

Temporary duty (TDY) location :  A place, away from an employee's official station, where the employee is authorized to travel.

Temporary storage :  The storage of household effects for a limited period of time at place of origin, destination, or en route in connection with transportation to, from, or between official duty stations.  Also, see definitions of continuous storage and nontemporary storage in this section.

TMONE (travel message one ):  Assignment notification by GTM/EX.

TMTWO (travel message two ):  An employee's requested travel itinerary and allowances for permanent change of station travel.

TMTHREE (travel message three ):  An employee's welcome to post message sent by GTM/EX and providing information regarding the employee's assigned post.

TMFOUR (travel message four) :  Personnel action and travel authorization for Foreign Service appointment, PCS, home leave/return to post, and separation.

TMEIGHT (travel message eight ):  Cable notification confirming employee arrival at post (Note:  TMSIX and TMSEVEN are no longer in use).

Transfer :  A permanent change of station (PCS) from one post of assignment to another.

Transportation expenses :  Includes commercial bus, air, rail, or vessel/steamship fares.  Other transportation expenses include local transit system, taxi fares, cost of commercial rental cars and other special conveyances; and mileage and other allowances to cover operating expenses for use of privately owned conveyances, including fees for parking, ferries, etc.

Transportation Network Company (TNC ):  An entity that uses a digital network to connect riders to drivers affiliated with the entity in order for a driver to provide transportation services.  Examples of TNCs include Uber, Lyft, DiDi, and Grab.

Travel advance :  Prepayment of estimated travel expenses paid to an employee.  (See 4 FAM 463. )

Travel authorization (orders) :  Written permission for an employee to travel away from his/her official duty station on official business.  (See 14 FAM 521.2 for types of travel authorizations.)

Travel claim (voucher) :  A written request, supported by documentation and receipts where applicable, for reimbursement of expenses incurred in the performance of official travel, including permanent change of station (PCS) travel (See 14 FAM 517 ).

Travel management center (TMC) :  A commercial travel agent under joint contract with the General Services Administration (GSA), Department of State, and other Foreign Affairs agencies.

Unaccompanied air baggage (UAB ):  See 14 FAM 613.3 .

United States :  The several States, the District of Columbia, and the States and areas defined under the term, non-foreign area .

U.S. Government aircraft:  Manned or unmanned aircraft operated for the use of the Department, including:

(1)  Federal aircraft - manned or unmanned aircraft that the Department owns (i.e., holds title to) or borrows for any length of time; or

(2)  Aircraft leased as Commercial Aviation Services (CAS), which include:

(a)  Leased aircraft for exclusive use for an agreed upon period of time;

(b)  Capital lease aircraft for which the Department holds an option to take title;

(c)  Charter aircraft for hire under a contractual agreement for one-time exclusive use that specifies performance;

(d)  Rental aircraft obtained commercially under an agreement in which the Department has exclusive use for an agreed upon period of time;

(e)  Contracting for full services (i.e., aircraft and related aviation services for exclusive use); or

(f)   Obtaining related aviation services (i.e. services but not aircraft) by commercial contract, except those services acquired to support a Federal aircraft.

USAGM :  United States Agency for Global Media, formerly Broadcasting Board of Governors (BBG).

USAID :  United States Agency for International Development, a foreign affairs agency.

USDA :  United States Department of Agriculture, a foreign affairs agency.

Usually traveled route :  See definition for direct route in this section.

Worldwide :  Within and outside the United States.

Zero-Emission Vehicle (ZEV):  A vehicle that when operating produces zero tailpipe exhaust emissions of any criteria pollutant (or precursor pollutant) or greenhouse gas .

14 FAM 511.4  Authorities

(CT:LOG-282;   1-27-2020) (State/USAID/Commerce/Agriculture) (Foreign Service)

a. Travel and transportation regulations and policy, as set forth in this volume of the FAM, are carried out under the applicable laws of the United States, principally those contained in:

(1)  The Foreign Service Act of 1980, as amended;

(2)  The Mutual Educational and Cultural Exchange Act of 1961, as amended, the Foreign Affairs Act of 1980 and Reorganization Plan No. 2 of 1977;

(3)  The Foreign Assistance Act of 1961, as amended, Executive Order 12163 dated September 1979, as amended;

(4)  The State Department Basic Authorities Act (Public Law 84-885), Section 28 (22 U.S.C. 2700);

(5)  5 U.S.C. 5701 – 5709;

(6)  31 U.S.C. 1353 (home-to-work transportation);

(7)  The Federal Management Regulation, 41 CFR 102-117.5;

(8)  The Federal Travel Regulation (FTR) (41 CFR 301-1.1);

(9)  The Fly America Act at 49 U.S.C. 40118, and provisions regarding use of U.S. flag sea vessels;

(10) USAID Automated Directives System sections ADS 522, ADS 523, ADS 524, ADS 525, and Series 500 Interim Update 18;

(11) Standardized Regulations (Government Civilians, Foreign Areas);

(12) 5 U.S.C. 5742;

(13) The Foreign Affairs Reform and Restructuring Act of 1998;

(14) Panama Canal Treaty of 1977 and related agreements (as described in section 3(a) of the Panama Canal Act of 1979); and

(15) USAID Automated Directives System section ADS 251, International Disaster Assistance, and Series 200 Interim Update 01-06, USAID/BHR Office of U.S. Disaster Assistance's Guidance for Disaster Planning and Response - FY2002.

b. The Secretary of State's authority for use of first-class train or steamer accommodations has been delegated to the Under Secretary for Management (M) under State Department Delegation of Authority 462 dated January 9, 2019.

14 FAM 512  EMERGENCY, UNUSUAL, OR ADDITIONAL PAYMENT PERTAINING TO TRAVEL AND TRANSPORTATION

Any Department or Agency covered by these regulations may authorize any emergency, unusual, or additional payment pertaining to travel and transportation that is necessary or expedient, if allowable under existing authority, notwithstanding anything in these regulations.  For the Department of State, exercise of this provision requires the approval of M.

14 FAM 513  OFFICIAL TRAVEL EXPENSES

(CT:LOG-282;   01-27-2020) (State/USAID/Commerce/Agriculture) (Foreign Service)

In accordance with the provisions of law and these regulations, Foreign Service employees and the members of their families are entitled only to actual and necessary expenses incurred in the performance of official travel.  Travelers are expected to make a conscientious effort to minimize costs of official travel and to assume costs of a personal nature and any additional expenses incurred for personal convenience.  No expenses should be incurred prior to the receipt of an official travel authorization that specifically authorizes the expenditure and/or entitlement.  Any expense incurred prior to the issuance of a travel authorization may be considered unauthorized and not reimbursable.

14 FAM 514  AGENCY EXCEPTIONS

14 FAM 514.1  Considering Exception Requests

a. Although employees are responsible for strict compliance with these regulations, there are instances in which entitlements are exceeded or excess costs are incurred for travel, transportation, or storage of effects, despite all reasonable precautions taken by the employee.

b. Requests eligible for consideration by the committees will include, but not be limited to:

(1)  Excess or increased limited shipment weight when total amount shipped and stored does not exceed the combined shipment and storage allowance under 14 FAM 613 ;

(2)  Emergency storage of effects and/or privately owned motor vehicles;

(3)  Increased limited shipment weight following reduction due to a previous shipment in connection with marital separation, divorce, or statement of dissolution of domestic partnership as defined in 3 FAM 1610 (in line with provisions of 14 FAM 618.1 and 14 FAM 627.6 ) when total amount shipped and stored does not exceed the combined shipment and storage allowance under 14 FAM 611.6-1 ;

(4)  When the limited shipment allowance will not be sufficient to permit an employee, whose official position has truly representational responsibilities, to ship an adequate amount of furnishings to carry out this phase of official duties in a satisfactory manner; and

(5)  Occasions when an employee has need of professional materials related to official responsibilities and/or career specialization that are not otherwise available at the post.  (For professional materials for medical specialists, see 14 FAM 514.4 .)

14 FAM 514.2  Role of the Exceptions Committee

a. The Department of State, USAID, Commerce, and FAS have established special committees or internal agency procedures (employees should refer to their transportation offices) for reviewing requests for relief and recommending appropriate action when it has been conclusively demonstrated that such excesses have occurred through no fault of the employee, or when an increase in the limited shipping allowance is fully justifiable.  Employees who have unavoidably incurred excess charges for travel, transportation, or storage of their effects, or who can justify an increase in their limited shipping allowance, may submit their requests for appropriate relief to the Department of State, USAID, or Commerce (as appropriate) for consideration by these committees or other established agency procedures.

b. The exceptions committees ensures that employee requests for an exception are reviewed impartially and objectively, and determines if the circumstances of individual cases are truly "exceptional" in nature; e.g., beyond the employee's control.  Employees must have a compelling reason for requesting an exception, especially if it results in additional cost to the Government.

c.  The committees have no authority to recommend approval of a request for an increase in an employee's combined shipping and storage allowance or any other request which would be in violation of the Foreign Service Act of 1980, as amended, or any other law or statute, or decisions of the Civilian Board of Contract Appeals (CBCA), or Comptroller General (GAO).

d. Denial of a request for exception will not preclude any right an individual may have to seek a ruling from the CBCA either directly or through the finance office of the appropriate agency.  Requests must include complete justification for the desired action, and whenever possible, be supported by pertinent written statements, inventories, bills of lading, or other supporting documents.

e. For State employees only:  The Exceptions Committee (EC) has authority over regulations pertaining only to travel, transportation, or storage of effects which are in these regulations; i.e., those found in 14 FAM.  The scope of the EC does not include regulations that come under the Department of State Standardized Regulations (DSSR).

14 FAM 514.3  Composition of the Exceptions Committee

(CT:LOG-293;   10-05-2020) (State/Agriculture only) (Foreign Service)

a. The State Department Exceptions Committee is chaired by A/LM.  There are 10 voting members including representatives from the six regional bureaus, the Office of Career Development and Assignment (GTM/CDA/AD), the Transportation Management Division (A/LM/OPS/TM), the Office of Budget Analysis (BP/OBA), and the Global Talent Management Executive Office (GTM/EX).  In the event of a tie, the A/LM senior advisor will make the determining vote.

b. The USDA/FAS Exception Committee is chaired by the assistant deputy administrator, Office of Foreign Service Operations (OFSO).  Other committee members include the appropriate area director and the director of the International Services Division.

c.  The Department of Commerce Exception Committee is chaired by the Office of Foreign Service Human Capital Budget and Operations deputy.  Other committee members include the appropriate regional director and the career development officer.

14 FAM 514.4  Procedures

(CT:LOG-285;   05-15-2020) (State/USAID/Commerce/Agriculture) (Foreign Service)

a. For State :

(1)  Forward all requests for committee consideration by email or memorandum, subject:  "Exception to Foreign Service Travel Regulations," to the executive director of the regional or functional bureau having management over the post/office to which the employee is assigned.  In the case of separations or if new assignment is to the United States, submit requests to the regional or functional bureau of last assignment.  Requests shall include a full and complete justification for the desired action, and  be supported by pertinent written statements, inventories, bills of lading, or other supporting documents;

(2)  The regional bureau executive office reviews the exception request; if supported, the executive office forwards it with the bureau’s memorandum of support and agreement with the employee's request to A/LM/OPS/TMP.  If the bureau declines to support the employee’s request, the bureau will notify the employee of the bureau’s decision;

(3)  A/LM/OPS/TMP will review the request to determine if the employee can be accommodated without an exception.  If A/LM/OPS/TMP determines that an exception is not necessary, they will notify GTM/EX and GTM/CDA/AD with a request to amend the employee's orders if applicable to do so.  They will also notify the employee and the regional bureau;

(4)  If A/LM/OPS/TMP finds that, given applicable statutes and regulations, an exception is necessary to grant the employee's request, then A/LM/OPS/TMP forwards the request to the full Exceptions Committee (EC) for review and a decision.  As committee chair, A/LM oversees the process and coordinates responses in a timely manner.  Additional supporting documentation will not be accepted by the Committee after voting commences or after the decision is reached, unless such documentation is specifically requested by the Committee;

(5)  If the EC approves the exception, GTM/CDA/AD and GTM/EX amend the travel authorization if required, and notify the employee and the regional bureau of the decision;

(6)  If the EC disapproves the exception, the decision is final.  The EC will not reconsider a case.  However, denial of a request for exception will not preclude any right an individual may have to seek a ruling from the Civilian Board of Contract Appeals (CBCA);

(7)  In cases where the EC disapproves the exception, the employee is not relieved of the financial obligation for the excess transportation or travel costs incurred as a result of the employee’s action.  Excess costs related to shipment of personal effects must be paid by the employee before shipments can be initiated, regardless of whether an employee has submitted a request for exception concerning the shipment.  If the EC request is approved, the employee will be reimbursed accordingly.  If the EC determines that an employee cannot be relieved of a cost that the employee has not yet paid, the employee must pay the amount owed within 30 days of the date of the EC’s written decision.  In accordance with the provisions of 4 FAM 321 , at posts abroad, payment is to be made to the post cashier; in Washington, DC, payment is to be made to CGFS/DFS/T, HST Room 1258.  If a receipt of payment is not received by A/LM/OPS/TMP within the 30 day time limit, the case will be forwarded to CGFS for collection; and

(8)  Requests for an exception for the shipment of professional materials must be filed by the employee through his/her bureau in advance of shipment of effects and will be acted upon expeditiously by the bureau and the Exceptions Committee, and resolved, whenever possible, prior to departure of the effects shipment from the origin.

NOTE :  Medical specialists are authorized to ship professional materials by air prior to departing to or from post as part of the authorized household effects (HHE) shipment allowance without approval from the Exceptions Committee.  Eligible employees should contact their HR technicians to include the entitlement on their travel authorizations.  Weights for professional materials by air are set at 500 pounds for doctors and psychiatrists, and 100 pounds for nurses and medical technicians.

b. For USAID :

(1)  Foreign Service personnel who have unavoidably incurred what they consider to be excess charges for travel, transportation, or storage of their effects should first seek relief through the normal administrative process;

(2)  In the United States, employees should submit requests to the USAID Office of Personnel Management, M/PM/FSP or M/PM/EPM, as appropriate;

(3)  At a post abroad, the request should be submitted to the appropriate approving official; and

(4)  Employees who have exhausted the normal administrative process and have not received a satisfactory resolution of their problem may submit a request for committee consideration to the chairperson, Committee on Exceptions, Office of Administration and Services, Travel and Transportation Division (M/AS/TT).

c.  For Commerce :

(1)  Foreign Service personnel who have unavoidably incurred what they consider to be excess charges for travel, transportation, or storage of their effects should first seek relief through the normal administrative process; and

(2)  Foreign Service personnel who have exhausted the normal administrative process and have not received a satisfactory resolution of their problem may submit a request for committee consideration through an e-mail or memorandum, subject:  “Exception to Foreign Service Travel Regulations,” to the Director of the Office of Foreign Service Human Capital, OFSHC.  Requests are to include complete justification for the desired action, and whenever possible, be supported by pertinent written statements, inventories, bills of lading, or other supporting documents.

d. For USDA/FAS :  FAS Foreign Service personnel who have unavoidably incurred what they consider to be excess charges for travel, transportation, or storage of effects should send an e-mail or memorandum, subject:  Exception to Foreign Service Travel Regulations, to the Director of the International Services Division, OFSO.  Requests are to include complete justification for the desired action, and whenever possible, be supported by pertinent written statements, inventories, bills of lading, or other supporting documents.

14 FAM 515  TRAVELER’S RESPONSIBILITY

a. Employees and their eligible family members traveling under official travel authorizations are expected to use the most direct and expeditious routes consistent with economy and reasonable comfort and safety.  By the same token, employees are expected to exercise good judgment in the costs they incur for all official transportation expenses as if they were personally liable for payments.

b. Claims against the U.S. Government for travel costs incurred by an employee are audited and approved according to this philosophy.

c.  The traveler is responsible:

(1)  For the correct performance of official travel;

(2)  For the payment of any charges incurred through failure to comply with the governing regulations, regardless of who may have assisted the traveler in making travel arrangements; and

(3)  For the value of tickets in traveler's possession purchased with U.S. Government funds or through the exchange of transportation requests.  In cases where excess costs occur despite reasonable precautions, requests for relief may be made as set forth in 14 FAM 514 .

14 FAM 516  LOCAL TRANSPORTATION

(CT:LOG-279;   11-20-2019) (State/USAID/Commerce/Agriculture) (Foreign Service)

Local transportation, including taxicabs and privately owned motor vehicles at the post of assignment abroad, may be used for the performance of official duties that do not require a travel authorization.  Such use must be in accordance with the policies and procedures as established by the authorizing officer at the post of assignment (see 4 FAM 460 and USAID ADS Series 500 Travel and Transportation chapter).

14 FAM 517  SUBMITTING TRAVEL VOUCHERS AND UNUSED TICKETS

14 FAM 517.1  Prompt Submission of Vouchers

a. Upon completion of travel, the traveler is required to submit an expense report (voucher claim) for reimbursement of expenses within:

(1)  Five (5) work days of completion of authorized temporary duty (TDY) travel;

(2)  Five (5) work days of completion of permanent change of station (PCS); and

(3)  Five (5) work days for each thirty (30) calendar-day period for extended travel, including long-term training and PCS travel.

b. Noncompliance on submission of voucher/claim may result in recovery action in accordance with 4 FAM 490 .  EXCEPTION:  USAID and Commerce on PCS travel require five (5) work days for completion of travel voucher.

c.  Travelers should not postpone this submission until completion of delayed travel by the employee's family or delayed transportation of effects.

d. Administrative approval of the travel vouchers by approving officials must be completed within two (2) work days of submission by the traveler (for procedures, see 4 FAM 460 and USAID ADS Series 500 Travel and Transportation chapter).

e. For Commerce:  When travel authorization or advance is issued in Washington, DC, voucher submission must be filed in Washington, DC.

14 FAM 517.2  Submission of Unused Tickets or Carrier Refund Applications for Exchange Tickets

Travelers should turn in any unused tickets immediately upon arrival at post to the administrative officer (or the executive officer for USAID), or, upon arrival in Washington, DC, to the executive office of the managing bureau or office in accordance with 4 FAM 460 .

14 FAM 517.3  Required Receipts

Receipts are required for each allowable cash expenditure in excess of $75, unless it is not practicable to obtain them or if the duties of the traveler are of a confidential nature.  All receipts for seat selection policy (SSP) (formerly listed as extended economy seating 14 FAM 567.2-1 ) are required regardless of the amount.

14 FAM 517.4  Accountability for Serially Numbered Forms OF-1169 and SF-1103

a. An accountable officer is designated at each post to control the procurement, stock, distribution, and accountability for Form OF-1169, U.S. Government Transportation Request (GTR), in accordance with 14 FAM 544.4 .  Similar procedures are followed by the accountable officer for the control and accountability for Form SF-1103, U.S. Government Bill of Lading (GBL), in accordance with 14 FAM 619 .

b. Travelers are held accountable for all serially numbered forms furnished to them including spoiled, canceled, unused, lost, or stolen forms.  When a GTR is lost or stolen, the traveler immediately notifies the appropriate accountable officer in writing of the loss or theft and includes a complete statement of attendant facts.

14 FAM 518  and 519 UNASSIGNED

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What Are Travel Points Worth and Why Do They Matter?

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

When was the last time you took a vacation? A real “toes in the sand, cold drink in the hand” kind of vacation? If you’re like most of us, it’s been too long.

We’re here to help.

One of the main reasons it can be tough to book a great trip is that those carefree vacation days don’t always come cheap. But the solution might be hiding in plain sight: travel points.

We’re going to walk you through the basics of what travel points are, what they’re worth and why they matter — so you can spend time in your vacation destination without spending a big chunk of your savings.

What are travel points?

Travel points are a type of currency that can be earned in many different ways. For the purpose of this explainer, we're going to use the umbrella term "travel points" to include both airline miles and hotel points — the two most common types of travel points.

Generally speaking, the term "miles" is reserved for airline loyalty programs, whereas the term "points" crops up in a variety of travel rewards programs (like hotels, dining, rental cars and more).

One way to earn travel points is through loyalty programs. For example, you can earn AAdvantage miles when you fly on American Airlines and World of Hyatt points when you stay at Hyatt properties.

Another common way to earn travel points is by spending on credit cards. Chase, American Express and other financial institutions offer co-branded credit cards, like the World of Hyatt Credit Card and the Delta SkyMiles® Gold American Express Card , that pay you points or miles when you make purchases. Terms apply.

Different travel points systems have members earn and redeem awards at different rates, and generally speaking, the value of individual travel points varies widely.

» Learn more: The beginner’s guide to points and miles

How are travel points different from transferable points currencies?

Citi, Chase, Capital One, American Express and other card issuers each have their own type of currency — Citi ThankYou Rewards , Chase Ultimate Rewards® , Capital One Miles and American Express Membership Rewards . Their points tend to be more flexible than airline and hotel points. These points leverage transfer partners to offer members a wide variety of opportunities to earn and redeem points, whereas hotel- or airline-specific travel points are generally designed to be redeemed with the specific hotel group or airline.

Points from financial institutions can be redeemed in a variety of ways. We’ll talk more about that in a moment.

What are travel points worth?

The value of points and miles varies. While it can be useful to think of points as being worth about 1 cent apiece, there are ways to squeeze more value out of each point. On the flip side, there are also several ways to redeem points for a not-so-great value, so it’s important to do the math to determine if a deal is really a deal.

NerdWallet analyzed the value of dozens of rewards programs to estimate how many cents per point or mile you could get when making award bookings. These valuations are a nice starting point: If you can get this baseline value from a redemption, you know you’re doing well.

A simple math trick will help you determine the value of your points redemption: Simply divide the cash value by the number of points needed to book the flight, then multiply times 100.

What is the best way to redeem travel points?

Generally speaking, the best way to redeem travel points is with the company most closely associated with the loyalty program. So, use your United MileagePlus miles to book United flights, and use your Marriott Bonvoy points to book stays at a Marriott hotel.

While you can get outsized value by using transferable currencies wisely, it is not as common among specific airline or hotel groups to get such high-value redemptions with external partners (the caveat being that savvy travelers can sometimes leverage high-value award tickets via airline alliances ).

The worst ways to redeem points or miles include for things like merchandise and magazine subscriptions.

» Learn more: How to shop for flights

Good points redemptions

Let’s say you’ve earned 25,000 Chase Ultimate Rewards® points. You decide to transfer them to Hyatt, one of Chase’s transfer partners . The points transfer at a 1:1 ratio, so you get 25,000 World of Hyatt points.

Now the fun begins.

NerdWallet values Hyatt points at 2.3 cents each , so those points are worth $575.

Hyatt offers hotel properties that span budget to luxury, and you can often find “sweet spots” for points redemption at any quality level. For example, Hyatt Category 2 properties cost 8,000 points per night (and just 6,500 for an off-peak stay); so even on a standard night, with 25,000 points, you can book a three-night stay — with 1,000 points to spare.

Since some of these same Category 2 properties can cost over $250 per night, your 24,000 points could equate to $750 in value — a decent jump from the $575 baseline value you hoped to get.

That’s exciting.

Bad points redemptions: Be warned

Let’s say you have 30,000 American Express Membership Rewards points. You browse the American Express shopping portal and consider adding a very nice tea kettle to your cart for 27,312 points. This tea kettle typically sells for $125, so it might seem like a great redemption. After all, those points were free — and what a lovely tea kettle.

However, 27,312 points is a lot of points. Armed with NerdWallet’s points valuations, you can do the math to determine exactly what those points are worth. Since NerdWallet has determined that American Express Membership Rewards points are worth about 2.8 cents apiece, this number of points is roughly worth $764.74.

That would have been one expensive tea kettle.

Why do travel points matter?

Some travelers have built entire lifestyles around the points and miles hobby. Even so, you might ask: Do travel points matter?

For individuals motivated to save on travel expenses, the answer is short: Yes. Here are some additional reasons why learning — and using — travel points is worth it.

Enjoy fringe membership program. For instance, simply being a member of IHG Rewards means free Wi-Fi for all hotel stays within the brand's portfolio, including the Holiday Inn.

Don't leave money on the table. If you are going to spend on credit cards anyway, you might as well get a little something back. By using travel points, you can get occasional free flights and other awards.

Quicker path towards elite status . If lounge access and priority boarding or complimentary breakfast and welcome gifts sound like travel conveniences you don't want to miss out on, learning to use points and miles wisely can get you closer to status with your preferred business.

Community. There is a small but delightful community of points nerds out there, all waiting to geek out over high-value redemptions and secrets for finding little-known sweet spots. Join us. We'd be happy to have you.

» Learn more: Should I get a travel credit card that earns points or one that earns miles?

If you’re new to travel points

What are travel points worth? A lot. There are many different types of travel points — airline miles, hotel points and credit card points, which you can spend on a variety of things. The value of points and miles can be significant, but some points redemptions are much more valuable than others. Do the math to determine if a redemption makes sense for you.

How to maximize your rewards

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75,000 Enjoy a one-time bonus of 75,000 miles once you spend $4,000 on purchases within 3 months from account opening, equal to $750 in travel.

'Supply and demand on steroids' as peak Sydney to Melbourne flights exceed $900. What does it mean for holiday travel?

If you're not a fan of watching race cars go around in circles, you may have gotten a shock if you needed to book a flight from Sydney to Melbourne this week.

With Formula 1 grand prix events kicking off at Melbourne's Albert Park on Thursday, it was rare to spot a one-way fare for less than $400 from Monday.

By Wednesday, across Jetstar, Rex, Virgin and Qantas, flights were a minimum of about $500 to upwards of $900.

In some instances, it was cheaper to book a seat in business class than economy.

While it's not uncommon for airlines to hike up prices around sporting events, holidays and concerts, Chris Ford from Compare the Market said with Easter approaching this was a "double whammy".

"It's sort of a double hit that can extend over a period of time," he told the ABC.

Experts have called it "supply and demand on steroids" during peak periods.

The Australian Competition and Consumer Commission (ACCC) monitors the prices and profits of the major domestic airlines but plays no role in regulating fares.

So, airlines have the freedom to increase prices according to market demand and conditions, aviation analyst and associate professor at RMIT, Chrystal Zhang, said.

"The key question is really, 'How high can the airline go?'"

She warned nowadays people need to book trips months in advance and be willing to be flexible around "hot events" and holidays. 

Best days to avoid Easter holiday hikes

Concerts and events generally only lead to fluctuations over a few days, Mr Ford said.

But when Taylor Swift mania took hold last month, airfares to Sydney and Melbourne spiked over a sustained period, even across regional airports.

In the lead-up to Easter, Compare the Market analysed which days were best to travel and how long it would take for prices to start to drop.

It found consistent patterns in its reviews over Christmas, showing fares inevitably "skyrocket" before public holiday days.

Comparing where prices were at about two weeks out from Easter, there was a difference of hundreds of dollars between the cheapest and most expensive days to fly.

With the Easter long weekend falling on March 29 to 31, flights out of Brisbane, Sydney and Melbourne to the rest of Australia's major cities were the most expensive on March 28.

The cheapest days in the lead-up were between March 18 and 22.

On the other side, flights were most affordable from April 4 to 12.

Prices will continue to rise

Over the last two weeks, flights have been increasing incrementally along key routes, and are expected to continue to rise, Mr Ford said.

"We're not talking hundreds of dollars at this point in time, but it will be interesting over the next few days to see how much they do nudge up."

This week, flights from Brisbane to Sydney were about $170 one-way on March 28, Mr Ford said.

They come down to $110 on April 4, then a few days later prices are at $74.

"You're looking at around $100 from peak to trough over a two-week period," he said.

On the Melbourne to Sydney route, a flight on March 28 this week was selling for around $180 depending on the flight times.

When Compare the Market analysed flights a week ago, the most expensive flight from Melbourne to Sydney on March 25 was $174.

Now, with the pinch of grand prix demand and most flights being close to sold out, the cheapest flight is about $400.

By April 9, there are flights for $52.

Weekend crowds at the international racing event are expected to exceed 440,000. 

"If there is a lesson to be learned for future needs, it's doing that research as early as possible," Mr Ford said.

How far should you book in advance?

There are some opportunities to find cheaper prices as holidays approach, but it depends on how much time you have and if you're open to "inconvenience", Mr Ford said.

Generally, flights will be less expensive during early mornings and late nights, and from regional airports.

"You need to be able to be more flexible and open to travelling slightly out of town, or getting to the airport at 4am for a 6am flight," he said.

But, the best way to avoid getting stung is to book early, and check terms and conditions in case flights are cancelled, Professor Zhang said.

She suggested these days it's best to generally book flights about three months in advance.

"Two to three months before you plan the travel is a kind of suggested time to finalise your schedule and your overall itinerary," she said.

Depending on the demand of the particular route, you will start seeing prices rise up to two to three weeks, she added.

"And you really need to be mindful of these very hot events in hot destinations, whether that's a big conference or a popular sporting event."

'People will still fly'

Rico Merkert, professor of operations and supply chain management at the University of Sydney, said there have always been increases during peak seasons, but it has become more excessive since the COVID pandemic.

"Supply and demand on steroids," he told the ABC.

"What happened is that we didn't have enough capacity or [there was] reduced capacity." 

Now, there are chances to "capture an audience" when there are holidays and events like a Taylor Swift concert.

"Sydney to Melbourne is one of the busiest routes on the planet, so it's difficult for airlines to add more capacity — more flights," Professor Merkert said.

"But they see that suddenly everyone wants to fly so that means they can easily increase the fares and know people will still fly."

Jetstar said strong demand from Sydney to Melbourne was a factor in their high prices this week.

"Most customers book well ahead of when they want to travel and like all airlines, our cheapest fares sell out first," Jetstar said in a statement to the ABC.

Falls into 'price gouging' but is it illegal?

These practices are unfortunate for people who have no choice but to book last-minute travel, Professor Merkert said, adding that it would "fall into the category of price gouging".

It also isn't isolated to airlines, with petrol prices already increasing in the lead-up to Easter.

"It's the same with a car, if you have to drive to Orange (in regional NSW) to see your family, you might be able to take a train but there are all sorts of other destinations in NSW where you have to travel further and you have no choice," he said.

The ACCC said increasing prices during periods of high demand is not illegal, but businesses just need to provide clear and up-front information about the price consumers will pay.

Currently, competition is the best hope of keeping prices within reason.

"The ACCC tries to ensure that there's sufficient competition in the market," Professor Merkert said.

"If there are two or three airlines in this space, surely one will have a slightly better deal.

"But in fact, if one raises fares by 30 per cent, then the others won't be far behind."

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Definition of cost

 (Entry 1 of 2)

Definition of cost  (Entry 2 of 2)

intransitive verb

transitive verb

• disbursement
• expenditure

Examples of cost in a Sentence

These examples are programmatically compiled from various online sources to illustrate current usage of the word 'cost.' Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors. Send us feedback about these examples.

Word History

Verb and Noun

Middle English, from Anglo-French custer, couster , from Latin constare to stand firm, cost — more at constant

14th century, in the meaning defined at sense 1a

14th century, in the meaning defined at transitive sense 1

Phrases Containing cost

• at cost price
• cost accountant
• cost - of - living index
• cost - plus
• cost - push
• cost (someone) dearly / dear
• cost - effective
• to one's cost
• not cost a penny
• it'll cost (someone)
• not cost a dime / nickel
• cost accounting
• at the cost of
• count the cost
• cost - benefit
• cost an arm and a leg
• opportunity cost
• cost cutting
• cost of living
• indirect cost
• cost - efficient
• dollar cost averaging

Articles Related to cost

Price vs. Cost: Yes, they’re...

Price vs. Cost: Yes, they’re different!

When to differentiate between these words

Dictionary Entries Near cost

Cite this entry.

“Cost.” Merriam-Webster.com Dictionary , Merriam-Webster, https://www.merriam-webster.com/dictionary/cost. Accessed 22 Mar. 2024.

Kids Definition

Kids definition of cost.

Kids Definition of cost  (Entry 2 of 2)

Legal Definition

Legal definition of cost, more from merriam-webster on cost.

Nglish: Translation of cost for Spanish Speakers

Britannica English: Translation of cost for Arabic Speakers

Britannica.com: Encyclopedia article about cost

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FinanceBuzz

14 Hidden Costs of Owning an RV That Nobody is Really Talking About

Posted: November 20, 2023 | Last updated: December 6, 2023

RVs have become popular in recent years as people want to travel more and hitting the road seems like the thriftiest and safest way to head towards their next adventure.

With RV travel, you don’t have to worry about hotels and also have the freedom to go wherever you want or change your itinerary on a whim. What’s not to love?

But RVs have expenses above and beyond the vehicle’s sticker price. Here are some hidden costs to consider to help you avoid money stress before you hit the open road.

Earn Points and Miles: Find the best travel credit card for nearly free travel

Just because you have a traveling home with you doesn’t mean you can park anywhere for free. 

Some campsites have amenities, like showers and bathrooms. They also could have unique features like pools, spas, or other outdoor activities.

But staying at one of these campsites usually means you have to pay a fee for a parking spot for your RV. Those fees can change depending on the site’s popularity during peak travel times.

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You may like the idea of traveling with your own bathroom in an RV, but emptying your waste can be a dirty job — and it can cost you money.

Some campsites allow you to dump your waste for free if you paid for your parking spot. But other places charge a fee to dump out your tanks before you hit the road again.

You have to get the best insurance rates for your RV just as you would for a car or motorcycle, but you may be surprised at the cost. Insurance may be more expensive for a large vehicle compared to your typical car in your driveway.

It‘s a good idea to call around and find out how much insurance for different sizes of RVs will cost you before you make a purchase.

Grow Your $$: 11 brilliant ways to build wealth after 40

Driver’s training

Driving an RV is not like driving a car, so you’ll want to consider taking a course specifically for RV drivers.

It’s also a good idea to check with your state’s department of motor vehicles (DMV) to see if they require you to have a specific license to operate an RV, which could also cost you more money in fees.

You may think you’ve calculated your gas costs, but filling up the tank of an RV can be expensive. 

Remember to account for how many miles per gallon your potential vehicle can handle and factor in any changes in cost depending on the places you may stop for gas.

Pro tip: Check out some of the best credit cards for gas to save a few extra dollars every time you fill up.

Registration

Registering your RV with your state‘s DMV costs money, and those fees will likely be more expensive than registering your car.

Check with your local DMV to see how much registration for your vehicle will cost and if those registration fees vary depending on the length of the vehicle.

Retire Sooner: Take this quiz to see if you can retire early

Maintenance

Just like your car, you need to regularly maintain your RV with oil changes, tire rotation, and brake inspections. 

But those costs may be higher than you expect, since your RV is a larger vehicle. You might also have to pay extra for a more specialized technician.

It can be difficult to park a large vehicle like an RV at your home, and some cities or homeowners associations may not permit you to do so.

It’s a great idea to find a garage or some other storage facility that can accommodate your RV when you’re not using it, but storage fees will add to the cost of RV ownership.

You may want to add special features to a basic RV, like a TV, Wi-Fi, dash camera, or other fun features. 

But additional technology adds up and makes the true cost of your vehicle more than the base price.

9 nearly secret things to do if you fly Southwest

You need electricity to run all the extras that an RV holds, like your stove, lights, heating or cooling, and electronics. 

The great thing is that campsites may have electricity hook-ups to help you out, but that can add to your campsite fees.

You don’t need an electric hook-up to run those cool electric gadgets out on the open road, but you may need a generator.

Adding a generator to your RV costs extra money. Don’t forget to factor in the cost of gas to keep it running if you’re not at a campsite with a hook-up to electricity.

Your dirty clothes can pile up if you plan to go on the road for long periods. 

It may not be a big issue compared to other items on your RV budget, but it’s a good idea to factor in the cost of doing laundry when you’re on the road.

You may want to bring along your car for day trips or small vehicles (like ATVs) for outdoor fun while using your RV as a base at a campsite. 

But bringing additional vehicles requires towing equipment, which can get expensive.

You also need to get equipment capable of handling the weight of whatever you’re hauling behind you for your trips.

The open road sometimes costs money, and those tolls can add up.

Remember to bring change to get you through toll plazas quicker, or invest in something like an EZ Pass, which can be used in several states to get past toll booths quicker.

Bottom line

The good news is there are ways to save money if you want to hit the open road in an RV.

Buy an RV with (relatively) good fuel efficiency and proven reliability. Find free places to park whenever possible. And, as basic as it sounds, make a travel budget and stick to it.

Remember to pack some of the best travel credit cards to help fund future travels, and enjoy your next RV vacation.

More from FinanceBuzz:

• 6 genius hacks Costco shoppers should know.
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Highlights From SpaceX’s Starship Test Flight

The powerful rocket, a version of which will carry astronauts to the moon for NASA, launched for the third time on Thursday morning. It achieved a number of milestones before losing contact with the ground.

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Kenneth Chang

Here’s what happened during the third test flight of the most powerful rocket ever built.

Spacex launches starship for third time, the rocket, a version of which will eventually carry nasa astronauts to the moon, traveled almost halfway around the earth before it was lost as it re-entered the atmosphere..

“Five, four, three, two, three, one.” “This point, we’ve already passed through Max-Q, maximum dynamic pressure. And passing supersonic, so we’re now moving faster than the speed of sound. Getting those on-board views from the ship cameras. Boosters now making its way back, seeing six engines ignited on ship. Kate, we got a Starship on its way to space and a booster on the way back to the Gulf.” “Oh, man. I need a moment to pick my jaw up from the floor because these views are just stunning.”

The third try turned out to be closer to the charm for Elon Musk and SpaceX, as his company’s mammoth Starship rocket launched on Thursday and traveled about halfway around the Earth before it was lost as it re-entered the atmosphere.

The test flight achieved several key milestones in the development of the vehicle, which could alter the future of space transportation and help NASA return astronauts to the moon.

This particular flight was not, by design, intended to make it all the way around the Earth. At 8:25 a.m. Central time, Starship — the biggest and most powerful rocket ever to fly — lifted off from the coast of South Texas. The ascent was smooth, with the upper Starship stage reaching orbital velocities. About 45 minutes after launch, it started re-entering the atmosphere, heading toward a belly-flop splashdown in the Indian Ocean.

Live video, conveyed in near real-time via SpaceX’s Starlink satellites , showed red-hot gases heating the underside of the vehicle. Then, 49 minutes after launch, communications with Starship ended, and SpaceX later said the vehicle had not survived the re-entry, presumably disintegrating and falling into the ocean.

Even so, Bill Nelson, the administrator of NASA, congratulated SpaceX on what he called a “successful test flight” of the system his agency is counting on for some of its Artemis lunar missions.

SpaceX aims to make both the vehicle’s lower rocket booster and the upper spacecraft stage capable of flying over and over again — a stark contrast to the single-launch throwaway rockets that have been used for most of the space age.

That reusability gives SpaceX the potential to drive down the cost of lofting satellites and telescopes, as well as people and the things they need to live in space.

Completing most of the short jaunt was a reassuring validation that the rocket’s design appears to be sound. Not only is Starship crucial for NASA’s lunar plans, it is the key to Mr. Musk’s pipe dream of sending people to live on Mars.

For Mr. Musk, the success also harks back to his earlier reputation as a technological visionary who led breakthrough advances at Tesla and SpaceX, a contrast with his troubled purchase of Twitter and the polarizing social media quagmire that has followed since he transformed the platform and renamed it X. Even as SpaceX launched its next-generation rocket, the social media company was dueling with Don Lemon , a former CNN anchor who was sharing clips from a combative interview with Mr. Musk.

SpaceX still needs to pull off a series of formidable rocketry firsts before Starship is ready to head to the moon and beyond. Earlier this week, Mr. Musk said he hoped for at least six more Starship flights this year, during which some of those experiments may occur.

But if it achieves them all, the company could again revolutionize the space transportation business and leave competitors far behind.

Phil Larson, a White House space adviser during the Obama administration who also previously worked on communication efforts at SpaceX, said Starship’s size and reusability had “massive potential to change the game in transportation to orbit. And it could enable whole new classes of missions.”

NASA is counting on Starship to serve as the lunar lander for Artemis III, a mission that will take astronauts to the surface of the moon for the first time in more than 50 years. That journey is currently scheduled for late 2026 but seems likely to slide to 2027 or later.

The third flight was a marked improvement from the first two launch attempts.

Last April, Starship made it off the launchpad, but a cascade of engine failures and fires in the booster led to the rocket’s destruction 24 miles above the Gulf of Mexico.

In November, the second Starship launch traveled much farther. All 33 engines in the Super Heavy booster worked properly during ascent, and after a successful separation, the upper Starship stage nearly made it to orbital velocities. However, both stages ended up exploding.

Nonetheless, Mr. Musk hailed both test flights as successes, as they provided data that helped engineers improve the design.

Thursday’s launch — which coincided with the 22nd anniversary of the founding of SpaceX — occurred 85 minutes into a 110-minute launch window. The 33 engines in the booster ignited at the launch site outside Brownsville, Texas, and lifted the rocket, which was as tall as a 40-story building, into the morning sky.

Most of the flight proceeded smoothly, and a number of test objectives were achieved during the flight, like opening and closing the spacecraft’s payload doors, which will be needed to deliver cargo in the future.

SpaceX did not attempt to recover the booster this time, but did have it perform engine burns that will be needed to return to the launch site. However, the final landing burn for the booster, conducted over the Gulf of Mexico, did not fully succeed — an area that SpaceX will attempt to fix for future flights.

SpaceX said the Super Heavy disintegrated at an altitude of about 1,500 feet.

SpaceX engineers will also have to figure out why Starship did not survive re-entry and make fixes to the design of the vehicle.

Even with the partial success of Thursday’s flight, Starship is far from ready to go to Mars, or even the moon. Because of Mr. Musk’s ambitions for Mars, Starship is much larger and much more complicated than what NASA needs for its Artemis moon landings. For Artemis III, two astronauts are to spend about a week in the South Pole region of the moon.

“He had the low price,” Daniel Dumbacher, the executive director of the American Institute of Aeronautics and Astronautics and a former high-level official at NASA, said of Mr. Musk, “and NASA chose to take the risk associated with that configuration hoping that it would work out. And we’ll see if that turns out to be true.”

To leave Earth’s orbit, Starship must have its propellant tanks refilled with liquid methane and liquid oxygen. That will require a complex choreography of additional Starship launches to take the propellants to orbit.

“This is a complicated, complicated problem, and there’s a lot that has to get sorted out, and a lot that has to work right,” Mr. Dumbacher said.

Thursday’s flight included an early test of that technology, moving liquid oxygen from one tank to another within Starship.

Mr. Dumbacher does not expect Starship to be ready by September 2026, the launch date NASA currently has for Artemis III, although he would not predict how much of a delay there might be. “I’m not going to give you a guess because there is way too much work, way too many problems to solve,” he said.

Kenneth Chang and Michael Roston

A rare sight: Starship’s bright orange glow as it re-entered Earth’s atmosphere.

Just past the 45-minute mark of the Starship vehicle’s journey through space on Thursday, something eerie happened. As it drifted high above Earth’s oceans and clouds, the spacecraft’s silvery exterior was overtaken by a brilliant and fiery orange glow.

Starship re-entering Earth's atmosphere. Views through the plasma pic.twitter.com/HEQX4eEHWH — SpaceX (@SpaceX) March 14, 2024

When a spacecraft re-enters the atmosphere, the air beneath it gets hot — hot enough that it turns into a plasma of charged particles as electrons are stripped away from the air molecules. The charged particles create picturesque glows, like neon signs.

But seeing this happen in nearly real-time during a spaceflight is uncommon. That plasma disrupts radio signals, cutting off communication.

Such blackouts happen, for instance, when SpaceX’s Crew Dragon capsule returns to Earth from the International Space Station with its complement of four astronauts. Mission controllers must wait with bated breath to be reassured that the spacecraft’s heat shield has held up and protected the crew during atmospheric re-entry.

Until Starship succumbed to the intense forces of re-entry on Thursday, SpaceX used its Starlink internet satellites to relay the live video feed. The Starlink satellites are in higher orbits, and sending signals upward — away from the plasma — is easier than trying to communicate through it to antennas on the ground.

But Starship wasn’t the only spacecraft in recent weeks to give us a view of plasma heating. Varda Space, a startup that is developing technology for manufacturing in orbit, had cameras on a capsule it landed on Earth on Feb. 21. Before it parachuted to the ground, its Winnebago capsule recorded a day-glow re-entry. The company retrieved the video recording from the capsule and shared it online:

Here's a video of our capsule ripping through the atmosphere at mach 25, no renders, raw footage: pic.twitter.com/ZFWzdjBwad — Varda Space Industries (@VardaSpace) February 28, 2024

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Jeff Bezos’s rocket company could race SpaceX to the moon.

Which billionaire space company will get to the moon first: Elon Musk’s SpaceX or Jeff Bezos’ Blue Origin?

At first glance, SpaceX seems to have a huge head start. It is about to launch the third test flight of Starship. A variation of Starship is scheduled to take NASA astronauts to the surface of the moon as soon as September 2026.

By contrast, Blue Origin has yet to launch anything into orbit, and its contract with NASA for a lunar lander for astronauts is for a mission that is launching in 2030.

But Blue Origin might still get there first. SpaceX faces major challenges with Starship, which is as tall as 16-story building, while Blue Origin plans to send a smaller cargo lander to the moon by the end of next year.

“This lander, we’re expecting to land on the moon between 12 and 16 months from today,” John Couluris, senior vice president of lunar permanence at Blue Origin, said during a n interview on the CBS News program “60 Minutes” this month.

The first launch of the Mark 1 version of the Blue Moon lander is what Blue Origin calls a “pathfinder” to test technologies like the BE-7 engine, the flight computers, avionics and power systems — the same systems that will be used in the much larger Mark 2 lander that will take astronauts to the moon’s surface.

The Mark 1 lander can carry up to three tons of cargo to the lunar surface, but will be small enough to fit inside one of Blue Origin’s New Glenn rockets . New Glenn has yet to fly, but the company says its debut journey will occur later this year.

After Blue Moon Mark 1 is launched into an orbit about 125 miles above Earth’s surface, the lander’s BE-7 engine will propel it toward the moon, slowing it down to enter orbit around the moon and then guiding it to the landing on the surface.

The smaller size means that the Mark 1 lander, unlike Starship, will not need to be refueled before leaving Earth orbit. Demonstrating that refueling technology in orbit will be a key test to validate Starship’s design. Refueling will also be needed for the Blue Moon Mark 2 lander.

Mr. Musk and Mr. Bezos have already been beaten to the moon by another billionaire, Kam Ghaffarian , one of the founders of Intuitive Machines, which put a small robotic lander named Odysseus near the lunar south pole in February . That was the first private spacecraft to successfully make it to the moon’s surface in one piece (although its journey had some hiccups ).

As with every American rocket mishap, the Federal Aviation Administration will open an investigation to review what went wrong and what SpaceX needs to do to correct it. But if, as Elon Musk says, there are at least six more Starship flights this year, SpaceX will have opportunities to complete a full test flight.

Starship's third flight went very far, but like its first two flights, it was not a complete success. The landing burn for the Super Heavy booster stage of the rocket — the aim was to “land” it in the Gulf of Mexico — was not fully successful, and the Starship craft did not survive re-entry. But it was marked significant progress, because none of the problems from the earlier flights recurred, and SpaceX engineers now have data to tackle the new problems.

Michael Roston

On the social media site X, Bill Nelson, the administrator of NASA, congratulated SpaceX on what he called a “successful test flight” of Starship. The agency is counting on Starship to land astronauts on the moon’s surface as part of the Artemis III mission. Another vehicle, the Orion capsule, is to be used to bring those astronauts back to Earth.

SpaceX says Starship did not survive re-entry, but it achieved several key milestones during the flight. That marks significant progress since the second test flight. Elon Musk has said he hopes there will be a half-dozen Starship flights this year.

SpaceX says a dual loss of communication, both through its own Starlink satellites and other forms spacecraft communications with Earth, suggest that Starship did not survive re-entry. They’re still listening to see if radio contact resumes.

Video is gone. Telemetry is also stuck at a speed 25,707 kilometers per hour and an altitude of 65 kilometers. The reason is not clear.

Starship already has private customers booked for deep space trips.

Starship has not yet done a full orbit of the Earth, but SpaceX already has three private astronaut missions on its manifest for the spacecraft.

The first flight with astronauts aboard will be led by Jared Isaacman who previously bought an orbital trip on a Falcon 9 rocket that was known as Inspiration4 .

Then two other Starship flights will travel around the moon and back, one led by Yusaku Maezawa , a Japanese entrepreneur, and the other by Dennis Tito, who was the first private individual to buy a trip to the International Space Station in 2001.

Back in 2018 when Mr. Maezawa signed up for the lunar flyby, Mr. Musk said Starship would be ready by 2023.

Mr. Maezawa later called the mission ‘dearMoon,’ inviting people to apply for a seat on the trip. Last week, he acknowledged it was not going to happen this year.

“We were planning for our lunar orbital mission ‘dearMoon’ to take place in 2023, but seems like it will take a little longer,” he wrote on the social network X. “We’re not sure when the flight will be, but we will give you all an update once we know more.”

SpaceX is apparently also planning uncrewed cargo flights to the surface of the moon with Starship.

In March last year, a small start-up company, Astrolab, announced that it was sending a Jeep Wrangler-size rover to surface in the south polar region of the moon , and the ride would be a cargo Starship flight that would take it there.

SpaceX did not confirm the news.

This appears to be part of the expanding potential market for Starship. SpaceX also plans to use the rocket for launching its second generation of Starlink internet communications satellites .

Starship is re-entering Earth's atmosphere. We’re seeing the heating on the flaps, with video being transmitted to the ground through SpaceX's Starlink satellites. The view is incredible. Usually the plasma disrupts radio transmissions.

SpaceX skipped the restart of one of the Raptor engines on the upper stage of Starship. It did conduct the propellant transfer test and the opening and closing of the payload door, which means the flight achieved some of its experimental objectives during its coast around the Earth, but not others. Next stop: Re-entry through the atmosphere and a hard bellyflop in the Indian Ocean.

The music on the livestream is more old-fashioned than the ambient beats we’re used to during SpaceX video feeds. But there’s nothing old-fashioned about the views in space from the rocket, which are unreal, but have not always been visible as its connection to the ground comes and goes.

During this period of the flight, Starship is scheduled to perform several tests. The first, opening the payload door, is complete. It will also move several tons of liquid oxygen between two tanks within Starship. That’s a preliminary test for future in-orbit refueling between two Starships, which is critical for sending the vehicle to the moon. Finally, Starship will try to restart one of its Raptor engines in the vacuum of space, something it has not done before.

The payload door of the upper Starship rocket stage is now open. That’s how a future Starship will deploy Starlink satellites, and demonstrating that it works was one of the objectives of today's flight.

The engines on the upper-stage of the rocket successfully completed their burn. Starship is now coasting in space, on a trajectory that will re-enter the atmosphere over the Indian Ocean.

We were watching the booster attempting to land in the Gulf of Mexico. But the camera feed cut off, and we're not sure what actually happened. The upper stage Starship is still continuing on its trajectory toward the Indian Ocean.

The Super Heavy booster stage of the rocket appears to be headed back to Earth. During the last attempt, the booster exploded at this point, so it looks like SpaceX has fixed that issue.

The large Super Heavy booster stage has separated from the Starship upper stage, which is on its way to space. The flight is looking good.

All 33 Raptor engines in the booster are working fine. So far everything looks good.

Less than 2 minutes until liftoff. Propellant tanks are full, and wind will not prevent an on-time liftoff.

Starship is less than 10 minutes away from its third launch. The countdown is going smoothly.

What will happen during Starship’s third test flight.

For its third test flight, Starship aims to fly part of the way around the Earth, starting from SpaceX’s launch site in Boca Chica Village, Texas, and splashing down in the Indian Ocean.

The earlier test flights — both of which ended in explosions — aimed to come down in waters off Hawaii. SpaceX said it had set the new flight path to allow for safe testing of things it hadn’t done before with the Starship vehicle.

The journey will start at the site that SpaceX calls Starbase, which is a few miles north of where Texas and Mexico meet along the Gulf of Mexico. The rocket, nearly 400 feet tall, will be mounted next to a launch tower that is about 480 feet tall. It will be filled with methane and liquid oxygen propellants during the hours before liftoff.

Three seconds before launch, computers will begin to ignite the 33 engines in the Super Heavy rocket booster beneath Starship.

Starship and Super Heavy will begin their ascent over the Gulf. At 52 seconds into the flight, SpaceX says, the vehicle will experience the heaviest atmospheric stress of its trip, a moment flight engineers call max-q.

If the stainless steel spacecraft survives that stress, the next key moment will occur 2 minutes and 42 seconds into flight, when most of the Super Heavy booster’s engines power down. Seconds later, the upper Starship vehicle will begin “hot-staging,” or lighting up its engines before separating from Super Heavy.

Super Heavy’s journey will end about seven minutes after launch. SpaceX would typically aim to return the massive rocket booster to the launch site for a vertical landing. But for the test flight, the spent Super Heavy will perform a series of maneuvers before firing its engines one last time to slow its descent into the Gulf of Mexico.

As Super Heavy is descending, Starship will be gaining altitude. About eight and a half minutes into its flight, its engines will switch off. It will then begin coasting around the Earth.

While floating through space, Starship will attempt several things that the spacecraft has never done. Nearly 12 minutes into the flight, it will open a door that in the future could deploy satellites and other cargo into space. About 12 minutes later, it will transfer propellants from one tank to another while in space, a technique needed for future journeys to the moon and beyond. Then, 40 minutes into the flight, Starship will relight one if its engines while in space.

If the spacecraft makes it through those experiments, the conclusion of Starship’s journey will start at about the 49-minute mark. The spacecraft is set to pivot horizontally into a belly-flop to re-enter Earth’s atmosphere. If it survives the extreme temperatures, Starship will splash down 64 minutes after it left Texas. The company has said in the past that it expects the belly-flop ocean landing to end in an explosion .

After SpaceX completes its testing campaign, future Starship flights will return to the Texas Starbase site after they complete their missions in orbit. SpaceX is also building a launch tower for Starship at Kennedy Space Center in Florida, where flights could one day launch and land, including the Artemis III mission that NASA plans to use to return American astronauts to the moon’s surface.

SpaceX has started the company’s official live video stream from Texas, a sign that it is serious about igniting the rocket in about 20 minutes. You can watch it in the video player embedded above.

What went right and wrong during the 2nd Starship test flight.

The second test flight of Starship in November got a lot higher and faster than the first attempt seven months earlier.

During the first launch outside Brownsville, Texas, in April last year, things went wrong from the start — the exhaust of the engines of the Super Heavy booster excavated a hole beneath the launchpad, sending pieces of concrete flying up to three-quarters of a mile away and a plume of dust drifting 6.5 miles, blanketing the nearby town of Port Isabel. Several of the booster engines failed, and the upper stage never separated from the booster.

Instead, the rocket started making loop-de-loops before the flight termination system destroyed it.

During the second test flight , all 33 of the booster engines worked during ascent. A water deluge system protected the launchpad. The upper Starship stage separated from the booster and then made it most of the way to orbital velocity. However, the journeys of both the booster and the upper Starship stage still ended in explosions.

For the booster, as it dropped away from the upper stage, 13 of the 33 engines fired again to guide it toward the landing location. Although this particular booster was not going to be recovered, SpaceX wanted to test the re-entry techniques that are similar to what it currently uses for its smaller Falcon 9 rockets. However, something went wrong. Several engines shut down and then one blew up, causing the destruction of the booster.

In an update posted on the company’s website on Feb. 26 , SpaceX said the most likely cause of the booster failure was a blockage of a filter where liquid oxygen flowed to the engines. The company said it had made design changes to prevent that from happening again.

The upper stage continued upward for seven minutes after stage separation. This was itself an achievement because the company completed a step called hot-staging, during which the upper-stage engines ignite before the stage detaches from the Super Heavy booster.

Because the spacecraft was empty, extra liquid oxygen was loaded to simulate the weight of a future payload it could carry to orbit. But when the extra oxygen was dumped, a fire started, disrupting communication between the spacecraft’s flight computers. The computers shut down the engines and then set off the flight termination system, destroying the spacecraft.

The upper Starship stage reached an altitude of about 90 miles and a speed of about 15,000 miles per hour. For a spacecraft to reach orbit, it needs to accelerate to about 17,000 miles per hour.

Frost lines have appeared on Starship and the Super Heavy booster as methane and liquid oxygen flow into the rocket’s tanks.

It’s sunrise in Cameron County, Texas, but weather reports show cloudy conditions persist. We’ll see if weather is going to keep Starship on the beach, but SpaceX says it has started loading propellants into the rocket.

Launch time is now 9:25 a.m. Eastern. SpaceX says winds are still a concern that could cause a liftoff to be called off, but it will go ahead with loading of propellants in the rocket.

SpaceX pushed the launch time back a little more, to 9:10 a.m. Eastern. They have until 9:50 to try today.

SpaceX has just announced the new target launch time is 9:02 a.m. Eastern, and the company said on X that it is clearing some boats from a safety zone in the Gulf of Mexico. Cameras from a number of space enthusiast websites like NASASpaceflight that are pointing at the rocket show there is still no frost on its side, so the loading of ultracold methane and liquid oxygen propellants has not yet begun.

As SpaceX prepares for its third flight of Starship, other space efforts have experienced difficulties this week. On Wednesday, Kairos, a rocket from a Japanese startup called Space One, exploded moments into its first launch attempt. And Xinhua, a Chinese state news agency, said on Thursday that two Chinese satellites were lost after a rocket failed to reach the planned orbit.

In a posting on the social media site X, SpaceX says that it is aiming for launch at 8:30 a.m. Eastern time, or 30 minutes into the 110-minute launch window. There is a 70 percent chance of favorable weather. There have been concerns of high winds, especially at higher altitudes.

What is Starship?

For Elon Musk, Starship is really a Mars ship. He envisions a fleet of Starships carrying settlers to the red planet in the coming years.

And for that eventual purpose, Starship, under development by Mr. Musk’s SpaceX rocket company , has to be big. Stacked on top of what SpaceX calls a Super Heavy booster, the Starship rocket system will be, by pretty much every measure, the biggest and most powerful ever.

It is the tallest rocket ever built — 397 feet tall, or about 90 feet taller than the Statue of Liberty including the pedestal.

And it has the most engines ever in a rocket booster: The Super Heavy has 33 of SpaceX’s powerful Raptor engines sticking out of its bottom. As those engines lift Starship off the launchpad in South Texas, they will generate 16 million pounds of thrust at full throttle.

NASA’s new Space Launch System rocket , which made its first flight in November 2022, holds the current record for the maximum thrust of a rocket: 8.8 million pounds. The maximum thrust of the Saturn V rocket that took NASA astronauts to the moon during the Apollo program was relatively paltry: 7.6 million pounds.

An even more transformative feature of Starship is that it is designed to be entirely reusable. The Super Heavy booster is to land much like those for SpaceX’s smaller Falcon 9 rockets, and Starship will be able to return from space belly-flopping through the atmosphere like a sky diver before pivoting to a vertical position for landing.

That means all of the really expensive pieces — like the 33 Raptor engines in the Super Heavy booster and six additional Raptors in Starship itself — will be used over and over instead of thrown away into the ocean after one flight.

That has the potential to cut the cost of sending payloads into orbit — to less than $10 million to take 100 tons to space, Mr. Musk has predicted.

Starship and Super Heavy are shiny because SpaceX made them out of stainless steel, which is cheaper than using other materials like carbon composites. But one side of Starship is coated in black tiles to protect the spacecraft from the extreme heat that it will encounter if it gets far enough in its flight to re-enter the atmosphere.

Here is what to know about Thursday’s SpaceX test flight.

The third try was closer to the charm for Elon Musk and SpaceX, as the company’s flight test of the mammoth Starship rocket launched on Thursday and traveled almost halfway around the Earth before it was lost as it re-entered the atmosphere.

The flight achieved some key milestones in the development of the vehicle, which could alter the future of space transportation and help NASA return astronauts to the moon.

This particular flight did not, by design, make it all the way around the Earth. At 9:25 a.m. Eastern time, Starship, the biggest and most powerful rocket ever to fly, lifted off from the coast of South Texas. About 45 minutes later it started its re-entry, but communications were lost a few minutes after that. The company said the rocket was lost before attempting to splash down in the Indian Ocean, a sign that more work needs to be completed on the vehicle.

That reusability gives SpaceX the potential to drive down the cost of lofting satellites and space telescopes, as well as people and the things they need to live in space.

Here’s what else to know:

Thursday’s flight demonstrated new capabilities for Starship. In addition to reaching orbital speeds, the Starship vehicle opened and closed its payload door and managed to move several tons of liquid oxygen between two tanks within the rocket, a key test needed for future missions.

The Starship system consists of two stages — the Super Heavy rocket booster and the upper-stage spacecraft, which is also called Starship. The company intends both to be fully reusable in the future. Read more about Starship .

Thursday’s launch was the third of Starship. Here’s a recap of what happened last time .