Self-employed? Traveling?

Consider using the Standard Meal Allowance.

Question:

I heard about the standard meal allowance rate. What is it? Does it apply to a self-employed individual?

Answer:

If you travel as a self-employed individual, you may be eligible to claim the standard meal allowance for each allowable travel day.

Each year the IRS releases updated allowance rates prior to the start of the government’s fiscal year, which begins October 1. Here are the details:

• The October 2019–September 2020 standard meal allowance is $55 per day.

• The rate applies to travel in the contiguous United States (CONUS).

• If you travel to high-cost localities within CONUS, you may be able to claim a higher daily rate, available on the government’s General Services Administration website.

If your duties require you 1) to be away from your tax home and 2) to sleep or rest to meet the demands of your work while away from home, you are traveling away from home and are eligible to deduct “ordinary and necessary” travel expenses, which would include the standard meal allowance. But don’t forget to prorate the allowance on days you depart and return.

Which records to keep: If you use the standard meal allowance, you do not need to track actual costs with receipts. Rather, you must keep records that prove the time, place, and business purpose of your travel.

The 50% limit: You can only deduct 50% of meal costs when using the standard meal allowance, just like actual costs.

Higher actual costs: If your actual costs are higher than $55 per day, use your actual costs instead of the allowance. But make sure to keep receipts!

For more details, read IRS Notice 2019-2020 and IRS Publication 463.