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FAQ – How are travel expenses for which I was reimbursed treated for PAYE purposes?

What is a travel allowance, fixed travel allowance, employees’ tax treatment, income tax assessment treatment.

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Travel Allowances

• July 6, 2021
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COVID-19 has far-reaching effects for the South African taxpayer and, unbeknown to many, may be silently increasing their tax liability for the 2022 year of assessment. In some cases, the purpose for granting a travel allowance to employees (and the same applies to company vehicles) has been subverted by the pandemic, where business travel may no longer be required or possible. In this article we revisit the general taxing principles of a travel allowance, and the reimbursement of travel expenses claims. We also as consider how COVID-19 may increase the tax burden of an employee in this context.

The general taxing principles of a travel allowance and a reimbursive travel allowance

The SARS Guide for Employers in Respect of Allowances (2022 Tax Year) defines a travel allowance as  “any allowance paid or advance given to an employee in respect of travelling expenses for business purposes.”

Fundamentally, the legislative framework makes provision for two scenarios –

• A travel allowance given to an employee to finance transport, which in the ordinary course would be a set rate or amount per pay period (“travel allowance”).
• A reimbursement given to an employee based on actual business travel (“reimbursement”).

The travel allowance “deduction” operates on the premise that an allowance is included in a person’s taxable income (see section 8(1)(a)(i) of the Income Tax Act No. 58 of 1962 (“the Income Tax Act”)), to the extent that the allowance has not actually been expended on business travel (see section 8(1)(a)(i)(aa)). The general position is private travel is taxable and business travel is not taxable.

Travel allowance

Where the employee is granted a travel allowance, paragraph (cA) of the definition of “remuneration” under the Fourth Schedule to the Income Tax Act provides for two inclusion rates for purposes of deducting employees’ tax (PAYE), namely 80% or 20%.

The standard withholding rate is 80%, unless the employer is satisfied that at least 80% of the use of the motor vehicle in question will be for business purposes, in which case the inclusion rate is only 20%.

In certain cases, employers are cognisant that the employee will not expend their travel allowance on business travel to any degree, which prompts a 100% withholding rate. It is important to note, however, that since the release of the 2019 SARS BRS Change – Patch Phase 3, the 100% inclusion rate is no longer applicable and should therefore not be implemented on payroll.

This position aligns with the purpose of a travel allowance, which is to defray costs of business travel. Technically, where it is known at the outset that the employee will not use the allowances for business travel expenses, the amount is not a “travel allowance” as envisaged by section 8(1)(a)(i)(aa), read with the definition of “remuneration”.

Reimbursive travel allowance

An alternative to providing an employee with a monthly travel allowance amount is to provide the employee with a reimbursive travel allowance. A reimbursive travel allowance is an allowance paid to an employee for actual business kilometres travelled, according to either the SARS determined rate – which is R 3.82 per kilometre from 1 March 2021 (down 4% from R3.98) – or as determined by the employer.

The taxing of the reimbursive allowance has fundamentally changed from 1 March 2018. Where an employee is reimbursed using a rate higher than the SARS prescribed rate, the differential between the SARS prescribed rate and the rate utilised by the employer will be subject to employees’ tax (PAYE), regardless of the number of business-related kilometres travelled.

It is advisable that employers prudently consider their reimbursement rates against the prescribed rate. An unintended consequence of reimbursing an employee on a higher rate will increase the employee’s PAYE liability and may result in lower employee take-home pay. An alternative to avoid this possible occurrence would be for the employer to reimburse the employee at a rate below the prescribed rate of R 3.82 per kilometre. The reimbursement will not attract PAYE and will also not be taxable on the employee’s personal tax return.

In our practice we have a golden rule when it comes to employee travel debates, i.e. company car vs. travel allowance vs. reimbursive structure: an apples-with-apples computation must always be done. Each employee’s factual matrix will be different, and one can only determine the most optimal outcome once calculations for every scenario has been done.

Although the reimbursive changes have not altered an employee’s ability to claim against a travel allowance, they have introduced an additional record-keeping requirement. This especially becomes complex where travel reimbursive rates have changed during the tax year.

The Commissioner for SARS is alive to the fact that most employees’ circumstances have changes as a result of the pandemic, where business travel would generally have decreased to great extent. Building on their 2020 tax season approach, SARS will most likely enhance their robust stance on verifications and audits of tax returns. It is now, more than ever, particularly important to maintain an accurate and detailed travel logbook and to adopt good tax filing and compliance strategies.

Must I own the vehicle or motorcycle?

In certain circumstances, employees who receive travel allowances can find themselves travelling with a vehicle that is not self-owned, for example a relative’s motor vehicle. Will this disqualify the employee from claiming against the travel allowance? No, it is not imperative that the car in question should be owned by the employee. Section 8 of the Income Tax Act does not limit or disallow the claim against the travel allowance in this instance. Obviously, this can lead to an enquiry by the SARS auditor, possibly to check that there is only one person claiming against the same vehicle.

Travel allowance with the right of use of motor vehicle

Where an employee receives a travel allowance and has made use of a company-provided car, a tax claim against the travel allowance (in terms of travel for business purposes) will not be allowed (see section 8(1)(a)(i)(aa)).

This will raise a concern with the employee, as the use of a company motor vehicle is considered a taxable fringe benefit, according to paragraph 7(2)(b)) of the Seventh Schedule to the Income Tax Act. Taxes on the fringe benefit may also be withheld at either 80% or 20% of the benefit. Does this mean that even where the employee travels for business, he or she may not claim against taxes on the travel allowance and the company car fringe benefit? No, there is a way out.

Tax deduction against a right of use of motor vehicle

Although a deduction against a travel allowance is not possible under section 8, a reduction of the fringe benefit constituted by the use of an employer-provided vehicle can still be claimed. Like section 8(1)(a)(i), the claim against a fringe benefit under paragraph 7(2)(b)) of the Seventh Schedule has been worded similarly. The reduction of the fringe benefit operates on the premise that the fringe benefit should be excluded from a person’s taxable income to the extent that it is expended on business travel.

In other words, the fringe benefit can be reduced to the extent that the benefit has been actually expended on travelling on business, and not on private travel. To reiterate: private travel is taxable and business travel is not taxable. Similarly, the COVID-19 restrictions will have a direct impact on the business claim lodged against the fringe benefit. This may very well create an employee’s tax exposure for those employers who apply the 20% rule or otherwise will cause an unwelcome surprise in relation to the employee’s tax liability.

How does one prove or illustrate that travel was for business v private?

Section 8(1)(b)(iii) provides that “ where such allowance or advance is based on the actual distance travelled by the recipient in using a motor vehicle on business … or such actual distance is proved to the satisfaction of the Commissioner to have been travelled by the recipient … the amount expended by the recipient on such business travelling shall … be deemed to be an amount determined on such actual distance at the rate per kilometre fixed … in the Gazette for the category of vehicle used ”.

It is interesting to note that the word “logbook” is not specifically mentioned in the Act. Rather, reference is made to a travel allowance claim being allowed to a taxpayer that proves business distance travelled to the satisfaction of the Commissioner.

Nonetheless – and in practice – a taxpayer can discharge the onus of proof that travelling with a private vehicle was travel for business purposes through keeping a logbook and recording the necessary information related to business travel (see SARS Interpretation Note 14, paragraph 5.4.2). SARS has provided an acceptable format.

According to the SARS eLogbook Guide for 2021/2022 on the acceptable format, the bare minimum information required to claim a tax deduction is the following:

• The date of business travel
• The business kilometres travelled
• The business travel details (where to and the reason for the trip)

It is not necessary to keep record of the details of private travel. This format and the requirement to record only business kilometres travelled have remained consistent since the 2018 year of assessment. This was not the case during the 2015, 2016 and 2017 years of assessments, as per the respective 2015, 2016 and 2017 SARS eLogbook Guides. Furthermore, the SARS eLogbook Guide for 2020/2021 and 2021/2022 continues the same chorus and requires record of business travel only – continuing to provide taxpayers with administrative relief.

Whilst the law does not specifically require a format in which the onus must be discharged, the SARS logbook format is generally recommended as the path of least resistance. Nonetheless, as long as the logbook can discharge the taxpayer’s onus of proof it will be acceptable.

What is defined as business travel?

The Income Tax Act does not define what is regarded as travel for business purposes, and what constitutes private use of a travel allowance. The “travel between home and work” exclusion has caused interpretation problems for as long as can be remembered. The law clearly determines that private travelling includes “travelling between … place of residence and … place of employment or business” (see section 8(1)(b)(i)). In alleviating any further uncertainty, SARS has published Interpretation Note 14, noting the examples below to distinguish between business and private travel. (These should only be used as a guideline. It must be noted that SARS is not bound by Interpretation Notes and may deviate from them.)

• Where an employee travels from the office to attend a conference.
• Travelling from home to a client and the travel after the meeting to the office.
• Travelling from a home office to a client’s premises.
• Travelling from home to another branch of your employer where you are not ordinarily working.
• Examples of private travel include:
• Travel between the home and office.
• Travelling from a friend’s house to the office.
• Regularly travelling from home to different places of work on different days.

Could the current context of COVID-19 restrictions introduce an added interpretation problem on what constitutes business travel? Where an employee falling under the essential services category has travelled for business purposes during the lockdown periods, one would not anticipate any dilemma in claiming against a travel allowance. Considering that the restrictions announced by Government were legally binding, it will be interesting to see whether a claim for business kilometres travelled by a non-essential service employee, during the same period, will also be considered as valid business kilometres. This may only find application in the periods where the country operated under very strict lockdown restrictions but may very well become an added SARS audit requirement.

Calculating the claim

There are two methods of calculating the deductible amount against the travel allowance: the actual costs method and the deemed costs method. Each method has its own set of requirements.

1. The actual costs method

This method requires accurate information in the form of receipts, tax invoices and other relevant source documents. For the purpose of finance charges (section 8(1)(b)(iiiA)(bb)(B)) and wear-and-tear expenses (section 8(1)(b)(iiiA)(bb)(A)) the maximum vehicle value is R665 000.

The qualifying deduction is based on computing actual expenditure per kilometre and multiplying it with the business kilometres. To illustrate this, let us consider the below example:

Mr X owns a vehicle valued at R280 000 and incurred the following expenses:

Mr X travelled a total of 32 000 km, of which 8 000 km were for business purposes, as evidenced by his logbook. Mr X received a total travel allowance of R48 000 for the 2020 year of assessment. As a result, Mr X would be able to claim R21 637,50 (8 000 km ÷ 32 000 km x R86 550) as a deduction against his travel allowance.

2. The deemed costs method

The deemed costs method comprises three components: the fixed costs, the fuel costs and the maintenance costs. SARS provides a table from which the taxpayer determines the appropriate deemed cost elements based on the vehicle value. The table can be found on SARS’ website and is revised annually, per notice in the  Gazette . Taxpayers who want to claim using this method must bear maintenance costs and fuel costs themselves.

Considering the information provided in the previous example, the fixed cost, fuel cost and maintenance cost components can be referenced as follows. Figures below are relevant for a vehicle fitting into the R285 000 to R380 000 cost bracket.

In using this method, Mr X would be able to claim R39 224 (8 000 km x R4.903 per km) as a deduction against his travel allowance.

In our experience, the deemed costs method requires less administration and is almost always more favourable than the actual costs method. It is critical to note that the fuel and maintenance components can only be factored in where the employee has borne the full costs of fuel and maintenance. Where these are reimbursed to any degree, the relevant component cannot be factored in to calculate the cost per kilometre.

COVID-19 and travel allowances

The travel allowance will become a contentious item where employees are receiving a travel allowance for business travel and such business travel is not possible, or required as a result of the pandemic. In the initial stages of the pandemic, travelling was prohibited to a large extent. Since then, the restrictions have eased significantly, but this does not mean that the situation has changed. Company culture and practices have changed considerably, where employees are still precluded from working at the office or are given the option to work at home. The result is that meetings are held virtually and the need to travel to clients have diminished. The upshot is that business travel is, for the most part, no longer required. This reality was reflected in the 2021 Budget Review, where government noted that the efficacy of travel allowances will be reviewed:

“Reviewing tax provisions for travel and working from home In light of the large-scale migration to working at home over the past year, the National Treasury will review current travel and home office allowances to investigate their efficacy, equity in application, simplicity of use, certainty for taxpayers and compatibility with environmental objectives. In recognition of the potential effect on salary structuring, this will be a multi-year project, starting with consultations during 2021/22.”

Consequently, employees will be required to take extra care in preparing their logbooks and employers must consult with their employees on how their allowances should be structured and taxed.

In determining the taxing rate of the travel allowance – that is whether taxes should be withheld at a rate of 80% or 20% of the travel allowance – the employer and employee would have adopted a rate based on the actual travel performed in previous years, and on which much anticipation has been placed for the 2022 year of assessment. Regardless of the rate adopted by the employer, the sudden impact of COVID-19 and the limitations placed on the employee’s business travel may translate into a 2022 tax liability for the employee on submission of the related return.

Employers that have resolved to taxing 20% of a travel allowance paid to an employee who is not an essential services employee, or one that will no longer travel as normal, should perhaps consider adopting the 80% rate. This will likely assist the employee to “prepay” the pending tax liability resulting from an expected reduced travel allowance claim.

In case of a reimbursive travel allowance, the above dilemma appears to be conveniently avoided, even where a tax liability arises. A reimbursive allowance is paid to an employee at a rate multiplied by business kilometres travelled. This thus creates a relationship between the allowance and the business kilometres travelled. Employees will find that the risk of a deferred 2022 tax liability is eliminated, as their business travel claim will be directly aimed at the reimbursive allowance. The importance of a well-maintained travel logbook, for such employees, must be emphasised.

It is best practice that the employer’s resolution to tax more of the allowance be performed on a case-by-case basis and based on the factual circumstances of the employee, as opposed to a blanket approach. The change in withholding taxes will reduce take-home pay and will be felt immediately in the employee’s pocket, although preventing a cash flow burden in the long run.

Travel allowance deduction: The independent contractor perspective

What is the difference between employees’ and independent contractors’ deductions?

Due to the nature of the contract between an independent contractor and a client, the provision of a travel allowance would be unusual. An independent contractor would usually recover business travel costs incurred by invoicing or charging a disbursement fee.

An independent contractor, as explained in Interpretation Note 17, is an individual or person similar to an entrepreneur – someone clearly distinguishable as an “employer” and not an “employee”.

Implications of travel costs deduction

Section 8 does not cater for an independent contractor. Consequently, an independent contractor can rely on section 11(a) to obtain a deduction for travel costs – as well as section 11(e), in terms of claiming a capital allowance on the wear-and-tear incurred on his or her vehicle. The burden of proof is placed on the independent contractor (section 102 of the Tax Administration Act). This means relevant source documents, including a logbook, would need to be provided. The position may be summarised as follows:

• The independent contractor does not need a travel allowance or reimbursement to claim, and any amounts received by the independent contractor for business travel will form part of their gross income.
• The tax deduction is effectively claimed in the same way as an employee would claim against a travel allowance, by using the actual costs method, with a logbook indicating the portion of business travel.

Further to the above, the R665 000 limit for wear-and-tear and finance costs per section 8(1)(b)(iiiA)(bb)(A) and (B) is not applicable to an independent contractor. As mentioned above, the vehicle wear-and-tear expense is claimed separately as a capital allowance under section 11(e).

Example (based on the details provided above):

Mr X owns a vehicle valued at R280 000 that he bought on 1 March 2018. He incurred the following expenses:

Wear-and-tear expenses (claimed under section 11(e) – see below)

Mr X travelled a total of 32 000 km, of which 8 000 km were for business purposes, as evidenced by his logbook. As a result, Mr X would be able to claim R11 637.50 (8 000 km ÷ 32 000 km x R46 550) as a business travel expense against his gross income. In addition, Mr X would be able to claim a R14 000 wear-and-tear capital allowance – according to section 11(e), read together with Interpretation Note 47.

The wear-and-tear capital allowance is calculated as follows:

(R280 000 ÷ 5 × (12 months ÷ 12 months)) × (8 000 km ÷ 32 000 km) = R14 000

It is important to note that in this instance – as per section 11(e), and read with Interpretation Note 47 – an independent contractor who seeks to claim this capital allowance needs to be the owner of the vehicle or should have borne the cost of purchasing the vehicle. Contrary to section 8, the ownership of the vehicle is one of the important factors that need to be adhered to, in order to claim the section 11(e) capital allowance.

Key take aways

• Maintaining an accurate logbook remains imperative. For verifications and audits on the 2020 tax returns, it appears that SARS will look to build on the stance adopted during 2020, and scrutinise the information included on a travel logbook. A taxpayer must retain a logbook for at least five years, and SARS reserves the right to audit and query the content and information recorded in it. Where documents are not kept for five years, it is a criminal offence.
• Considering that the COVID-19 travel restrictions announced by Government are legally binding, it might be expected for an essential services employee to further support their essential service designation to SARS, in addition to providing a logbook.
• An employee might be facing a tax liability on assessment, where the employee is receiving a travel allowance or company vehicle for business travel and such business travel is not possible or no longer required.
• Similarly, in light of the restrictions and changes brought on by the pandemic, a reimbursive travel allowance might be viewed as a more apt option and suited to the circumstances. Even where an employer withholds taxes on the reimbursive allowance, an employee will be able to align their business travels to the reimbursive allowance and will find themselves more efficient come the 2022 tax submission.
• Where an employer is withholding taxes on 20% of the travel allowance paid to an employee whose business travel will be substantially limited due to the pandemic, the employer should consider adjusting their tax withholding strategy to align to the circumstances, where possible. It should be noted that generally SARS will legally come after the employer (and so they should for collection efficiency) where the 20% withholding is incorrectly applied. In saying that, failure by the employer to withhold the correct employees’ tax does not absolve the employee from a tax liability.

Article: TaxConsulting

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Subsistence, Travel Allowance Policy in South Africa

December 17, 2022 Jeremiah Amosu Southern Africa , South Africa 0

• Allowances in South Africa are granted to employees by their employers either to take care of future expenses or reimburse them for costs incurred while working.

Subsistence, travel allowance policy in South Africa are key areas of taxation in South Africa, especially for the fact that they are types of allowances.

Subsistence, Travel Allowance Policy in South Africa : General Perspective

Subsistence and Travel Allowances both have their features and are liable to taxation in certain instances while in some they are not.

Let’s do a proper breakdown of these allowances and enlighten you on how they work.

What is a Subsistence Allowance?

A subsistence allowance is a fixed amount provided to an employee or a holder of any office for expenses incurred in respect of personal subsistence and incidental costs such as meals and drinks.

SARS’ Deemed Costs For Subsistence Allowances

It is important to note that the South African Revenue Service (SARS) has a set deemed rate for meals and incidental costs for local travel which is applicable per night the employee spends away from home.

If you select the deemed rate set by SARS, it is not necessary to provide proof of what you have spent.

They also have a fixed daily amount for business travel outside of South Africa, which varies from country to country.

This brings us to Subsistence Allowance for both International and Local travel.

Subsistence Allowance International

This allowance applies in a situation where the accommodation to which the allowance relates is outside the Republic.

SARS specifies an amount that is deemed to be spent for each day that is spent in another country.

Log on to the SARS website and go to “Foreign” to view a complete list of countries and amounts deemed to have been expended.

Subsistence Allowance Local

This allowance applies in a situation where the accommodation to which the allowance or advance relates is in the Republic.

Every year, the Finance Minister discloses the amounts deemed to be spent and these are disclosed on the SARS website.

How A Subsistence Allowance Is Taxed

The tax is usually imposed on any amount that wasn’t spent while on a business trip and not returned to one’s employer.

It is usually assessed once you submit your annual tax return for assessment.

Tax-Free Subsistence Allowance

A tax-free subsistence allowance simply means that the allowance amount that you received from your employer is equal to the SARS deemed rate and therefore it is regarded as tax-free.

In other words, after deducting the SARS deemed rate from the allowance amount you received, there will be nothing left to tax.

Therefore, you don’t need to submit any supporting documentation and you also can’t make any claims against this allowance on your tax return.

Taxable Subsistence Allowance

If your employer repays you an amount that is higher than the SARS deemed rates for the expenses incurred, then it’s a taxable subsistence allowance.

This means that it will be indicated with the source code 3704 for local trips and/or 3715 for foreign travel.

Now that we’ve expatiated Subsistence Allowance and explained their taxation pattern, let us move on to Travel Allowance.

What is a Travel Allowance?

Travel allowance is any allowance given to an employee in respect of traveling expenses for business purposes.

A travel allowance should only be given to an employee where that employee is expected to use their private vehicle for the employer’s business.

It is risky for travel allowances to be paid to employees, not for commercial reasons, but only for tax reasons.

Note that the employee doesn’t need to own the vehicle that they are travelling in before they can receive a travel allowance, as long as it is being used for the employer’s business.

Usually, the allowance is paid in two forms:

1. It is either set at a specific amount per pay period or;

2. Reimbursed to an employee for actual business kilometers travelled, according to either the SARS deemed rate or as determined by the employer.

Reimbursive Travel Allowance

Most employers prefer to reimburse their employees rather than set an amount because there is no guarantee that the employee will spend the whole amount while on business travel.

Employers should reimburse their employees at a rate below the SARS prescribed rate of R 3.82 per kilometer so that it will not attract PAYE and will also not be taxable on the employee’s tax return.

Taxation for Travel Allowance

Taxation for travel allowance operates on the assumption that an allowance is included in a person’s taxable income to the extent that the allowance has not been spent on business travel.

The general position is that private travel is taxable and business travel is not taxable.

Where an employee is reimbursed using a rate higher than the SARS deemed rate, the disparity between the SARS deemed rate and the rate used by the employer will be liable to employees’ tax (PAYE).

This is done irrespective of the number of business-related kilometers traveled.

There are two inclusion rates for purposes of deducting employees’ tax (PAYE), namely 80% or 20%.

Unless the employer is convinced that at least 80% of the use of the motor vehicle that the employee is receiving a travel allowance for is business related, the basic withholding rate is 80%.

When the employer is convinced though, the inclusion rate is only 20%.

However, employers opt for a 100% withholding rate when they realize that the employee will not spend much of their travel allowance on business travel.

Business Travel and Private Travel

When an employee receives a travel allowance, it is usually spent on either business travel or private travel, even though they are both business related.

There are two options available to determine the business travel deduction on assessment.

1 . Where an employee has kept a detailed logbook of the business kilometers traveled during the tax year.

2 . Where an employee does not keep records of actual business traveling. In this case, the first 18,000 kilometers traveled in the tax year will be considered to be private travel, while the subsequent 14,000 kilometers will be deemed to be business travel.

It is important to note that travel between home and work is regarded as private travelling and kilometers travelled more than 32 000 will also be considered to be private.

In conclusion, both subsistence and travel allowance are granted by employers in South Africa to help employees take care of expenses such as food, drinks, accommodation, travel, etc.

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The information contained herein is general and is not intended, and should not be taken, as legal, accounting or tax advice provided by Taxmobile.Online Inc to the reader. This information remains strictly the opinion of Taxmobile.Online Inc.

The reader also is cautioned that this material may not apply to, or suitable for, the reader’s specific circumstances or needs, and may require consideration of other tax factors if any action is to be contemplated. The reader should contact his or her Tax Advisers before taking any action based on this information.

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Biden-Harris Administration Announces Final Rule Requiring Automatic Refunds of Airline Tickets and Ancillary Service Fees

Rule makes it easy to get money back for cancelled or significantly changed flights, significantly delayed checked bags, and additional services not provided  

WASHINGTON – The Biden-Harris Administration today announced that the U.S. Department of Transportation (DOT) has issued a final rule that requires airlines to promptly provide passengers with automatic cash refunds when owed. The new rule makes it easy for passengers to obtain refunds when airlines cancel or significantly change their flights, significantly delay their checked bags, or fail to provide the extra services they purchased.

“Passengers deserve to get their money back when an airline owes them - without headaches or haggling,” said U.S. Transportation Secretary Pete Buttigieg . “Our new rule sets a new standard to require airlines to promptly provide cash refunds to their passengers.”  

The final rule creates certainty for consumers by defining the specific circumstances in which airlines must provide refunds. Prior to this rule, airlines were permitted to set their own standards for what kind of flight changes warranted a refund. As a result, refund policies differed from airline to airline, which made it difficult for passengers to know or assert their refund rights. DOT also received complaints of some airlines revising and applying less consumer-friendly refund policies during spikes in flight cancellations and changes. 

Under the rule, passengers are entitled to a refund for:

• Canceled or significantly changed flights: Passengers will be entitled to a refund if their flight is canceled or significantly changed, and they do not accept alternative transportation or travel credits offered. For the first time, the rule defines “significant change.” Significant changes to a flight include departure or arrival times that are more than 3 hours domestically and 6 hours internationally; departures or arrivals from a different airport; increases in the number of connections; instances where passengers are downgraded to a lower class of service; or connections at different airports or flights on different planes that are less accessible or accommodating to a person with a disability.  
• Significantly delayed baggage return: Passengers who file a mishandled baggage report will be entitled to a refund of their checked bag fee if it is not delivered within 12 hours of their domestic flight arriving at the gate, or 15-30 hours of their international flight arriving at the gate, depending on the length of the flight.  
• Extra services not provided: Passengers will be entitled to a refund for the fee they paid for an extra service — such as Wi-Fi, seat selection, or inflight entertainment — if an airline fails to provide this service.

DOT’s final rule also makes it simple and straightforward for passengers to receive the money they are owed. Without this rule, consumers have to navigate a patchwork of cumbersome processes to request and receive a refund — searching through airline websites to figure out how make the request, filling out extra “digital paperwork,” or at times waiting for hours on the phone. In addition, passengers would receive a travel credit or voucher by default from some airlines instead of getting their money back, so they could not use their refund to rebook on another airline when their flight was changed or cancelled without navigating a cumbersome request process.  

The final rule improves the passenger experience by requiring refunds to be:

• Automatic: Airlines must automatically issue refunds without passengers having to explicitly request them or jump through hoops.   
• Prompt: Airlines and ticket agents must issue refunds within seven business days of refunds becoming due for credit card purchases and 20 calendar days for other payment methods.  
• Cash or original form of payment: Airlines and ticket agents must provide refunds in cash or whatever original payment method the individual used to make the purchase, such as credit card or airline miles. Airlines may not substitute vouchers, travel credits, or other forms of compensation unless the passenger affirmatively chooses to accept alternative compensation.    
• Full amount: Airlines and ticket agents must provide full refunds of the ticket purchase price, minus the value of any portion of transportation already used. The refunds must include all government-imposed taxes and fees and airline-imposed fees, regardless of whether the taxes or fees are refundable to airlines.

The final rule also requires airlines to provide prompt notifications to consumers affected by a cancelled or significantly changed flight of their right to a refund of the ticket and extra service fees, as well as any related policies.

In addition, in instances where consumers are restricted by a government or advised by a medical professional not to travel to, from, or within the United States due to a serious communicable disease, the final rule requires that airlines must provide travel credits or vouchers. Consumers may be required to provide documentary evidence to support their request. Travel vouchers or credits provided by airlines must be transferrable and valid for at least five years from the date of issuance.

The Department received a significant number of complaints against airlines and ticket agents for refusing to provide a refund or for delaying processing of refunds during and after the COVID-19 pandemic. At the height of the pandemic in 2020, refund complaints peaked at 87 percent of all air travel service complaints received by DOT. Refund problems continue to make up a substantial share of the complaints that DOT receives.

DOT’s Historic Record of Consumer Protection Under the Biden-Harris Administration

Under the Biden-Harris Administration and Secretary Buttigieg, DOT has advanced the largest expansion of airline passenger rights, issued the biggest fines against airlines for failing consumers, and returned more money to passengers in refunds and reimbursements than ever before in the Department’s history.

• Thanks to pressure from Secretary Buttigieg and DOT’s flightrights.gov dashboard, all 10 major U.S. airlines guarantee free rebooking and meals, and nine guarantee hotel accommodations when an airline issue causes a significant delay or cancellation. These are new commitments the airlines added to their customer service plans that DOT can legally ensure they adhere to and are displayed on flightrights.gov .  
• Since President Biden took office, DOT has helped return more than $3 billion in refunds and reimbursements owed to airline passengers – including over $600 million to passengers affected by the Southwest Airlines holiday meltdown in 2022.   
• Under Secretary Buttigieg, DOT has issued over $164 million in penalties against airlines for consumer protection violations. Between 1996 and 2020, DOT collectively issued less than $71 million in penalties against airlines for consumer protection violations.  
• DOT recently launched a new partnership with a bipartisan group of state attorneys general to fast-track the review of consumer complaints, hold airlines accountable, and protect the rights of the traveling public.  
• In 2023, the flight cancellation rate in the U.S. was a record low at under 1.2% — the lowest rate of flight cancellations in over 10 years despite a record amount of air travel.  
• DOT is undertaking its first ever industry-wide review of airline privacy practices and its first review of airline loyalty programs.

In addition to finalizing the rules to require automatic refunds and protect against surprise fees, DOT is also pursuing rulemakings that would:

• Propose to ban family seating junk fees and guarantee that parents can sit with their children for no extra charge when they fly. Before President Biden and Secretary Buttigieg pressed airlines last year, no airline committed to guaranteeing fee-free family seating. Now, four airlines guarantee fee-free family seating, and the Department is working on its family seating junk fee ban proposal.  
• Propose to make passenger compensation and amenities mandatory so that travelers are taken care of when airlines cause flight delays or cancellations.   
• Expand the rights for passengers who use wheelchairs and ensure that they can travel safely and with dignity . The comment period on this proposed rule closes on May 13, 2024.

The final rule on refunds can be found at https://www.transportation.gov/airconsumer/latest-news and at regulations.gov , docket number DOT-OST-2022-0089. There are different implementation periods in this final rule ranging from six months for airlines to provide automatic refunds when owed to 12 months for airlines to provide transferable travel vouchers or credits when consumers are unable to travel for reasons related to a serious communicable disease. 

Information about airline passenger rights, as well as DOT’s rules, guidance and orders, can be found at   https://www.transportation.gov/airconsumer .

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IRS Tax Tip 2023-15, February 7, 2023

Whether someone travels for work once a year or once a month, figuring out travel expense tax write-offs might seem confusing. The IRS has information to help all business travelers properly claim these valuable deductions.

Here are some tax details all business travelers should know

Business travel deductions are available when employees must travel away from their  tax home  or  main place of work  for business reasons. A taxpayer is traveling away from home if they are away for longer than an ordinary day's work and they need to sleep to meet the demands of their work while away.

Travel expenses  must be ordinary and necessary. They can't be lavish, extravagant or for personal purposes.

Employers can deduct travel expenses paid or incurred during a  temporary work assignment  if the assignment length does not exceed one year.

Travel expenses for  conventions  are deductible if attendance benefits the business. There are special rules for conventions held  outside North America .

Deductible travel expenses include:

• Travel by airplane, train, bus or car between your home and your business destination.
• Fares for taxis or other types of transportation between an airport or train station and a hotel, or from a hotel to a work location.
• Shipping of baggage and sample or display material between regular and temporary work locations.
• Using a personally owned car for business.
• Lodging and  meals .
• Dry cleaning and laundry.
• Business calls and communication.
• Tips paid for services related to any of these expenses.
• Other similar ordinary and necessary expenses related to the business travel.

Self-employed individuals or farmers with travel deductions

• Those who are self-employed can deduct travel expenses on  Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) .
• Farmers can use  Schedule F (Form 1040), Profit or Loss From Farming .

Travel deductions for the National Guard or military reserves

National Guard or military reserve servicemembers can claim a deduction for unreimbursed travel expenses paid during the  performance of their duty .

Recordkeeping

Well-organized records  make it easier to prepare a tax return. Keep records such as receipts, canceled checks and other documents that support a deduction.

Subscribe to IRS Tax Tips

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Automatic Refunds and No More Hidden Fees: D.O.T. Sets New Rules for Airlines

The Transportation Department issued new requirements on refunds when flights are canceled or delayed and on revealing “junk” fees before booking. Here’s what passengers can expect.

By Christine Chung

The Transportation Department on Wednesday announced new rules taking aim at two of the most difficult and annoying issues in air travel: obtaining refunds and encountering surprise fees late in the booking process.

“Passengers deserve to know upfront what costs they are facing and should get their money back when an airline owes them — without having to ask,” said U.S. Transportation Secretary Pete Buttigieg in a statement, adding that the changes would not only save passengers “time and money,” but also prevent headaches.

The department’s new rules, Mr. Buttigieg said, will hold airlines to clear and consistent standards when they cancel, delay or substantially change flights, and require automatic refunds to be issued within weeks. They will also require them to reveal all fees before a ticket is purchased.

Airlines for America , a trade group representing the country’s largest air carriers, said in a statement that its airlines “abide by and frequently exceed” D.O.T. consumer protection regulations.

Passenger advocates welcomed the new steps.

Tomasz Pawliszyn, the chief executive of AirHelp, a Berlin-based company that assists passengers with airline claims, called it a “massive step forward and huge improvement in consumer rights and protection” that brings the United States closer to global standards in passenger rights.

Here’s what we know about the D.O.T.’s new rules, which will begin to go into effect in October.

There’s now one definition for a “significant” delay.

Until now, airlines have been allowed to set their own definition for a “significant” delay and compensation has varied by carrier . Now, according to the D.O.T., there will be one standard: when departure or arrival is delayed by three hours for domestic flights and six hours for international flights.

Passengers will get prompt refunds for cancellations or significant changes for flights and delayed bags, for any reason.

When things go wrong, getting compensation from an airline has often required establishing a cumbersome paper trail or spending untold hours on the phone. Under the new rules, refunds will be automatic, without passengers having to request them. Refunds will be made in full, excepting the value of any transportation already used. Airlines and ticket agents must provide refunds in the original form of payment, whether by cash, credit card or airline miles. Refunds are due within seven days for credit card purchases and within 20 days for other payments.

Passengers with other flight disruptions, such as being downgraded to a lower service class, are also entitled to refunds.

The list of significant changes for which passengers can get their money back also includes: departure or arrival from an airport different from the one booked; connections at different airports or flights on planes that are less accessible to a person with a disability; an increase in the number of scheduled connections. Also, passengers who pay for services like Wi-Fi or seat selection that are then unavailable will be refunded any fees.

Airlines must give travel vouchers or credits to ticketed passengers unable to fly because of government restrictions or a doctor’s orders.

The vouchers or credits will be transferable and can be used for at least five years after the date they were issued.

Fees for checked baggage and modifying a reservation must be disclosed upfront.

Airlines and ticket agents are now required to display any extra fees for things like checking bags or seat selection clearly and individually before a ticket purchase. They will also need to outline the airline’s policies on baggage, cancellations and changing flights before a customer purchases a ticket.

The rules, which apply to all flights on domestic airlines and flights to and from the United States operated by foreign airlines, have varying start dates.

For example, automatic refunds must be instituted by the airlines within six months. But carriers have a year before they’re required to issue travel vouchers and credits for passengers advised by a medical professional not to fly.

Follow New York Times Travel on Instagram and sign up for our weekly Travel Dispatch newsletter to get expert tips on traveling smarter and inspiration for your next vacation. Dreaming up a future getaway or just armchair traveling? Check out our 52 Places to Go in 2024 .

Christine Chung is a Times reporter covering airlines and consumer travel. More about Christine Chung

Open Up Your World

Considering a trip, or just some armchair traveling here are some ideas..

52 Places:  Why do we travel? For food, culture, adventure, natural beauty? Our 2024 list has all those elements, and more .

Mumbai:  Spend 36 hours in this fast-changing Indian city  by exploring ancient caves, catching a concert in a former textile mill and feasting on mangoes.

Kyoto:  The Japanese city’s dry gardens offer spots for quiet contemplation  in an increasingly overtouristed destination.

Iceland:  The country markets itself as a destination to see the northern lights. But they can be elusive, as one writer recently found .

Texas:  Canoeing the Rio Grande near Big Bend National Park can be magical. But as the river dries, it’s getting harder to find where a boat will actually float .