Travel Expense

[LLC_Partner]

I work one week per month in Illinois as a general partner of an LLC, and work/live the rest of the time from my home in Virginia. 90% of my income comes from a client in Illinois. Are my travel & living expenses for 12 trips to Illinois (one week each) deductible?

[GeorgeM777]

Perhaps.  The Tax Book provides the following with regard to unreimbursed expenses incurred by a partner in connection with partnership business:

Under the general rule, a partner is not allowed to deduct partnership expenses on his or her individual tax return. However, an exception applies when there is a provision in the partnership agreement requiring the partner to pay the expenses, or if payment of the expenses is a routine partnership practice tantamount to an agreement...Allowable expenses are deducted on Part II, Schedule E (Form 1040).  Report allowable unreimbursed partnership expenses as a separate item from partnership income on line 28, Schedule E.  Enter “UPE” as the name of the line item, then list the amount on (i) of line 28. The expense will be deducted from partnership income and will also reduce net income subject to self-employment tax.

[LLC_Partner]

Thank you GeorgeM777.

My question was more oriented towards determining my "tax home". If most of my income comes from another state but I'm only there one week per month, is my "tax home" that state? If so, then IRS topic 511 is very clear stating that travel expenses between "tax home" state and state of residence are NOT tax deductible. So if I only spend 84 total days in another state, but 90% of my income comes from that gig, if that my "tax home"?

Thanks

[GeorgeM777]

That additional information is helpful.  Yes, Illinois appears to be your "tax home" as that term is defined by the IRS in Topic 511. Tax home is not dependent on the number of days spent in a particular jurisdiction, but rather, the location where work activity is performed.  Thus, IL would be your tax home and your travel back to your domicile in Virginia would not be a deductible expense.

While you may already know this, whether you are an IL resident is entirely predicated on the fact of whether you maintain your domicile in IL.  Given that your domicile is the place where you reside and the place where you intend to return after temporary absences, your domicile would be VA and not IL.  

[LLC_Partner]

Thanks again GeorgeM777.

What if I spend the rest of my time preparing software and drawings at home (VA), for the 1 week of work a month at the remote state (IL). The work at home is unpaid, but strictly necessary for the paid work at the remote state.

Thanks

[GeorgeM777]

Those additional facts may not make a difference.  However, there are situations where a taxpayer’s residence may be treated as the taxpayer's tax home if the taxpayer's principal place of business is temporary rather than indefinite.   Employment is “temporary” if it is the type that can be expected to last for only a short period and is indefinite if its termination cannot be foreseen within a fixed or reasonably short period of time.  

It appears your place of business--IL--is not temporary.  It appears to be more permanent where you consistently commute one week per month to IL to perform work for which you are compensated.  Given these facts, it appears your tax home continues to be IL even though you perform additional duties in VA all of which are connected to your paid work in IL.