Travel Tax Credit: Will Uncle Sam Pay You to Take a Vacation?
There's a proposal in Congress to give you an "Explore America" tax credit of $4,000 or more to cover travel expenses. But don't pack your bags quite yet.
After being cooped up for months at home, who doesn't want to pack their bags and take a vacation? I certainly could use some time lounging on the beach or hiking up a mountain. And the travel industry wants us all to take a trip somewhere, too. Airlines, hotels, restaurants, and other businesses that rely on vacationers have been in the dumps during the coronavirus pandemic. They're looking for anything that will boost their bottom line.
So, how then do you make it easier for Americans to take a vacation and save the travel industry at the same time? How about a tax credit! That's the idea behind a bill introduced in Congress by Sen. Martha McSally (R-AZ). The American Tax Rebate and Incentive Program (TRIP) Act would provide a tax credit of up to $4,000 ($8,000 for married couples filing a joint return), plus an additional $500 for each child age 16 or younger, for your domestic travel expenses. (The credit is also being called the Explore America Tax Credit.)
What Expenses Would Be Eligible for the Credit?
Under the plan, you could claim a tax credit (up to the applicable amount mentioned above) for travel expenses related to:
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
- Food and beverages;
- Lodging;
- Transportation;
- Live entertainment (including sporting events); or
- Attending a conference or business meeting.
So, your meals and hotel expenses on vacation would be covered. You could even get a credit for your margaritas at the tiki bar. If you fly to your destination, airfare would be counted. If you drive your own car, you could claim the standard mileage rate for business travel as a credit (57.5¢ per mile in 2020). If you rent a car, the rental fee would be added to the total. Going to a show, no problem. Theme park tickets would probably be allowed as well.
There would be a couple of exceptions, though. For example, if you stay at your own vacation home, costs associated with that home (mortgage, interest, maintenance, etc.) would not count as lodging expenses. Any expenses that are also deductible as a business expense would not be eligible for the credit, either.
Where and When Can You Go?
To claim the credit, you would have to travel within the U.S. (including any U.S. territory or possession). Your final destination would also have to be at least 50 miles from your home. In addition, the credit would only be available for travel in 2020 and 2021.
What Are the Chances This Will Pass?
Before you book a trip, you should know that the chances of this bill ever becoming law are slim. President Trump has called for legislation to help the travel industry, and a few Republican senators like the general idea of a travel credit, but at this point the TRIP Act doesn't have widespread support in Congress.
As legislators hash out another stimulus package, a travel credit of some sort could make it's way into a final bill – but don't count on it. So, while you may be dreaming of the vacation of a lifetime, don't pack your bags just yet.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Rocky Mengle was a Senior Tax Editor for Kiplinger from October 2018 to January 2023 with more than 20 years of experience covering federal and state tax developments. Before coming to Kiplinger, Rocky worked for Wolters Kluwer Tax & Accounting, and Kleinrock Publishing, where he provided breaking news and guidance for CPAs, tax attorneys, and other tax professionals. He has also been quoted as an expert by USA Today, Forbes, U.S. News & World Report, Reuters, Accounting Today, and other media outlets. Rocky holds a law degree from the University of Connecticut and a B.A. in History from Salisbury University.
-
A Modern Guide to Money Etiquette: Gifts, Tips, Splitting Bills and More
What is modern money etiquette? The customs for splitting a restaurant check, purchasing a wedding gift, tipping and more have evolved. These guidelines can help.
By Emma Patch Published
-
Want to Give Money to Your Adult Children? 10 Things You Should Know
It’s less taxing to give money to your adult children than you might think. A good plan can help you avoid certain pitfalls — and drama.
By Jeremy Greenfield Published
-
Three Creative Ways to Lower Your Retirement Taxes
Tax Tips You can apply key minimalism concepts for potential tax savings. Here’s how.
By Kate Schubel Published
-
States That Offer a Child Tax Credit in 2024
Child Tax Credit Fifteen states plus the District of Columbia currently offer a child tax credit. Here’s how much you can get.
By Gabriella Cruz-Martínez Last updated
-
Three Tax Reasons to Retire in Panama
Retirement Taxes With low property taxes and tax-free foreign income, this tropical paradise could make you rethink retirement as a U.S. expat.
By Kate Schubel Last updated
-
Is the IRS Coming for Your Gambling Winnings?
Tax Tips The latest tax audit on unreported income points to high-income, high-wealth gamblers. Could
By Kate Schubel Published
-
Best States to Buy Chocolate Candy Tax-Free
State Taxes There’s something spooky this Halloween and it’s not just the ghouls. Find out if your state’s sales tax takes a bite out of sweet savings.
By Kate Schubel Last updated
-
Five Ways Your Boss Can Step Up in the Aftermath of a Hurricane
Tax Relief The IRS offers some tax advantages for employers that financially help their employees during federally declared disasters.
By Gabriella Cruz-Martínez Published
-
Six Tax Deadlines for October 15
Tax Deadlines You might know about the federal tax return extension deadline, but did you know about these other tax deadlines for Oct. 15?
By Kate Schubel Last updated
-
IRS Sued for Millions Over Employee Retention Credit (ERC) Delays
Tax Credits The pandemic-era tax refunds for businesses have been a contention point for the agency, now employers are fighting for their cash.
By Gabriella Cruz-Martínez Last updated