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:
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- 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.
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