Question

being the $510 upgrade that Corey paid at the London Sofitel St James from a standard room costing $1,450 to a Deluxe room costing $1,960 at. You are to advise Corey exactly how much is tax-deductible in relation to the accommodation and reasons why

Answer 1

As per the IRS rules, the deduction with respect to lodging is available to the extent of actual cost incurred. However, such expenses should be reasonable in nature and not lavish/extravagant.

Corey has initially booked a standard room costing $1,450 which can be assumed to be sufficient to meet his requirements. However, he decided to spend $510 extra to upgrade to deluxe room. Therefore, in the given case, the reasonable expenditure would be $1,450 and the amount of $510 paid for deluxe room will get treated as lavish/extravagant expenditure. In such a case, the tax-deductible amount in relation to accomodation would be $1,450 only. Corey will not be able to claim deduction for the total amount of $1,960.

Answer is $1,450.