Business Travel: Tax-Deductible?
Business Travel: What Is (and Isn’t) Tax-Deductible
Business travel, whether for a quick trip or extended stay, can wear on any of us. For most business owners the biggest place this is felt is in their bank accounts. From lodging to meals and transportation, business travel charges can add up quickly. Fortunately, most of these expenses are tax-deductible.
Now that this year’s tax season dust has settled, let’s take a closer look and clearly define what you can, and can’t, write off as a business travel expense on your tax return.
Tax-Deductible Business Travel Expenses
The IRS defines business travel as any travel that is “longer than an ordinary’s day of work”, requires you to sleep away from home and is temporary (i.e. less than a year).
The IRS requires that business travel expenses be, “ordinary and necessary expenses incurred while carrying on your trade or business.”
The following business expenses will generally qualify as tax-deductible. Don’t forget, always save your receipts!
Trains, planes or automobiles…no matter how you get to your business-related meeting or event, the expense can be deducted. And once you get to your final destination? Any transportation or fees associated with the trip are deductible as well. This includes taxis, Uber or Lyft, rental cars, tolls and parking. Don’t forget that you can also write off every mile you drive for your business, whether in your car or a rental. The current deductible rate is 57.5 cents per mile, offsetting gas and upkeep costs.
Extra Tip: Even cruises for business purposes are considered a write off, though limited. Typically you can claim up to $2,000, but be prepared to show clear justification and documentation.
Baggage and Shipping
All baggage and shipping fees associated with business travel are tax-deductible. Keep in mind that the final destination for these items must be your business travel location.
Whether in an extended stay hotel or AirBnb, your accommodations during business travel are considered a write off. Be careful, this doesn’t cover every charge you could possibly incur. Be sure to always get a detailed, itemized bill for all lodging charges, as not everything is tax-deductible. Parking/valet charges? Absolutely. Mini-bar and movies? Most likely not.
Any meals associated with business travel fall under the tax-deductible category. Let’s not go crazy though. Be aware that while you can claim meals as part of business travel, according to current IRS rules you are limited to only deducting 50% of the total cost. So, for every $500 you spend, only $250 you can write off.
Most any charge that is directly related to and necessary for business travel can qualify as tax-deductible. This includes conference or event registration fees, any equipment that is necessary for a presentation or meeting, dry cleaning or laundry service and more.
Non Tax-Deductible Business Travel Expenses
If any of us got creative enough we could probably come up with a reason why a certain charge was a necessary expense for business travel. When it comes to the IRS though, you don’t want to get too creative. To avoid an audit, keep all deductions within reason.
To help you tow the line, the IRS has deemed the following as non tax-deductible business travel expenses.
Expenses Located In Your Home City
In order to claim expenses as related to business travel you have to actually travel somewhere, outside of your home city. The only business expenses that are deductible at home are meals and the standard mileage rate (57.5 cents per mile). Lodging, transportation, conference fees and shipping within your home city are not considered a write off.
Companion Travel Costs
The charges incurred for anyone who comes along on your trip, who is not there for business purposes, are not tax-deductible.
Unnecessary: A broad term, but when it comes to the IRS – an important one. No one wants to be flagged for an audit, trust us. To protect yourself, always ask this question before claiming any deduction, “Was this expense necessary to conduct business while traveling?” If it’s even a little bit questionable, do yourself a favor and don’t claim it.
For additional information on tax-deductible expenses for business travel, see IRS publication 463 – Travel, Entertainment, Gift, and Car Expenses.