travelexpenses

Travel Expenses 101: How and When to Deduct Travel Expenses on Your Taxes

Taxes are probably your least favorite thing. Don’t miss out just because you don’t like them. Read on to learn how and when you can deduct travel expenses.

Do you travel for business? In 2017, travelers spent $319.2 billion on direct business traveling. Did you know you can deduct business travel expenses on your taxes?

Taxes are probably your least favorite thing. Don’t miss out just because you don’t like them. Read on to learn how and when you can deduct travel expenses.

A Few Rules on Deducting Business Travel Expenses

The first rule for deducting your travel expenses is that your travel must be mostly business-related. You cannot deduct personal vacations or pleasure trips. You must be traveling away from home to pursue a current business.

Travel expenses related to creating a new business or acquiring another business are not deductible under business expenses. You can figure in these costs with your startup fees and deduct part of them this way.

You also cannot claim any deductions for your spouse’s travel expenses if he or she goes with you on a business trip. If your spouse or other dependent work for the business, the travel expenses are deductible. Just like your expenses, the travel must be primarily for business.

Your expenses must be reasonable and not considered extravagant or lavish. You do get some slack here because the IRS won’t necessarily deny you for dining in four-star restaurants or flying first class.

Deductible Expenses

Now that we got a few little details clarified, let’s take a look at some of the items that are deductible. Here is a list of expenses you may be able to deduct from business trips:

  • Local transportation costs like taxi fares, transportation to the hotel or to the client, and also tips
  • 50 percent of meals
  • Airline, rail, and bus fares
  • Hotel expenses
  • Cleaning and laundry charges
  • Gasoline
  • Baggage charges
  • Computer rentals
  • Transportation costs for display materials or samples
  • Tips on these eligible expenses
  • Telephone or fax fees
  • Entertainment like theater tickets if it is for hosting a client

These expenses must be necessary for your travel. You must meet the business requirements to claim these deductions.

Keep Records and Receipts

When you travel, you need to keep your receipts and keep detailed logs for your business travel. Here is the information you should keep for each business trip:

  • The reason for your business travel
  • Miles driven (if you drove your car or a rental car)
  • All other expenses like gas, meals, transportation fares, and hotel costs

You will need these receipts if the IRS audits your taxes. Keep all the receipts together by trip along with your other notes-create a folder for each trip or you can store in one travel binder with pockets for each trip. This way it is easy to go through each trip to provide proof of expenses.

Combined Business and Personal Trips

What happens if you travel for business but decide to do a little personal travel as well? The IRS looks for people that try to claim a personal trip as business for deductions, but you can still deduct the business portion of your trip if your this travel was mostly for your business.

You need to record and decide on the main reason for this trip. Determine if you spend more time on business activities or personal sightseeing and entertainment. Your business time must be more than your personal time to be able to deduct any of these expenses.

If you travel internationally, you may have more limitations on deducting business expenses if you engage in personal activities on your trip. Trips that are mostly personal are not deductible.

If the trip is mainly for personal pleasure, your traveling expenses are not deductible. This includes trips where you conduct or engage in a few business activities on your vacation. You may deduct a few of these expenses if they qualify for business deductions, but not the trip itself.

Local Travel Expenses

Do you own a car that you use for business? If so, you can deduct the cost of business-related travel. This includes scenarios such drive time to a client’s location, going to pick up supplies, and transporting potential investors to job site.

You have options on this type of deduction. You can use the standard mileage rate by recording the miles you used for business purposes. You can also do actual expenses for the business portion which includes repairs and gasoline.

Be sure you keep a detailed log of all your mileage each time you use your car to travel. It will help you classify your business expenses.

Meal Costs

You can deduct your meal costs at only 50 percent of the total cost. You can deduct meals you eat alone while traveling if you are required to stay overnight or the travel is long enough that you need to stop to rest.

If you entertain clients or guests for business, you can also deduct these expenses. The rate is still only 50 percent of these meals.

There is one exception to the 50 percent rule. This is for workers traveling for work under the Department of Transportation regulations. These employees include interstate truck and bus drivers, airline employees, and mariners-meals are 80 percent deductible for these workers.

Simplify Records

Do you travel often and want to simplify your record keeping? If so, you can elect to use half of the Standard Meal Allowance (SMA) instead of the true costs of all your meals, tips, and cleaning charges.

The biggest advantage of choosing this option is that you don’t have to keep as many records and receipts. You still need to keep records that show the time, purpose, and place of your travel.

The downside of choosing this option is that these standard meal allowances are typically pretty low. Your real expenses are probably larger than these allowances, which gives you higher deductions.

Looking for Other Travel Advice?

Know that you know how to deduct travel expenses, take a look at some of our other travel articles for advice and tips on having the best travel experience whether it’s personal or business. You can find articles like how to pack for a business trip with just carry-on bags.