Wondering what counts as a travel expense for your business? Look no further – we are here to break it down for you.
Travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. You can’t deduct expenses that are lavish or extravagant, or that are for personal purposes.
Internal revenue service
In order to categorize certain expenses as deductible travel expenses, the travel must meet several conditions:
Away from Tax Home
You must travel away from your regular place of business for a period long enough that you need to sleep or rest. Your regular place of business, or tax home, is the location where business is usually conducted. This generally applies to the city a business is located in.
For business purposes, a tax home is not necessarily where you live.
Example: If a business is located in NYC has an employee that lives in New Jersey but commutes each day, the costs associated with commuting do not count as business travel. If the same employee was required to travel to Los Angeles for a 2 day business trip that meets the other criteria, it would be considered a deductible travel expense.
Primarily for Business
More than 50% of the trip’s purpose must be for business activities such as meetings, conferences, or client visits.
Example: If you travel from NYC to Chicago for a three-day business conference, your transportation, hotel, and part of your meals would be deductible as business travel expenses. If you decide to extend your trip for an entire week to visit friends in the city, however, the majority of the trip would no longer be business related.
Ordinary & Necessary Expense
The travel must be common and accepted in your industry. It also myst be helpful, necessary and appropriate for your business.
Example: A freelance photographer may need to travel for a hired event, such as a wedding. In this case, the travel is common and necessary to fulfill their obligation. If a freelance journalist, however, decides to take a month-long tropical vacations for “inspiration” it may not qualify for business travel deductions.
Reasonable Costs
The expenses should be reasonable and cost effective; extravagant or personal expenses aren’t deductible.
Example: A business owner who books an economy flight and obtains lodging in a mid-range hotel could count their travel expenses as business related. However, if the same business owner chose to fly first-class and stay at a five-star, all-inclusive resort, despite these accomodations not being necessary to conduct a business meeting at a convention center, they would not be considered business travel expenses.
Deductible Travel Expenses
Transportation (airfare, rental cars, taxis/ rideshares, trains, etc)
Lodging (hotels, Airbnb)
Meals (typically deductable up to 50%)
Business-related phone or internet charges
Dry cleaning or laundry during the trip
Tips & Service fees on related expenses
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