Tax Deductions for Travel Expenses

A practical benefit of business travel is that many travel expenses are tax-deductible. The requirements for Federal tax deductions can be tricky to understand, so the purpose of this guide is to explain some of the common definitions and guidelines associated with taxation in the context of business travel.

The Definition of Travel

The IRS explains business travel as travel away from your tax home requiring you to be gone substantially longer than an ordinary day of work—long enough that you have to sleep or rest while away. Your “tax home” is the city or area where your place of business is located (or where you actually do your job), different from your place of residence. The length of the travel period can range from an overnight trip up to nearly a year of temporary assignment, so long as that assignment is understood or expected to be temporary. Conventions and seminars count as business trips for tax purposes as long as you can show that your attendance was for the purpose of benefiting the business. Interestingly, travel done in the course of looking for a new job inside your current trade or profession is also defined as business travel, though not when looking for a job outside your current field.

What Can Be Deducted

Expenses for traveling to and from your destination by plane, train, bus, or automobile (e.g. ticket costs, fuel costs)
Use of a personal vehicle, whether gas for your own car or taxi fares
Lodging costs
Meals

Meals are limited to deductions of 50% of their cost before reimbursement, but tipping for all services, including meals, is completely deductible.

Keeping Track of Your Expenses

You will of course be expected to provide proof of your business expenses, so keep copies of all receipts, including hotel bills and airline tickets. Most gas pumps nowadays can conveniently print receipts for you, and gas station attendants can provide you with receipts otherwise. Cash tips by their nature don’t lend themselves well to being recorded, but most tipping occurs with meals, which have a special set of rules. Rather than keeping a receipt for every meal, you may assume a standard allowance of $31 to $51 per meal depending on the area you’re visiting.

Further Research

Many states have different laws for deductions from state taxes, and your accountant will be more familiar with them. Be sure to ask for Federal tax regulations specific to your profession as well; a serviceman’s qualifications will differ from a doctor’s.