How to Deduct Business Travel Expenses
Do you travel for your own business? Do you have employees who travel? Make sure you know which travel expenses are deductible - and which are not.
How "Business Travel" Is Determined
Business travel is a specific term determined by the IRS to describe travel away from your tax home that is "substantially longer than an ordinary day's work" and that requires you to sleep or rest while away from home.
You must sleep away from home to be able to deduct these costs. The travel must also be "temporary" (lasting less than a year).
What You Can Deduct for Business Travel Away From Home
You can deduct costs to travel by train, bus, or airplane between your tax home and your business destination. For travel by ship, see the section on cruise ships below.
Car/Truck: You may deduct the costs of operating and maintaining your car or truck, using either actual expenses or the standard IRS mileage allowance. If you use the standard mileage allowance, you can also deduct tolls and parking expenses.
Taxi, commuter bus, airport limousine: You can deduct costs to take you from an airport to your hotel or to a business location.
Baggage and shipping: Costs for baggage delivery or for shipping business materials between your regular work location or tax home and a temporary work location are deductible.
Lodging and meals: You can deduct expenses for lodging and meals while away from home on a business assignment. You can submit actual expenses or use per diem rates, as determined by the IRS.
Deductions for Special Types of Travel
Conventions and Trade Shows: If you travel to a convention or trade show, you may need to show that the convention is directly related to or associated with your business. If you have a sales booth at the convention, that would qualify. If you are a delegate to a convention, the purpose of the convention must relate to your business.
Cruises: Cost of travel on cruise ships, even for direct or associated business purposes, is limited. You may be limited to a total of $2,000 of costs for the cruise, and other limitations may apply. Be prepared to provide documentation that the cruise activities were related to business purposes.
Documenting Travel Expenses
The most important part of the process of deducting travel expenses is to save all of your receipts. You don't have to save paper copies, but you should be able to pull out a separate receipt (not just a line item on a credit card) to show (1) date (2) expense details (3) amount spent and (4) business purposes. Be as specific as possible.
Don't forget that travel expenses must be, as stated by the IRS: "ordinary and necessary expenses incurred while carrying on your trade or business."
Learn more information on tax deductions for business travel on the IRS website.
Where to Show These Expenses
- For sole proprietors and single-member LLCs, show these expenses in the "Expenses" section of Schedule C.
- For partnerships and multiple-member LLCs, show these expenses in the "Deductions" section of Form 1065.
- For corporations, show these expenses in the "Deductions" section of Form 1120.
The information contained in this article is not tax or legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law. For current tax or legal advice, please consult with an accountant or an attorney.