Travel Expenses Deductions: What You Need to Know

Author: Meredith Wood | May 9, 2014

So, you’re planning on doing some business-related travel and you want to know what is tax-deductible and what isn’t.  How do you find this information and better yet, how do you make the most of it?  When it comes to travel expenses for your business, there are some things you need to know.  For example, you may be able to write-off a trip if you’ve met with clients while in the area but you can’t write off your spouse’s meal because he or she simply tagged along.

The following information will help you deduct travel expenses incurred by your business while traveling to conferences, to meet with out-of-city and out-of-state clients and suppliers, and while traveling to and from your office buildings to meet with your employees. IRS Publication 463 defines travel expenses as “The ordinary and necessary expenses of traveling away from home for your business, profession, or job.  An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be required to be considered necessary.”

Traveling Away from Home
To be considered “traveling away from home,” you must be away from the general area of your tax home (The city or general area where you have a business.) longer than an ordinary day’s work and/or you’ll need to sleep or rest to meet the demands of your work while away from home.  You do not need to be gone for a whole day or from dusk to dawn.  If your relief from duty is long enough to get the rest you need, it’s permissible under IRS guidelines.

What You Can Deduct
Here are some examples of the travel expenses as defined in Table 1-1 of IRS Publication 463 that can be deducted:

Transportation.  This includes travel by airplane, train, bus or car between your home and your business destination.  Free tickets or tickets that were awarded as part of a frequent traveler program cannot be considered.  Your transportation cost will be considered $0.  Traveling by ship carries its own set of rules and limits.

  • Taxi, Commuter Bus, and Airport Limousine.  The fares for these modes of transportation can be deducted if they took you from the airport or station to your hotel or the hotel or work location of your customers or clients, business meeting place or temporary work location.
  • Baggage and Shipping. If you need to send baggage, samples or display materials between your regular and temporary work locations, the cost is deductible.
  • Car.  If your car is operated and maintained while traveling from home on business, you can deduct actual expenses or a standard mileage rate.  You can also deduct business-related tolls and parking.  If you rent a vehicle, you can only deduct the business-use portion of the expenses.
  • Lodging and Meals.  The food, beverages, taxes, and tips that you paid for while traveling on business can be deducted if it was overnight or long enough for you to stop and sleep to perform your duties.  Lavish meals are subjected to some rules, however.  The IRS recommends using the “standard meal allowance” method for deductions.  You set an amount for your daily meals and incidental expenses (M&IE) rather than deducting actual costs.  You must keep records to prove the time, place, and business purpose of your travel.
  • Dry Cleaning and Laundry.  You need to look your best to meet with customers or clients so it’s a given that these expenses are deductible.
  • Telephone.  Any business calls placed while on your business trip fall under the category of deductible.  That includes communication by fax machine or other communication devices.
  • Tips.  Any tip that you pay for the expenses listed here.
  • Other.  Transportation to and from a business meal, public stenographer’s fees, computer rental fees, and even operating and maintaining a house trailer.

Make the most of your travel-related deductions today.  Now that you know which ones the IRS permits you to take, you’ll lessen your tax liability and enjoy out-of-town meetings even more.  To learn even more about deducting travel expenses, especially those pertaining to overseas travel, visit www.irs.gov.

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