Deductible Travel Expenses

Many taxpayers go away on business and incur expenses while travelling, and those same taxpayers think that all expenses incurred while travelling are deductible as a business expense.  This is not true.  In fact, there are many restrictions on business travel expenses and the IRS highly scrutinizes any tax return that claims these business travel expenses.

The first step in determining what travel expenses are deductible is to determine the tax home of the taxpayer.  Once the tax home is established, the taxpayer will know when they are travelling away from their tax home.  Once the tax home has been established, the taxpayer should separate their business travel expenses into three categories:  (1) meals, (2) entertainment, and (3) other expenses.

The following chart summarizes the travel expenses that a taxpayer can deduct once they are away from their tax home:

  • Transportation – A taxpayer can deduct the cost of travel by airplane, train, bus, or car between the taxpayer’s tax home and the business destination. 
  • Taxi, Bus, and Airport Limousines – A taxpayer can deduct the cost of fares for these and other types of transporation that takes the taxpayer (1) between the airport or station and the taxpayer’s hotel, and (2) between the taxpayer’s hotel and the work location or meeting location.
  • Baggage and Shipping – A taxpayer can deduct the cost of sending baggage and sample or display material between regular and temporary work locations.
  • Car – A taxpayer can deduct the cost of operating and maintaining the taxpayer’s car when travelling away from home on business.  However, the taxpayer can only deduct either (1) the actual expenses or (2) the standard mileage rate, plus any businses-related tolls and parking.
  • Cleaning – A taxpayer can deduct the cost of dry-cleaning and laundry.
  • Telephone – A taxpayer can deduct the cost of business calls while on a business trip.
  • Tips – A taxpayer can deduc the cost of tips paid for any expense listed in this chart.
  • Other – A taxpayer can deduct the cost of any ordinary and necessary expenses related to business travel.
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