Sometimes, travel is necessary in order to improve your business. The good news is that the IRS allows you to deduct many of the expenses that come with your business-related travel.
You do need to be careful, though. Make sure that your expenses are truly related to business, and that your trip is more about business than about pleasure.
You should also realize that you should only take expenses that occur away from your “tax home.” Your tax home is the general area where your main work,, or main place of business is. So, if you travel to a different city, and work there during the week, and return to your family on the weekends, none of your travel is deductible. This is because your “tax home” for business purposes is the city in which your regular job is located, and when you travel home, you aren’t doing it for business purposes.
However, if you are on a temporary assignment (less than a year), or traveling to a convention or trade show for business purposes, you can deduct a number of your travel expenses. Here are some of the expenses you can expect to deduct for business travel:
- Car mileage: If you use your car to drive for business travel, the IRS will reimburse you for each mile traveled. Make sure you keep accurate records of your mileage.
- Transportation costs: You can deduct your transportation costs if you don’t use your own car, including transport by airplane, bus, and train. Additionally, you can deduct the costs of taxi rides and shuttle rides between the airport/station and your hotel, and between the hotel and your work location.
- Lodging: Your hotel costs are tax-deductible.
- Meals: In most cases, your business meals while on a trip are limited to 50% of the cost, so keep that in mind as you eat out.
- Entertainment: If you entertain a client or potential partner, and discuss business, you can usually deduct 50% of the cost. Be careful, though, there is a fine line between business entertainment and regular entertainment.
- Laundry/dry cleaning: If you need to pay to have your clothes cleaned while on your business trip, you can deduct it.
- Tips: When you provide tips to service providers and drivers, you can deduct those expenses.
- Conference fees: Conference and trade show fees are also tax-deductible – as long as you can show that they are related to your business. As long as you are meeting potential clients or partners, making useful business contacts, or learning skills that will help you better run your business, you can deduct registration fees.
- Business communications: If you incur costs related to business communications (faxes, calls, extra cell phone charges, Internet access), you can deduct those costs.
- Other miscellaneous costs: If you have to pay fees for a stenographer, rentals, maintaining a house trailer, or some other cost that is related to your business activities, you can deduct those expenses.
As always, whenever you plan to claim a tax deduction, you need to make sure that you have plenty of documentation. Keep receipts. You might even want to take notes about the people you talked to, and the business discussions you had (especially important if you want to deduct entertainment expenses). If you have questions about whether something truly qualifies as a deductible travel expense, you can visit IRS.gov, or you can speak with a knowledgeable tax professional.