Business travel expenses add up quickly when you’re trying to impress clients or even just need to stay a couple nights in a new city. Hotels, food and transportation costs add up quickly. Luckily, the Internal Revenue Service (IRS) counts business travel expenses as deductible items. Claiming travel expenses can help you save money whenever you have to leave town on business.
When you’re claiming travel expenses you want to make sure that you’re doing it correctly, so that you can avoid a tax audit. Knowing what constitutes a business travel expense and how to claim them will keep you safe.
What Constitutes a Business Travel Expense?
The IRS allows you to claim travel expenses when you leave the general area of your tax home for longer than a day’s work. Your tax home is wherever you do your work. That means if your tax home is in Salt Lake City, but you have to travel to San Diego for business, claiming travel expenses would be acceptable.
However, if your tax home is in Salt Lake City, but you live in Las Vegas and you travel to Salt Lake during for the week for work, where you stay in a hotel and eat out at restaurants but return to Las Vegas every weekend, you cannot claim travel expenses. Salt Lake would be the tax home so any expenses to get to and from your tax home would not be deductible.
What Expenses can I Claim?
After you’ve determined if your expenses qualify as business travel, it’s time to determine what is deductible. As with all business expenses, claiming travel expenses must be necessary and ordinary. You cannot claim any travel expenses that are lavish, extravagant or personal.
The IRS allows you to claim the following travel expenses:
- Travel by plane, bus, car or train.
- Taxi fare between your hotel and the train/bus station or airport. Transportation between your hotel and the work location. Travel from customer to customer or from your work to a customer. Ubers or other ride sharing services are also deductible.
- Shipping of baggage and other necessary business tools. This can include, but isn’t limited to, displays and sample materials.
- Use of a car, for business purposes. This includes a car rental. You can deduct mileage for business trips only; you must subtract any personal use. Any tolls or parking fees can also be claimed as travel expenses.
- Meals and lodging
- Dry cleaning or laundry services
- Business calls, or other forms of communication, such as faxes.
- Any tips paid on these services.
- Entertainment costs when you’re doing business.
Other expenses can be claimed, but it’s best to consult your accountant with any questions.
How does Claiming Travel Expenses Work?
If you plan on claiming travel expenses we have one piece of advice: keep your receipts. The fastest, easiest way to prove how much you can deduct on a business trip is by knowing what you paid. Save all of your receipts from meals, hotels, cab rides, absolutely any time you pay someone ask for a receipt. (When you’re tipping keep track of how much you pay and where you paid it so that you have a record of it.)
When you file your tax return you’ll fill out an IRS from for business trips and submit with your tax return.
How Can I Turn My Business Trip into a Vacation?
Business trips can be incredibly boring if you go back to your hotel alone and watch TV every night. However, if you plan it out right, you could bring the whole family along and turn your business trip into a memorable family vacation.
If you are in charge of the plans for your business trip, then it makes it a lot easier to add some family time. Because you need to focus on business while you’re on your trip, try find a way to extend the trip so you can spend a few days with your family. The IRS isn’t usually too keen about adding days to the end of your trip, so try to schedule meetings late in the week (Thursday or Friday) and at the beginning of the week (Monday or Tuesday.) That way you can spend the weekend doing fun family activities.
Just because you’re bringing your family on a business trip doesn’t mean that their expenses are business related. You must keep your family’s expenses separate from your business expenses. You can’t deduct anything that you do for your family as business expenses. However, as long as the trip is mostly business your travel to and from the destination is still considered a business expense.