Can I Deduct That? Consult Our List of Deductible Business Travel Expenses
Palma Colón
•3 Oct 2024•
Navigating the cost of business travel while adhering to IRS regulations can be tricky, so it’s important to know which expenses are deductible and how to track them. For entrepreneurs and anyone managing travel for a small business, knowing the rules can save you money and keep you out of trouble. In this guide, we’ll give you a list of business travel expenses the IRS says you can deduct (though you should always consult a tax professional to be certain).
What Qualifies as a Business Travel Expense?
According to the IRS, business travel expenses are the costs you incur when traveling away from your regular work location (your tax home) for business purposes. The business trip must take you away for more than a regular workday and should warrant an overnight stay.
These rules focus on tax compliance, which of course is different from travel expense policies that some companies employ to dictate how employees manage and report expenses.
Essential Business Travel Expense List
Here are the most common business travel expenses you can deduct. The list is based on IRS guidelines to help you stay compliant and save money.
1. Transportation Costs
One of the biggest travel expenses is getting to and from your business destination, as well as getting around while you’re there. This category includes:
- Airfare, train, and bus tickets
- Car rentals and rideshares
- Gas and mileage when driving your own car
If you’re using your car or a rental car during a business trip, don’t forget to deduct parking fees and tolls. These expenses can be deducted separately from the standard mileage rate if you’re using your own vehicle.
2. Lodging
Whether you stay at a hotel, motel, or short-term rental, the cost of lodging is deductible as long as it’s business-related. Be sure to keep records of:
- Room rates, taxes, and fees
- Tips for hotel staff
- Business-related charges like meeting room rentals
However, non-business expenses, such as in-room movies or gym fees, are not deductible.
3. Meals
Business meals, which include food and beverages as well as taxes and tips, are generally 50% deductible. Small businesses and entrepreneurs have two options:
- Deduct actual costs by keeping all receipts
- Use the federal per diem rate for meals and incidental expenses
Be sure to understand the method of choice before departing on your trip.
4. Incidental Expenses
Smaller costs can add up. Common deductible incidental expenses include:
- Tips for services related to any deductible expenses
- Laundry and dry cleaning services
5. Communication Costs
Staying connected while traveling for work is critical. Fortunately, the costs of business-related phone calls, internet access, and fax services are deductible.
If you have a mobile plan that covers business travel, track those costs as well.
6. Shipping Costs
If your work requires shipping materials or equipment to your business destination, the cost is deductible. This includes fees for baggage and for shipping work-related documents or equipment.
Special Considerations for Business Travel Expenses
Business travel can sometimes include personal time, international trips, or even travel with family members. Here’s how to handle those situations:
Combining Business and Personal Travel
If your trip combines business and leisure travel, only the portion of expenses related to business is deductible. For international travel, if less than 25% of your trip is for personal reasons, the entire trip may still be considered business-related.
Mastering Your Bleisure Budget
Combining business and leisure travel can be exciting, but managing expenses requires extra care. It’s important to separate personal costs from work-related ones. Navan makes this easy, by allowing you to add leisure nights to your trip using a personal card, which helps you keep clear records and leaves no surprises if you’re using a company card.
Want to know more about bleisure travel? Unlock all the benefits here.
Traveling with Companions
If a spouse, child, or companion joins you, their travel expenses aren’t deductible unless they are employees performing substantial business tasks during the trip. Be sure to clearly document the business purpose to show that their involvement was necessary.
Cruise Travel
Cruise travel can be deductible, though this category is capped at $2,000 per year and must be directly tied to a business event. The IRS has especially strict rules for deducting these costs, so always consult a tax professional.
Tracking Your Business Travel Expenses
Maintaining proper documentation is essential when planning to deduct travel expenses. Here’s what you need to do:
- Keep all receipts: You’ll need receipts for every business-related expense incurred during travel. Digital copies are acceptable for tax purposes.
- Categorize expenses: Categorize each travel expense based on its type, such as transportation, lodging, meals, or entertainment. This helps organize your finances and is crucial for reporting purposes, for both internal reporting and tax deductions.
- Document the business purpose: Keep a detailed log of your activities, including who you met with, the purpose of the trip, and related business expenses. Having this information helps you verify the legitimacy of expenses in case of an audit.
By understanding which expenses are deductible and keeping detailed records, you can save money and stay compliant. Tools like a travel and expense management system can simplify the process, allowing you to focus on your business instead of paperwork.
Want to take the hassle out of managing your business travel expenses list? Book a demo and experience streamlined travel expense management with Navan.