irs travel expenses deduction

How to Deduct Travel Expenses (with Examples)

Reviewed by

November 3, 2022

This article is Tax Professional approved

Good news: most of the regular costs of business travel are tax deductible.

Even better news: as long as the trip is primarily for business, you can tack on a few vacation days and still deduct the trip from your taxes (in good conscience).

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Even though we advise against exploiting this deduction, we do want you to understand how to leverage the process to save on your taxes, and get some R&R while you’re at it.

Follow the steps in this guide to exactly what qualifies as a travel expense, and how to not cross the line.

The travel needs to qualify as a “business trip”

Unfortunately, you can’t just jump on the next plane to the Bahamas and write the trip off as one giant business expense. To write off travel expenses, the IRS requires that the primary purpose of the trip needs to be for business purposes.

Here’s how to make sure your travel qualifies as a business trip.

1. You need to leave your tax home

Your tax home is the locale where your business is based. Traveling for work isn’t technically a “business trip” until you leave your tax home for longer than a normal work day, with the intention of doing business in another location.

2. Your trip must consist “mostly” of business

The IRS measures your time away in days. For a getaway to qualify as a business trip, you need to spend the majority of your trip doing business.

For example, say you go away for a week (seven days). You spend five days meeting with clients, and a couple of days lounging on the beach. That qualifies as business trip.

But if you spend three days meeting with clients, and four days on the beach? That’s a vacation. Luckily, the days that you travel to and from your location are counted as work days.

3. The trip needs to be an “ordinary and necessary” expense

“Ordinary and necessary ” is a term used by the IRS to designate expenses that are “ordinary” for a business, given the industry it’s in, and “necessary” for the sake of carrying out business activities.

If there are two virtually identical conferences taking place—one in Honolulu, the other in your hometown—you can’t write off an all-expense-paid trip to Hawaii.

Likewise, if you need to rent a car to get around, you’ll have trouble writing off the cost of a Range Rover if a Toyota Camry will get you there just as fast.

What qualifies as “ordinary and necessary” can seem like a gray area at times, and you may be tempted to fudge it. Our advice: err on the side of caution. if the IRS chooses to investigate and discovers you’ve claimed an expense that wasn’t necessary for conducting business, you could face serious penalties .

4. You need to plan the trip in advance

You can’t show up at Universal Studios , hand out business cards to everyone you meet in line for the roller coaster, call it “networking,” and deduct the cost of the trip from your taxes. A business trip needs to be planned in advance.

Before your trip, plan where you’ll be each day, when, and outline who you’ll spend it with. Document your plans in writing before you leave. If possible, email a copy to someone so it gets a timestamp. This helps prove that there was professional intent behind your trip.

The rules are different when you travel outside the United States

Business travel rules are slightly relaxed when you travel abroad.

If you travel outside the USA for more than a week (seven consecutive days, not counting the day you depart the United States):

You must spend at least 75% of your time outside of the country conducting business for the entire getaway to qualify as a business trip.

If you travel outside the USA for more than a week, but spend less than 75% of your time doing business, you can still deduct travel costs proportional to how much time you do spend working during the trip.

For example, say you go on an eight-day international trip. If you spend at least six days conducting business, you can deduct the entire cost of the trip as a business expense—because 6 is equivalent to 75% of your time away, which, remember, is the minimum you must spend on business in order for the entire trip to qualify as a deductible business expense.

But if you only spend four days out of the eight-day trip conducting business—or just 50% of your time away—you would only be able to deduct 50% of the cost of your travel expenses, because the trip no longer qualifies as entirely for business.

List of travel expenses

Here are some examples of business travel deductions you can claim:

• Plane, train, and bus tickets between your home and your business destination
• Baggage fees
• Laundry and dry cleaning during your trip
• Rental car costs
• Hotel and Airbnb costs
• 50% of eligible business meals
• 50% of meals while traveling to and from your destination

On a business trip, you can deduct 100% of the cost of travel to your destination, whether that’s a plane, train, or bus ticket. If you rent a car to get there, and to get around, that cost is deductible, too.

The cost of your lodging is tax deductible. You can also potentially deduct the cost of lodging on the days when you’re not conducting business, but it depends on how you schedule your trip. The trick is to wedge “vacation days” in between work days.

Here’s a sample itinerary to explain how this works:

Thursday: Fly to Durham, NC. Friday: Meet with clients. Saturday: Intermediate line dancing lessons. Sunday: Advanced line dancing lessons. Monday: Meet with clients. Tuesday: Fly home.

Thursday and Tuesday are travel days (remember: travel days on business trips count as work days). And Friday and Monday, you’ll be conducting business.

It wouldn’t make sense to fly home for the weekend (your non-work days), only to fly back into Durham for your business meetings on Monday morning.

So, since you’re technically staying in Durham on Saturday and Sunday, between the days when you’ll be conducting business, the total cost of your lodging on the trip is tax deductible, even if you aren’t actually doing any work on the weekend.

It’s not your fault that your client meetings are happening in Durham—the unofficial line dancing capital of America .

Meals and entertainment during your stay

Even on a business trip, you can only deduct a portion of the meal and entertainment expenses that specifically facilitate business. So, if you’re in Louisiana closing a deal over some alligator nuggets, you can write off 50% of the bill.

Just make sure you make a note on the receipt, or in your expense-tracking app , about the nature of the meeting you conducted—who you met with, when, and what you discussed.

On the other hand, if you’re sampling the local cuisine and there’s no clear business justification for doing so, you’ll have to pay for the meal out of your own pocket.

Meals and entertainment while you travel

While you are traveling to the destination where you’re doing business, the meals you eat along the way can be deducted by 50% as business expenses.

This could be your chance to sample local delicacies and write them off on your tax return. Just make sure your tastes aren’t too extravagant. Just like any deductible business expense, the meals must remain “ordinary and necessary” for conducting business.

How Bench can help

Surprised at the kinds of expenses that are tax-deductible? Travel expenses are just one of many unexpected deductible costs that can reduce your tax bill. But with messy or incomplete financials, you can miss these tax saving expenses and end up with a bigger bill than necessary.

Enter Bench, America’s largest bookkeeping service. With a Bench subscription, your team of bookkeepers imports every transaction from your bank, credit cards, and merchant processors, accurately categorizing each and reviewing for hidden tax deductions. We provide you with complete and up-to-date bookkeeping, guaranteeing that you won’t miss a single opportunity to save.

Want to talk taxes with a professional? With a premium subscription, you get access to unlimited, on-demand consultations with our tax professionals. They can help you identify deductions, find unexpected opportunities for savings, and ensure you’re paying the smallest possible tax bill. Learn more .

Bringing friends & family on a business trip

Don’t feel like spending the vacation portion of your business trip all alone? While you can’t directly deduct the expense of bringing friends and family on business trips, some costs can be offset indirectly.

Driving to your destination

Have three or four empty seats in your car? Feel free to fill them. As long as you’re traveling for business, and renting a vehicle is a “necessary and ordinary” expense, you can still deduct your business mileage or car rental costs even when others join you for the ride.

One exception: If you incur extra mileage or “unnecessary” rental costs because you bring your family along for the ride, the expense is no longer deductible because it isn’t “necessary or ordinary.”

For example, let’s say you had to rent an extra large van to bring your children on a business trip. If you wouldn’t have needed to rent the same vehicle to travel alone, the expense of the extra large van no longer qualifies as a business deduction.

Renting a place to stay

Similar to the driving expense, you can only deduct lodging equivalent to what you would use if you were travelling alone.

However, there is some flexibility. If you pay for lodging to accommodate you and your family, you can deduct the portion of lodging costs that is equivalent to what you would pay only for yourself .

For example, let’s say a hotel room for one person costs $100, but a hotel room that can accommodate your family costs $150. You can rent the $150 option and deduct $100 of the cost as a business expense—because $100 is how much you’d be paying if you were staying there alone.

This deduction has the potential to save you a lot of money on accommodation for your family. Just make sure you hold on to receipts and records that state the prices of different rooms, in case you need to justify the expense to the IRS

Heads up. When it comes to AirBnB, the lines get blurry. It’s easy to compare the cost of a hotel room with one bed to a hotel room with two beds. But when you’re comparing significantly different lodgings, with different owners—a pool house versus a condo, for example—it becomes hard to justify deductions. Sticking to “traditional” lodging like hotels and motels may help you avoid scrutiny during an audit. And when in doubt: ask your tax advisor.

So your trip is technically a vacation? You can still claim any business-related expenses

The moment your getaway crosses the line from “business trip” to “vacation” (e.g. you spend more days toasting your buns than closing deals) you can no longer deduct business travel expenses.

Generally, a “vacation” is:

• A trip where you don’t spend the majority of your days doing business
• A business trip you can’t back up with correct documentation

However, you can still deduct regular business-related expenses if you happen to conduct business while you’re on vacay.

For example, say you visit Portland for fun, and one of your clients also lives in that city. You have a lunch meeting with your client while you’re in town. Because the lunch is business related, you can write off 50% of the cost of the meal, the same way you would any other business meal and entertainment expense . Just make sure you keep the receipt.

Meanwhile, the other “vacation” related expenses that made it possible to meet with this client in person—plane tickets to Portland, vehicle rental so you could drive around the city—cannot be deducted; the trip is still a vacation.

If your business travel is with your own vehicle

There are two ways to deduct business travel expenses when you’re using your own vehicle.

• Actual expenses method
• Standard mileage rate method

Actual expenses is where you total up the actual cost associated with using your vehicle (gas, insurance, new tires, parking fees, parking tickets while visiting a client etc.) and multiply it by the percentage of time you used it for business. If it was 50% for business during the tax year, you’d multiply your total car costs by 50%, and that’d be the amount you deduct.

Standard mileage is where you keep track of the business miles you drove during the tax year, and then you claim the standard mileage rate .

The cost of breaking the rules

Don’t bother trying to claim a business trip unless you have the paperwork to back it up. Use an app like Expensify to track business expenditure (especially when you travel for work) and master the art of small business recordkeeping .

If you claim eligible write offs and maintain proper documentation, you should have all of the records you need to justify your deductions during a tax audit.

Speaking of which, if your business is flagged to be audited, the IRS will make it a goal to notify you by mail as soon as possible after your filing. Usually, this is within two years of the date for which you’ve filed. However, the IRS reserves the right to go as far back as six years.

Tax penalties for disallowed business expense deductions

If you’re caught claiming a deduction you don’t qualify for, which helped you pay substantially less income tax than you should have, you’ll be penalized. In this case, “substantially less” means the equivalent of a difference of 10% of what you should have paid, or $5,000—whichever amount is higher.

The penalty is typically 20% of the difference between what you should have paid and what you actually paid in income tax. This is on top of making up the difference.

Ultimately, you’re paying back 120% of what you cheated off the IRS.

If you’re slightly confused at this point, don’t stress. Here’s an example to show you how this works:

Suppose you would normally pay $30,000 income tax. But because of a deduction you claimed, you only pay $29,000 income tax.

If the IRS determines that the deduction you claimed is illegitimate, you’ll have to pay the IRS $1200. That’s $1000 to make up the difference, and $200 for the penalty.

Form 8275 can help you avoid tax penalties

If you think a tax deduction may be challenged by the IRS, there’s a way you can file it while avoiding any chance of being penalized.

File Form 8275 along with your tax return. This form gives you the chance to highlight and explain the deduction in detail.

In the event you’re audited and the deduction you’ve listed on Form 8275 turns out to be illegitimate, you’ll still have to pay the difference to make up for what you should have paid in income tax—but you’ll be saved the 20% penalty.

Unfortunately, filing Form 8275 doesn’t reduce your chances of being audited.

Where to claim travel expenses

If you’re self-employed, you’ll claim travel expenses on Schedule C , which is part of Form 1040.

When it comes to taking advantage of the tax write-offs we’ve discussed in this article—or any tax write-offs, for that matter—the support of a professional bookkeeping team and a trusted CPA is essential.

Accurate financial statements will help you understand cash flow and track deductible expenses. And beyond filing your taxes, a CPA can spot deductions you may have overlooked, and represent you during a tax audit.

Learn more about how to find, hire, and work with an accountant . And when you’re ready to outsource your bookkeeping, try Bench .

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Accounting | How To

Determining Tax Deductions for Travel Expenses + List of Deductions

Published August 15, 2023

Published Aug 15, 2023

WRITTEN BY: Tim Yoder, Ph.D., CPA

This article is part of a larger series on Accounting Software .

• 1. Determine Your Trip Meets the Requirements of a Business Trip
• 2. Check the List of Business Expenses That Qualify for Deductions
• 3. (For Those Mixing Business & Personal Travel): Allocate Expenses

Bottom Line

The IRS considers deductible travel expenses to be any ordinary and necessary expenses you incur while traveling away from home on business. To get tax deductions for travel expenses, the trip must have a business purpose and be temporary (less than one year) and you must be away from your tax home for a length of time that exceeds your usual work day or be away overnight to get sleep to fulfill the demands of your job while away.

Key Takeaways

• A qualifying business trip must take you away from home overnight long enough to require rest.
• Most expenses incurred during a qualifying business trip are deductible, including meals on days off.
• Partnerships, limited liability companies (LLCs), and corporations can directly pay or reimburse employees for business travel expenses and deduct them from their business returns.
• Self-employed business owners will deduct their travel expenses on Schedule C, while farmers will use Schedule F.
• Purely personal expenses on business trips, such as sightseeing, are nondeductible.

Step 1: Determine Your Trip Meets the Requirements of a Business Trip

A business trip for tax purposes is one that meets the following criteria:

• There must be a business purposes for the travel
• You are required to be away from your tax home
• The trip lasts overnight or a period long enough to require rest
• The trip is temporary

Business Purpose

Your trip must be an ordinary and necessary part of conducting your business for your expenses to be deductible. Below are some reasons you may decide to travel for business:

• Meeting with clients or customers: If you travel overnight to meet with clients or customers for business purposes, such as negotiating contracts, discussing projects, or providing consultations.
• Attending business conferences or seminars: If you travel to attend conferences, seminars, or trade shows that are relevant to your business activities, including acquiring new industry knowledge or networking with other professionals.
• Training or professional developmen t : If you travel to attend training programs, workshops, or courses directly related to your business or profession.
• Conducting in-person meetings or negotiations: If you need to travel to have face-to-face meetings or negotiations with business partners, suppliers, or other stakeholders.

Your tax home is not your residence but rather your principal place of business activity including the entire city or general location of your business. So, your business trip cannot be in the general vicinity of your principal place of business for you to be away from home.

• Amount of time you spend at each location
• Degree of business activity in each area
• Relative significance of the financial return from each area
• No regular place of business: If, by the nature of the work, there is no regular or principal place of business, then your tax home will be the place where you regularly live and where you travel to different job sites to perform your service.

For example, a self-employed repair person may not have a regular place of business because they spend each workday at a different customer’s location.

Overnight Stay

Overnight stays for travel purposes do not specifically mean staying from evening to the next morning. Instead, overnight means that the trip is longer than a typical day’s work and long enough for you to require rest. Resting in your car is generally not enough, but if you have to get a hotel room, then the trip will qualify as overnight regardless of when you sleep.

Transportation vs travel expenses: Local transportation at your tax home can be deductible without an overnight stay—if there is a business reason for the transportation, such as driving from your office to visit a client. On a tangent, when you travel overnight, your transportation is deductible, and so are things like lodging, meals, and incidental expenses.

Temporary Travel

For purposes of business travel, a temporary stay is one that is expected to last for less than one year. Open-ended trips are not temporary.

However, say you initially anticipate that your trip will last less than one year, but it later becomes apparent that it will last more than one year. The trip is a deductible business trip up until the point in time it becomes apparent it will last more than one year.

The IRS will also consider a series of assignments to the same location, all for short periods, that together cover a long period to be an indefinite assignment. Any expenses you incur from this type of trip will not be deductible.

Step 2: Check the List of Business Expenses That Qualify for Deductions

Your travel expenses must be business-related—unless an exception applies—to qualify for a deduction. However, if you incur expenses that are purely for personal pleasure, they are nondeductible.

Here is a list of business travel expenses that can be deducted.

Round-trip Transportation To-and-From the Destination

Transportation for a round trip to and from your temporary work location is deductible—and it could be anything that gets you to the location, including via your personal car. If you use your personal car, your costs are calculated using either the actual expenses or the standard mileage rate .

In addition, you can deduct additional round trips to return to home when you are not working.

However, the deduction for the additional round trips is limited to the cost you would have incurred if you stayed at the temporary location. Those costs could include meals and lodging.

• The business purpose of the meals is your business trip and are thus deductible—even if you eat alone.
• Meals on days off qualify.
• Travel to and from meals is deductible—even on your days off.
• The meals do not have to have a specific business purpose, such as meeting with a client.
• For longer trips, lodging can include monthly rentals.
• If you return home on your days off but keep the lodging at your travel location, then the lodging is still deductible if it is ordinary and necessary. For instance, the monthly rent of an apartment at your travel location would be deductible even if you return home on the weekends.

Transportation at the Destination

Once you arrive at your destination, you may need additional transportation to get around town—and these costs are deductible. The only exception would be if you travel to the destination for a purely personal reason like sightseeing on your day off.

Incidentals

Incidental expenses are minor expenditures associated with business travel. You can deduct the actual cost of any one of the following expenses:

• Shipping of baggage and sample or display material between your regular and temporary work locations
• Business seminar and registration fees
• Dry cleaning and laundry
• Business calls include business communications by fax machine and other communication devices
• Tips you pay for services related to any of these expenses
• Parking, tolls, and fees
• Any other similar ordinary and necessary expenses related to your business travel

Step 3 (For Those Mixing Business & Personal Travel): Allocate Expenses

When trips are both business and personal, the allocation of expenses varies based on the primary purpose of the trip. Determining the primary purpose of your journey requires you to evaluate the time spent on business vs personal activities.

Primarily Business Domestic Trips

If your trip is primarily for business purposes, then the round-trip transportation is 100% deductible and does not need to be allocated to the personal portion of your trip. However, all other expenses, like lodging and meals, must be allocated to personal expenses for days where there was no business reason for staying.

For example, if your seminar ends on Friday and you stay until Sunday, then the lodging and meals for Saturday and Sunday are nondeductible.

Primarily Personal Domestic Trips

If the primary purpose of your trip is personal, then none of the round-trip expenses are deductible. However, you can deduct the business portion of meals, lodging, and local transportation that was incurred for a business purpose.

Let’s say you stay a couple of days after your family vacation to meet with a client. The lodging and meals for those extra days are deductible.

Business Foreign Trips

The allocation of travel expenses on foreign trips is slightly different from the rules above. Round-trip transportation for foreign trips must be allocated to business and personal based on the number of business vs personal days on the trip. This is different from the “all or nothing” rule for the cost of domestic round-trip travel.

If your spouse joins you on a business trip, you usually cannot deduct any of their expenses. However, if your spouse’s trip satisfies a business purpose, then expenses must be otherwise deductible by the spouse.

Generally, for the travel costs of a spouse, dependent, or any other person to be tax-deductible, they must work for the business or be a co-owner.

Frequently Asked Questions (FAQs)

Are travel expenses tax deductible for business.

Yes, roundtrip travel is 100% tax deductible as long as the primary purpose of the trip is business. Once at your destination, expenses must be allocated between business and personal. However, all meals are deductible as long as the reason for your continued stay is business.

Can I deduct travel expenses for my employees?

Yes, you can generally deduct travel expenses for your employees as long as the expenses are ordinary and necessary, directly related to your business, and properly substantiated.

Is there a limit to the amount of travel expenses I can deduct?

Yes, there are some such as business travel on a cruise ship, where the expense is limited to $2,000 per year. Also, your expenses are limited to the non-lavish or extravagant cost of the trip, so you may want to be careful before booking a 5-star hotel.

Travel expenses are ordinary and necessary expenses you incur while you are temporarily away from home, so these expenses cannot be lavish in nature. To determine if a travel expense is deductible, it must be directly related to your trade or business.

When it comes to travel expenses, having well-organized records makes it much simpler to complete your tax return. Keep track of any records that may be used to substantiate a deduction, such as receipts, canceled checks, and other documentation.

About the Author

Find Timothy On LinkedIn

Tim Yoder, Ph.D., CPA

Tim worked as a tax professional for BKD, LLP before returning to school and receiving his Ph.D. from Penn State. He then taught tax and accounting to undergraduate and graduate students as an assistant professor at both the University of Nebraska-Omaha and Mississippi State University. Tim is a Certified QuickBooks ProAdvisor as well as a CPA with 28 years of experience. He spent two years as the accountant at a commercial roofing company utilizing QuickBooks Desktop to compile financials, job cost, and run payroll. Tim has spent the past 4 years writing and reviewing content for Fit Small Business on accounting software, taxation, and bookkeeping.

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• Building Your Business
• Business Taxes

7 Rules You Should Know About Deducting Business Travel Expenses

• What Is Your "Tax Home"?

Charges on Your Hotel Bill

The 50% rule for meals, the cost of bringing a spouse, friend or employee.

• Using Per Diems To Calculate Employee Travel Costs

Combined Business/Personal Trips

International business travel.

• The Cost of a Cruise (Within Limits)

Frequently Asked Questions (FAQs)

Helde Benser / Getty Images

The IRS has a specific definition for business travel when it comes to determining whether these expenses are tax deductible. The agency says business travel is travel that takes you away from your tax home and is "substantially longer than an ordinary day's work." It requires that you sleep or rest while you're away from home, and that you do so. The travel must be "temporary." This means it can't last a year or more.

Key Takeaways

• You can deduct expenses that take you away from your tax home for a period of time that would require you to spend the night.
• Your tax home is the city or area where your regular place of business is located.
• You’re limited to 50% of the cost of your meals.
• Your trip must be entirely business-related for costs to be deductible, but special rules apply if you travel outside the U.S.

What Is Your "Tax Home"?

Your tax home is a concept set by the IRS to help determine whether a trip is tax deductible. It's defined by the IRS as the entire city or general area where your regular place of business is located. It's not necessarily the area where you live. 

Your tax home can be used to determine whether your business travel expenses are deductible after you've determined where it's located. You can probably count your expenses during travel as business deductions if you have to leave your tax home overnight or if you otherwise need time to rest and sleep while you're away.

Check with a tax professional to make sure you're accurately identifying the location of your tax home.

Charges for your room and associated tax are deductible, as are laundry expenses and charges for phone calls or for use of a fax machine. Tips are deductible as well. But additional personal charges, such as gym fees or fees for movies or games aren't deductible.

You can deduct the cost of meals while you're traveling, but entertainment expenses are no longer deductible and you can't deduct "lavish or extravagant" meals. 

Meal costs are deductible at 50%. The 50% limit also applies to taxes and tips. You can use either your actual costs or a standard meal allowance to take a meal cost deduction, as long as it doesn't exceed the 50% limit.

The cost of bringing a spouse, child, or anyone else along on a business trip is considered a personal expense and isn't deductible. But you may be able to deduct travel expenses for the individual if:

• The person is an employee
• They have a bona fide business purpose for traveling with you
• They would otherwise be allowed to deduct travel expenses

You may be able to deduct the cost of a companion's travel if you can prove that the other person is employed by the business and is performing substantial business-related tasks while on the trip. This may include taking minutes at meetings or meeting with business clients.

Using Per Diems To Calculate Employee Travel Costs 

The term "per diem" means "per day." Per diems are amounts that are considered reasonable for daily meals and miscellaneous expenses while traveling. 

Per diem rates are set for U.S. and overseas travel, and the rates differ depending on the area. They're higher in larger U.S. cities than for sections of the country outside larger metropolitan areas. Companies can set their own per diem rates, but most businesses use the rates set by the U.S. government.

Per diem reimbursements aren't taxable unless they're greater than the maximum rate set by the General Service Administration. The excess is taxable to the employee.

If you don't spend all your time on business activities during an international trip, you can only deduct the business portion of getting to and from the destination. You must allocate costs between business and personal activities.

Your trip must be entirely business-related for you to take deductions for travel costs if you remain in the U.S., but some "incidental" personal time is okay. It would be incidental to the main purpose of your trip if you travel to Dallas for business and you spend an evening with family in the area while you're there. 

But attempting to turn a personal trip into a business trip won't work unless the trip is substantially for business purposes. The IRS indicates that “the scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip."

The rules are different if part or all of your trip takes you outside the U.S. Your international travel may be considered business-related if you were outside the U.S. for more than a week and less than 25% of the time was spent on personal activities. 

You can deduct the costs of your entire trip if it takes you outside the U.S. and you spend the entire time on business activities, but you must have "substantial control" over the itinerary. An employee traveling with you wouldn't have control over the trip, but you would as the business owner would.

 The trip may be considered entirely for business if you spend less than 25% of the time on personal activities if your trip takes you outside the U.S. for more than a week.

You can only deduct the business portion of getting to and from the destination if you don't spend all your time on business activities during an international trip. You must allocate costs between your business and personal activities.

The Cost of a Cruise (Within Limits) 

The cost of a cruise may be deductible up to the specified limit determined by the IRS, which is $2,000 per year as of 2022.  You must be able to show that the cruise was directly related to a business event, such as a business meeting or board of directors meeting.

The IRS imposes specific additional strict requirements for deducting cruise travel as a business expense.

How do you write off business travel expenses?

Business travel expenses are entered on Schedule C if you're self-employed . The schedule is filed along with your Form 1040 tax return. It lists all your business income, then you can subtract the cost of your business travel and other business deductions you qualify for to arrive at your taxable income.

What are standard business travel expenses?

Standard business travel expenses include lodging, food, transportation costs , shipping of baggage and/or work items, laundry and dry cleaning, communication costs, and tips. But numerous rules apply so check with a tax professional before you claim them.

The Bottom Line

These tax deduction regulations are complicated, and there are many qualifications and exceptions. Consult with your tax and legal professionals before taking actions that could affect your business. 

IRS. " Topic No. 511: Business Travel Expenses ."

IRS. " Publication 463 (2021), Travel, Gift, and Car Expenses ."

IRS. " Here’s What Taxpayers Need To Know About Business-Related Travel Deductions ."

Everything You Need to Know About the Business Travel Tax Deduction

Justin is an IRS Enrolled Agent, allowing him to represent taxpayers before the IRS. He loves helping freelancers and small business owners save on taxes. He is also an attorney and works part-time with the Keeper Tax team.

You don’t have to fly first class and stay at a fancy hotel to claim travel expense tax deductions. Conferences, worksite visits, and even a change of scenery can (sometimes) qualify as business travel.

What counts as business travel?

The IRS does have a few simple guidelines for determining what counts as business travel. Your trip has to be:

• Mostly business
• An “ordinary and necessary” expense
• Someplace far away from your “tax home”

What counts as "mostly business"?

The IRS will measure your time away in days. If you spend more days doing business activities than not, your trip is considered "mostly business". Your travel days are counted as work days.

Special rules for traveling abroad

If you are traveling abroad for business purposes, you trip counts as " entirely for business " as long as you spend less than 25% of your time on personal activities (like vacationing). Your travel days count as work days.

So say you you head off to Zurich for nine days. You've got a seven-day run of conference talks, client meetings, and the travel it takes to get you there. You then tack on two days skiing on the nearby slopes.

Good news: Your trip still counts as "entirely for business." That's because two out of nine days is less than 25%.

What is an “ordinary and necessary” expense?

“Ordinary and necessary” means that the trip:

• Makes sense given your industry, and
• Was taken for the purpose of carrying out business activities

If you have a choice between two conferences — one in your hometown, and one in London — the British one wouldn’t be an ordinary and necessary expense.

What is your tax home?

A taxpayer can deduct travel expenses anytime you are traveling away from home but depending on where you work the IRS definition of “home” can get complicated.

Your tax home is often — but not always — where you live with your family (what the IRS calls your "family home"). When it comes to defining it, there are two factors to consider:

• What's your main place of business, and
• How large is your tax home

What's your main place of business?

If your main place of business is somewhere other than your family home, your tax home will be the former — where you work, not where your family lives.

For example, say you:

• Live with your family in Chicago, but
• Work in Milwaukee during the week (where you stay in hotels and eat in restaurants)

Then your tax home is Milwaukee. That's your main place of business, even if you travel back to your family home every weekend.

How large is your tax home?

In most cases, your tax home is the entire city or general area where your main place of business is located.

The “entire city” is easy to define but “general area” gets a bit tricker. For example, if you live in a rural area, then your general area may span several counties during a regular work week.

Rules for business travel

Want to check if your trip is tax-deductible? Make sure it follows these rules set by the IRS.

1. Your trip should take you away from your home base

A good rule of thumb is 100 miles. That’s about a two hour drive, or any kind of plane ride. To be able to claim all the possible travel deductions, your trip should require you to sleep somewhere that isn’t your home.

2. You should be working regular hours

In general, that means eight hours a day of work-related activity.

It’s fine to take personal time in the evenings, and you can still take weekends off. But you can’t take a half-hour call from Disneyland and call it a business trip.

Here's an example. Let’s say you’re a real estate agent living in Chicago. You travel to an industry conference in Las Vegas. You go to the conference during the day, go out in the evenings, and then stay the weekend. That’s a business trip!

3. The trip should last less than a year

Once you’ve been somewhere for over a year, you’re essentially living there. However, traveling for six months at a time is fine!

For example, say you’re a freelancer on Upwork, living in Seattle. You go down to stay with your sister in San Diego for the winter to expand your client network, and you work regular hours while you’re there. That counts as business travel.

What about digital nomads?

With the rise of remote-first workplaces, many freelancers choose to take their work with them as they travel the globe. There are a couple of requirements these expats have to meet if they want to write off travel costs.

Requirement #1: A tax home

Digital nomads have to be able to claim a particular foreign city as a tax home if they want to write off any travel expenses. You don't have to be there all the time — but it should be your professional home base when you're abroad.

For example, say you've rent a room or a studio apartment in Prague for the year. You regularly call clients and finish projects from there. You still travel a lot, for both work and play. But Prague is your tax home, so you can write off travel expenses.

Requirement #2: Some work-related reason for traveling

As long as you've got a tax home and some work-related reason for traveling, these excursion count as business trips. Plausible reasons include meeting with local clients, or attending a local conference and then extending your stay.

However, if you’re a freelance software developer working from Thailand because you like the weather, that unfortunately doesn't count as business travel.

The travel expenses you can write off

As a rule of thumb, all travel-related expenses on a business trip are tax-deductible. You can also claim meals while traveling, but be careful with entertainment expenses (like going out for drinks!).

Here are some common travel-related write-offs you can take.

🛫 All transportation

Any transportation costs are a travel tax deduction. This includes traveling by airplane, train, bus, or car. Baggage fees are deductible, and so are Uber rides to and from the airport.

Just remember: if a client is comping your airfare, or if you booked your ticket with frequent flier miles, then it isn't deductible since your cost was $0.

If you rent a car to go on a business trip, that rental is tax-deductible. If you drive your own vehicle, you can either take actual costs or use the standard mileage deduction. There's more info on that in our guide to deducting car expenses .

Hotels, motels, Airbnb stays, sublets on Craigslist, even reimbursing a friend for crashing on their couch: all of these are tax-deductible lodging expenses.

🥡 Meals while traveling

If your trip has you staying overnight — or even crashing somewhere for a few hours before you can head back — you can write off food expenses. Grabbing a burger alone or a coffee at your airport terminal counts! Even groceries and takeout are tax-deductible.

One important thing to keep in mind: You can usually deduct 50% of your meal costs. For 2021 and 2022, meals you get at restaurants are 100% tax-deductible. Go to the grocery store, though, and you’re limited to the usual 50%.

{upsell_block}

🌐 Wi-Fi and communications

Wi-Fi — on a plane or at your hotel — is completely deductible when you’re traveling for work. This also goes for other communication expenses, like hotspots and international calls.

If you need to ship things as part of your trip — think conference booth materials or extra clothes — those expenses are also tax-deductible.

👔 Dry cleaning

Need to look your best on the trip? You can write off related expenses, like laundry charges.

{write_off_block}

Travel expenses you can't deduct

Some travel costs may seem like no-brainers, but they're not actually tax-deductible. Here are a couple of common ones to watch our for.

The cost of bringing your child or spouse

If you bring your child or spouse on a business trip, your travel expense deductions get a little trickier. In general, the cost of bring other people on a business trip is considered personal expense — which means it's not deductible.

You can only deduct travel expenses if your child or spouse:

• Is an employee,
• Has a bona fide business purpose for traveling with you, and
• Would otherwise be allowed to deduct the travel expense on their own

Some hotel bill charges

Staying in a hotel may be required for travel purposes. That's why the room charge and taxes are deductible.

Some additional charges, though, won't qualify. Here are some examples of fees that aren't tax-deductible:

• Gym or fitness center fees
• Movie rental fees
• Game rental fees

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Where to claim travel expenses when filing your taxes

If you are self-employed, you will claim all your income tax deduction on the Schedule C. This is part of the Form 1040 that self-employed people complete ever year.

What happens if your business deductions are disallowed?

If the IRS challenges your business deduction and they are disallowed, there are potential penalties. This can happen if:

• The deduction was not legitimate and shouldn't have been claimed in the first place, or
• The deduction was legitimate, but you don't have the documentation to support it

When does the penalty come into play?

The 20% penalty is not automatic. It only applies if it allowed you to pay substantially less taxes than you normally would. In most cases, the IRS considers “substantially less” to mean you paid at least 10% less.

In practice, you would only reach this 10% threshold if the IRS disqualified a significant number of your travel deductions.

How much is the penalty?

The penalty is normally 20% of the difference between what you should have paid and what you actually paid. You also have to make up the original difference.

In total, this means you will be paying 120% of your original tax obligation: your original obligation, plus 20% penalty.

Justin W. Jones, EA, JD

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At Keeper, we’re on a mission to help people overcome the complexity of taxes. We’ve provided this information for educational purposes, and it does not constitute tax, legal, or accounting advice. If you would like a tax expert to clarify it for you, feel free to sign up for Keeper. You may also email [email protected] with your questions.

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Deductions For Business Travel Expenses

If you travel away from home overnight on business, you can deduct these travel expenses:

• Airline, train, or bus fares — This includes first-class.
• Actual expenses or standard mileage rate
• Business-related tolls and parking

You might rent a car while you’re away from home on business. If you do, you can deduct only the business-use portion of the expenses. To learn more, see the Car and Truck Expenses tax tip.

• To and from the airport or station
• From one customer to another
• From one place of business to another
• Transportation from your temporary lodging to your temporary work assignment
• Baggage charges and transportation costs for sample and display materials
• Your own meal
• Another person’s meal

To learn more, see the Meals and Entertainment tax tip.

• Dry cleaning and laundry expenses
• Phone, fax, and Internet expenses
• Tips relating to deductible travel expenses
• Other expenses, like public stenographer’s fees or computer rental fees

You can’t deduct expenses if they’re lavish or extravagant.

If your trip is mainly for business but includes some personal activities, you can deduct these expenses:

• Travel expenses to and from the business destination
• Food and lodging during the business portion of the stay

However, if the trip is mainly for personal reasons, you can’t deduct those expenses. This is true even if you conduct some business at the destination. You can deduct business expenses you incur at the destination, regardless of the purpose of the trip.

If you attend a convention that benefits or advances your business, you can also deduct appropriate expenses. These include:

• Round-trip travel
• Meals and lodging
• Display costs

Travel outside the United States

You can deduct the cost of travel outside the United States if your entire trip is devoted to business activities. You could take a trip mainly for business, but engage in some personal activities there. If so, you have to prorate travel costs between your business and personal activities. Prorated costs include meals and lodging en route.

You can’t deduct expenses for travel as a form of education. Ex: If you’re a professor of Asian history, you can’t deduct the cost of a tour of Japan, even though the trip will enhance your lectures.

Special rules apply for conventions held outside the North American area and on cruise ships.

To learn more, see Publication 463: Travel, Entertainment, Gift, and Car Expenses at www.irs.gov.

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Tax Deductions for Business Travelers

When you are self-employed, you generally can deduct the ordinary and necessary expenses of traveling away from home for business from your income. But before you start listing travel deductions, make sure you understand what the Internal Revenue Service (IRS) means by "home," "business," and "ordinary and necessary expenses."

Ordinary vs. necessary expenses

Business home, not home sweet home, transportation expenses on a business trip are deductible, fees for getting around are deductible, lodging, meals and tips are deductible.

Key Takeaways

• Typically, you can deduct travel expenses if they are ordinary (common and accepted in your industry) and necessary (helpful and appropriate for your business).
• You can deduct business travel expenses when you are away from both your home and the location of your main place of business (tax home).
• Deductible expenses include transportation, baggage fees, car rentals, taxis and shuttles, lodging, tips, and fees.
• You can also deduct 50% of either the actual cost of meals or the standard meal allowance, which is based on the federal meals and incidental expense per diem rate.

The IRS defines expense ordinary and necessary expenses this way:

• An expense is ordinary if it is common and accepted in your industry
• An expense is necessary if it is helpful and appropriate for your business

You can claim business travel expenses when you're away from home but "home" doesn't always mean where your family lives. You also have a tax home—the city where your main place of business is located—which may not be the same as the location of your family home.

For example, if you live in Petaluma, California but your permanent work location is in San Jose where you stay in hotels and eat out during the work week, you typically can't deduct your expenses in San Jose or your transportation home on weekends.

• In this situation San Jose is your tax home , so no deductions are permitted for ordinary and necessary expenses there.
• Your trips to your home in Petaluma are not mandated by business.

Go by plane, train or bus—the actual cost of the ticket to ride is deductible, as well as any baggage fees. If you have to pay top dollar for a last-minute flight, the high-priced ticket is a business expense, but if you use frequent-flyer miles for a free ticket, the deduction is zero.

If you decide to rent a car to go on a business trip, the car rental is deductible. If you drive your own vehicle, you can usually take actual costs or the IRS standard mileage rate. For 2023 the rate is 65.5 cents per mile. You also can add tolls and parking costs onto your deduction. This amount increases to 67 cents per mile for 2024.

TurboTax Tip: Even if you use the federal meals and incidental expense per diem rates to calculate your deductions, be sure to keep receipts from all your meals and incidental expenses.

Fares for taxis or shuttles can be deducted as business travel expenses. For example, you can deduct the fare or other costs to go to:

• Airport or train station
• Hotel from the airport or train station
• Between your hotel and the work location
• Between clients in the area

If you rent a car when you arrive at your destination, the expense is deductible as long as the car is used exclusively for business. If you use it both for business and personal purposes, you can only deduct the portion of the rental used for business.

The IRS allows business travelers to deduct business-related meals and hotel costs, as long as they are reasonable considering the circumstances—not lavish or extravagant.

You would have to eat if you were home, so this might explain why the IRS limits meal deductions to 50% of either the:

• Actual cost of the meal
• Standard meal allowance

This allowance is based on the federal meals and incidental expense per diem rate that depends on where and when you travel.

Generally, you can deduct 50% of the cost of meals. Alternatively, if you do not incur any meal expenses nor claim the standard meal allowance, you can deduct the amount of $5 per day for incidental expenses. You can also deduct incidental expenses, such as:

• Fees and tips given to hotel staff
• Fees for porters and baggage carriers

But don't forget to keep track of the actual costs.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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What Are Travel Expenses?

Understanding travel expenses, the bottom line.

• Deductions & Credits
• Tax Deductions

Travel Expenses Definition and Tax Deductible Categories

Michelle P. Scott is a New York attorney with extensive experience in tax, corporate, financial, and nonprofit law, and public policy. As General Counsel, private practitioner, and Congressional counsel, she has advised financial institutions, businesses, charities, individuals, and public officials, and written and lectured extensively.

For tax purposes, travel expenses are costs associated with traveling to conduct business-related activities. Reasonable travel expenses can generally be deducted from taxable income by a company when its employees incur costs while traveling away from home specifically for business. That business can include conferences or meetings.

Key Takeaways

• Travel expenses are tax-deductible only if they were incurred to conduct business-related activities.
• Only ordinary and necessary travel expenses are deductible; expenses that are deemed unreasonable, lavish, or extravagant are not deductible.
• The IRS considers employees to be traveling if their business obligations require them to be away from their "tax home” substantially longer than an ordinary day's work.
• Examples of deductible travel expenses include airfare, lodging, transportation services, meals and tips, and the use of communications devices.

Travel expenses incurred while on an indefinite work assignment that lasts more than one year are not deductible for tax purposes.

The Internal Revenue Service (IRS) considers employees to be traveling if their business obligations require them to be away from their "tax home" (the area where their main place of business is located) for substantially longer than an ordinary workday, and they need to get sleep or rest to meet the demands of their work while away.

Well-organized records—such as receipts, canceled checks, and other documents that support a deduction—can help you get reimbursed by your employer and can help your employer prepare tax returns. Examples of travel expenses can include:

• Airfare and lodging for the express purpose of conducting business away from home
• Transportation services such as taxis, buses, or trains to the airport or to and around the travel destination
• The cost of meals and tips, dry cleaning service for clothes, and the cost of business calls during business travel
• The cost of computer rental and other communications devices while on the business trip

Travel expenses do not include regular commuting costs.

Individual wage earners can no longer deduct unreimbursed business expenses. That deduction was one of many eliminated by the Tax Cuts and Jobs Act of 2017.

While many travel expenses can be deducted by businesses, those that are deemed unreasonable, lavish, or extravagant, or expenditures for personal purposes, may be excluded.

Types of Travel Expenses

Types of travel expenses can include:

• Personal vehicle expenses
• Taxi or rideshare expenses
• Airfare, train fare, or ferry fees
• Laundry and dry cleaning
• Business meals
• Business calls
• Shipment costs for work-related materials
• Some equipment rentals, such as computers or trailers

The use of a personal vehicle in conjunction with a business trip, including actual mileage, tolls, and parking fees, can be included as a travel expense. The cost of using rental vehicles can also be counted as a travel expense, though only for the business-use portion of the trip. For instance, if in the course of a business trip, you visited a family member or acquaintance, the cost of driving from the hotel to visit them would not qualify for travel expense deductions .

The IRS allows other types of ordinary and necessary expenses to be treated as related to business travel for deduction purposes. Such expenses can include transport to and from a business meal, the hiring of a public stenographer, payment for computer rental fees related to the trip, and the shipment of luggage and display materials used for business presentations.

Travel expenses can also include operating and maintaining a house trailer as part of the business trip.

Can I Deduct My Business Travel Expenses?

Business travel expenses can no longer be deducted by individuals.

If you are self-employed or operate your own business, you can deduct those "ordinary and necessary" business expenses from your return.

If you work for a company and are reimbursed for the costs of your business travel , your employer will deduct those costs at tax time.

Do I Need Receipts for Travel Expenses?

Yes. Whether you're an employee claiming reimbursement from an employer or a business owner claiming a tax deduction, you need to prepare to prove your expenditures. Keep a running log of your expenses and file away the receipts as backup.

What Are Reasonable Travel Expenses?

Reasonable travel expenses, from the viewpoint of an employer or the IRS, would include transportation to and from the business destination, accommodation costs, and meal costs. Certainly, business supplies and equipment necessary to do the job away from home are reasonable. Taxis or Ubers taken during the business trip are reasonable.

Unreasonable is a judgment call. The boss or the IRS might well frown upon a bill for a hotel suite instead of a room, or a sports car rental instead of a sedan.

Individual taxpayers need no longer fret over recordkeeping for unreimbursed travel expenses. They're no longer tax deductible by individuals, at least until 2025 when the provisions in the latest tax reform package are due to expire or be extended.

If you are self-employed or own your own business, you should keep records of your business travel expenses so that you can deduct them properly.

Internal Revenue Service. " Topic No. 511, Business Travel Expenses ."

Internal Revenue Service. " Publication 463, Travel, Gift, and Car Expenses ," Page 13.

Internal Revenue Service. " Publication 5307, Tax Reform Basics for Individuals and Families ," Page 7.

Internal Revenue Service. " Publication 463, Travel, Gift, and Car Expenses ," Pages 6-7, 13-14.

Internal Revenue Service. " Publication 463, Travel, Gift, and Car Expenses ," Page 4.

Internal Revenue Service. " Publication 5307, Tax Reform Basics for Individuals and Families ," Pages 5, 7.

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How to find deductions for travel expenses

With more consultants and business travelers hitting the road for business travel, it's time for a brush-up on what expenses are eligible for tax deduction while they're away. If you're unsure about what qualifies, read on.

Find out more about Business Taxes

by   Grace L. Williams

​Grace L. Williams is a journalist. Her areas of expertise include small business, career, personal finance, and inve...

Read more...

Updated on: October 27, 2023 · 15min read

Key takeaways

What is business travel or a business trip, what is a business-related travel expense, what business travel expenses are tax deductible, are there other tax deductions for travel expenses, tracking expenses on your business trip, importance of documentation, combining business and personal travel, special considerations for self-employed individuals, getting help with tax deductions for travel expenses, frequently asked questions.

Business travel is back after the pandemic, and with that increase comes the age-old question every business traveler must ask at least once: "What can I deduct as a business expense while I'm on the road?"

You've likely heard the term "write-off" somewhere and may have used it somewhere within your business circles. But what exactly is it? You might wonder if you can book first-class travel or five-star lodging and eat in fancy dining establishments and then submit them as business write-offs. The short, overarching rule for those specifics is no, you probably cannot, but there is more to eligible business travel expenses than that.

So before you book travel arrangements on your credit card (hopefully a designated business credit card), read on for more information about making expensing your business travel less stressful.

• Understand IRS guidelines for deductible travel expenses to maximize tax savings.
• Proper documentation is essential for claiming deductions, including meals and entertainment, with a clear business justification.
• Utilize tax professionals and leverage technology to ensure accurate deductions, compliance with laws, and maximum savings on travel expense deductions.

Simply put, business travel or a business trip is defined as any travel conducted that is business-related. To be considered eligible as a business trip, the travel itself must meet the following criteria:

• The trip must be conducted for legitimate business purposes, not as leisure time, vacation, or personal purposes.
• The trip must occur outside the bounds of a regular commute to and from work (or the main place of business) and home.

If the trip meets these criteria, it falls under the category of a business trip. It also means that you can deduct travel expenses whether you are a business owner sending an employee on your behalf or a self-employed individual.

To better understand business-related travel expenses, it's a good idea to look at overall business expenses. A business expense is incurred as part of the regular day-to-day operations of your employer (or for you if you are a self-employed individual) to conduct the business. Under current Internal Revenue Service (IRS) laws, special rules allow portions of business expenses to be deducted from the overall business income. These expenses are considered tax deductible, which means they are applied before any taxes are. The umbrella term "write-off" comes from this business tax deduction category.

In business, eligible tax deductions can have a significant impact. Being able to deduct expenses can often  reduce the total overall taxable income . Cumulatively, tax-deductible expenses will likely reduce the total bill when it is time to file your tax return.

A deductible business travel expense is one that you or an employee incur during travel directly related to conducting business. In both instances (a business expense or a business travel expense), it is essential to ensure the expense falls under the category of being for bona fide business purposes. This means that deducting the travel expenses must be something genuinely related to conducting or doing a bona fide business purpose. If it is, its cost can be written off as part of business or business travel-related expenses. It applies to self-employed individuals or employees traveling for an employer or business owner.

So what exactly can you expense?

First and foremost, consider the basics, or the "Big 3" in business travel. Essentials here include these three actual expenses: costs related to how you will get to your destination (travel), where you will stay (lodging), and what you will eat and drink when you are there and in transit. Each category within the Big Three can be an eligible travel expense and, therefore, a tax write-off, but they come with some criteria worth exploring.

Transportation expenses:  If you plan to travel by car, and you will either use a vehicle you lease long-term or your car, there are two choices related to how this mode of transportation might be expensed. One choice is known as the “ standard mileage rate ." Under current IRS allowances, the standard mileage rate deduction for self-employed individuals and employees is 65.5 cents per mile for business-related travel. The rate per mile would apply to any driving conducted to or from the business destination. It would also apply to any driving conducted while you are at the destination if it is business-related. For instance, once at the destination, if driving must be done to run errands, those miles can be added to the total mileage count.

The other vehicle expense option for a business trip is to itemize the individual expenses. Eligible business costs, in this instance, include the lease, insurance, fuel, costs related to the upkeep and maintenance of the vehicle, such as oil changes or tune-ups, and any major repairs on the vehicle, such as fixing a flat tire.

If you are renting a car as part of your transportation expenses and it falls under the ordinary and necessary business travel expense category, the cost to rent a car would qualify as an eligible business expense. Other vehicle-related expenses that qualify for travel deductions include tolls and parking fees.

Actual expenses method

The actual expenses method involves calculating the total cost of vehicle use and multiplying it by the percentage used for business purposes. This includes:

• Depreciation
• Garage rent
• Vehicle registration fees
• Lease payments

To calculate the percentage of business use, divide the total business miles driven by the total miles driven in the year. While this method can lead to larger deductions, it requires detailed record-keeping and more complex calculations than the standard mileage method.

Standard mileage rate

The standard mileage rate allows you to claim a fixed rate per mile driven for business purposes, plus parking fees and tolls. The standard mileage rate for business in the United States is 65.5 cents per mile. The IRS determines This rate annually based on a study of the fixed and variable costs of operating a vehicle for business reasons, such as gas, maintenance, and depreciation.

This method can be used for self-employment, business-related travel, or when using a vehicle for work as an independent contractor. However, personal use of the vehicle is not eligible for this deduction.

Ticketed travel:  For ticketed travel, like flights or trips by train, the cost of your ticket can be expensed as a travel deduction if your class fare qualifies as an eligible and reasonable expense. This means that while you likely won't be able to deduct first-class fare, you can deduct what is known as the ordinary and necessary expense related to the fare, which covers classes such as economy. You can also expense costs incurred while en route, such as baggage fees. And, if you are waiting at an airport or train station, any meal costs, snacks, or drinks would also qualify as business-related expenses.

Meal expenses and entertainment:  Business meals cut eligible business expenses but with some stipulations, including the standard meal allowance. While current IRS laws permit for up to 50% of a business meal to be deducted, like ticketed travel, rental cars, and other business-travel-related costs, the meal must fall under an ordinary and necessary expense to be eligible as a tax-deductible business expense. If you are tempted to go all out and splurge on your dining, you might find that it is not an eligible business travel expense.

But changes have been made to the entertainment category. While entertainment used to be an allowed business expense, it is sometimes no longer eligible to claim tax deductions. This means that if you expect to take clients out as part of client meetings or conduct business, be sure to read the fine print since you might discover you cannot claim entertainment as a legitimate business expense.

Lodging expenses:  Business travelers must consider where they will sleep while away. To be considered eligible as a business expense, the location of your stay must be outside of the main place of business and require overnight accommodation. Notably, in this expense category, IRS rules stipulate that for it to be an eligible business expense, the lodging cannot fall into the extravagant or considered recreational category.

Remember:  With each of the "Big 3" and all other related business expenses to be deducted, the expenses must be ordinary and fall under the category of reasonable business expenses. If you opt for pricey vehicles, tickets, meals, and rooms instead of the available moderately-priced alternatives, you risk losing eligibility as legitimate business expenses.

There are some other expenses anyone traveling for business should consider submitting as tax-deductible expenses.

Event fees:  These could come into play if you travel to an event such as a conference, convention, or trade show. In addition to the Big 3, certain expenses related to attending these events would qualify as eligible business travel expenses. The expenses are deductible if the event has an entry or booth fee. While you are there, if you attend workshops, lectures, or courses that require materials such as a workbook or registration, these would also be eligible as tax-deductible travel expenses. And, if you are running a booth or table at an event and need materials or supplies, the cost to purchase them would also qualify as legitimate business expenses.

Incidental expenses:  Any reasonable additional expenses you incur while traveling for a business activity can be considered incidental expenses. For instance, if you incur expenses on ground transportation, a rideshare fee, taxi fare, or a subway ticket qualify as business expenses. Laundry and dry cleaning services are also eligible business activities. In addition, indirect expenses like office supplies can be eligible business expenses.

Organization before, during, and after the business trip will help you avoid potential pitfalls or headaches when filing expenses or taxes. From the outset, one great way to  separate your business trips and expenses from personal expenses  is to have a single credit or debit card that you designate for business use only. This de facto "corporate" card will come in handy and be a best friend on the road since it automatically creates a tally of itemized expenses courtesy of the real-time accounting and monthly statements that come with it.

Beyond the lone card designated for business expenses, your meticulous record-keeping will greatly help you when it's time to account for everything. If you don't want to use a third-party software program or expense-tracking app to track your expenses, a simple solution is to use a basic spreadsheet that tracks the date, the reason for the expense, and the cost. To set this up, once you have incurred an expense, note it down using the aforementioned basic information.

While on the trip, another simple organizational tool is keeping all receipts and other applicable hard-copy records and materials in one designated place. A pouch or envelope will work fine as the place to keep these items. Make sure you read the receipt or record, and if it does not have information such as the name and address of the business, write it on the back before you stash it away. Finally, if a receipt is for something like a business lunch, ensure the date and information about the place of business are on the receipt. Then, write the name of the person you shared your time with and the reason for meeting up somewhere on the receipt.

Claiming travel expense deductions requires proper documentation. This includes retaining receipts and records for all expenses incurred during your business trip. For meals and entertainment expenses, you'll need to note the nature of the meeting, including who you met with, when, and the topics discussed.

It's worth noting that lodging expenses on non-business days may still be eligible for deductions if specific strategies are employed, such as incorporating “vacation days" between workdays. In such cases, the total cost of lodging for the trip can still be tax deductible even when no work is taking place on the weekend. However, meals and entertainment expenses without a clear business justification won't be deductible and must be paid personally.

Allocating expenses between business and personal activities is essential to ensure accurate deduction claims. Expenses must be allocated based on actual usage, so the non-business portion of the expenses may be viewed as taxable income if paid by the individual or company.

To accurately allocate expenses between business and personal activities for tax deductions, follow these steps:

• Track usage for a period of time.
• Determine the allocation by proportionally dividing the expenses based on the amount of business and personal use.
• Maintain proper records to support the allocation.

When combining business and personal travel, careful allocation of expenses and adherence to specific rules is important. Expenses related to the personal nature of the trip cannot be deducted; only those incurred for business purposes can be.

If traveling abroad, you must spend a minimum of 25% of your time conducting business to qualify as a business trip and claim travel expense deductions. If you conduct business for less than 25% of the time while on a trip, you can still deduct travel costs. This deduction must be proportional to the amount of time spent on business.

Rules for international travel

International travel has additional rules to consider when claiming travel expense deductions. As mentioned, you must spend at least 25% of your time abroad conducting business to claim travel-expense deductions.

If you use 25% or less of your trip for business purposes, you can deduct related travel costs in proportion to the time spent on work. This can help to make international business trips more affordable. For example, if 40% of your time is spent on business activities, you can claim the entire cost of airfare as a business expense.

Self-employed individuals should be aware of special considerations when deducting travel expenses, such as  home office deductions  and computer rental fees. Understanding these unique aspects can help self-employed individuals maximize their tax savings and ensure compliance with tax laws, especially regarding their tax home.

Home office considerations

Home office deductions can be claimed if the office is the primary place of business and is regularly used for business purposes. The IRS has specific guidelines for the regular use of a home office for business purposes, such as the office being used exclusively and regularly for business purposes.

To claim a home office deduction, you can use the simplified method the IRS provides. Here's how it works:

• Multiply the allowable square footage of your home office by the prescribed rate of $5 per square foot.
• The maximum allowable square footage is 300 square feet, so the maximum deduction you can claim using this method is $1,500 annually.
• The simplified option allows for a standard deduction without the need for detailed record-keeping.

Deducting computer rental fees

Computer rental fees can be deducted if the equipment is used for business during the trip. The full cost of the computer rental may be deducted as a business expense.

To claim a deduction for computer rental fees from business travel expenses, you must provide relevant documentation demonstrating the rental fees paid, such as receipts or invoices. Proper record-keeping is essential to support your deduction and ensure compliance with IRS regulations.

Leveraging technology

Technology, such as expense tracking apps and online bookkeeping services, can simplify record-keeping and documentation for travel expense deductions. These tools can help you track and categorize expenses, making it easier to identify and compute deductible expenses for tax purposes.

Expense tracking applications can:

• Generate reports and summaries of travel expenses
• Be beneficial for tax filing and auditing purposes
• Save time and effort in tracking and documenting your travel expenses
• Ensure accurate deductions and compliance with tax laws

Leveraging technology in expense tracking can be a valuable tool for managing your finances.

Sometimes, you might need more help. This guide provides basic questions about business travel deductions and expenses. Still, you are not alone if you have other questions about what might qualify as a tax-deductible business expense. There are experts at LegalZoom who can answer specific questions and better advise you about both business expenses and business travel-related expenses.

You might have questions about whether specific costs related to your business qualify as ordinary and necessary expenses or wonder if percentages of a certain expense or the entire cost can be completely deductible. Additionally, professionals in the know about things like a specific tax home can help you sort out concerns related to your business so that you can always claim the proper travel expenses. For any consultant looking to get back into the swing of travel, help and practical tips are just a click away.

Understanding and maximizing travel expense deductions can save you significant money on your tax return. By familiarizing yourself with the requirements, maintaining proper documentation, and leveraging the expertise of tax professionals and technology, you can ensure accurate deductions, compliance with tax laws, and, ultimately, keep more money in your pocket.

What kind of travel expenses are tax deductible?

Tax deductible travel expenses include airfare, train/bus fares, taxi rides between an airport or station and a hotel, or from the hotel to a work location.

What are the three requirements for a traveling expense deduction?

To qualify for a traveling expense deduction, you must have a “business trip," leave your tax home, have most of the trip business-related, and plan the trip in advance.

How do I prove travel expenses for taxes?

To prove business travel expenses for taxes, use credit card slips with notes on the business purpose made at the time of incurring the expense.

Are daily travel expenses tax deductible?

Daily travel expenses from your home to a regular place of business are not tax deductible. However, you can deduct transport expenses when traveling between your home and a temporary work location outside the metropolitan area where you live and normally work. Additionally, ordinary and necessary travel expenses incurred while away from your home and your main place of business can be deducted.

How do I allocate expenses between business and personal activities during a combined trip?

Allocate expenses proportionally based on the amount of business and personal use for a period of time, and maintain proper records to support deductions. 

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Does the IRS Let You Deduct Travel Expenses? What Is the Business Travel Expense Deduction?

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Some of the most common tax questions I get are about deductions for travel expenses: “Can I claim travel on my tax return? What are deductible travel expenses? Can you name for me some examples of travel-related expenses that are deductible? What about meals I eat on travel — are those deductible too?”

To start this conversation, let’s go over a list of some common travel deductions.

Table of Contents

Examples of Travel-Related Expenses that Are Deductible

Here are some examples of deductible travel expenses. This list is not exhaustive, so be sure to check with your tax advisor.

• Travel by airplane, train, bus or car between your home and your business destination. (If you’re provided with a ticket or you’re riding free as a result of a frequent traveler or similar program, your cost is zero.)
• Fares for taxis or other types of transportation between the airport or train station and your hotel, the hotel and the work location, and from one customer to another, or from one place of business to another.
• Shipping of baggage, and sample or display material between your regular and temporary work locations.
• Using your car while at your business destination. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking fees. If you rent a car, you can deduct only the business-use portion for the expenses.
• Meals and lodging.
• Dry cleaning and laundry.
• Business calls while on your business trip. (This includes business communications by fax machine or other communication devices.)
• Tips you pay for services related to any of these expenses.
• Other similar ordinary and necessary expenses related to your business travel. (These expenses might include transportation to and from a business meal, public stenographer’s fees, computer rental fees, and operating and maintaining a house trailer.)

But You Have to Play by the Rules.

The IRS has very specific rules for the deduction of travel expenses. If you abide by them and make sure you document the business purpose of your trip, you may be surprised at how much you can deduct. But if you don’t, rest assured that you will be a juicy target for the IRS.

Travel Expenses Must Be “Ordinary.”

Ordinary expenses are those that are common for businesses like yours. For example, it’s common for landlords to travel to their properties to check up on them.

Travel Expenses Must Be “Necessary.”

Necessary expenses are not expenses that your business absolutely positively  must incur in order for it to survive. So in that sense, the word “necessary” is somewhat misleading. All “necessary” means in this context is that your travel expenses must be helpful and appropriate for your business.

The Sleep or Rest Requirement

Also, in order for you to deduct travel expenses, you must be away from your “tax home” long enough to require you to sleep or rest. Your tax home is generally the city or general area in which you live and work.

Your Trip Must Be Primarily for Business Reasons.

In order to deduct travel expenses, your trip must be primarily for business reasons, meaning that more than 50% of the days you spend on your trip must be “business days,” which a “business day” defined as any day in which you spend at least 4 hours working on your business (including travel time itself).

You can deduct all of your qualifying travel expenses during each business day, even if you only worked 4 hours on your business that day and had fun the rest of the time. Of course, the more aggressively you pursue deductions, the more you should seek to substantiate your business work on that day.

So a possible strategy here, if you’re so inclined and you enjoy the locale you are visiting, is to spread your trip out longer such that you only work 4 hours a day.

The Sandwich Day Rule

Weekends are considered “rest days,” and you may still count them as business days as long as the preceding Friday and following Monday were business days as defined by the 4-hour rule.

The caveat is that it must be less expensive for you to lodge the weekend at your location than to travel back home for the weekend and travel back to your trip location on Monday.

Let’s say you’re a landlord who lives in Los Angeles, California, and you are planning a trip to Cleveland, Ohio to visit your rental properties.

• Thursday: you fly out to Cleveland on Thursday morning. The time you spent getting to the airport, in flight, etc., all amounted to at least 4 hours.
• Friday: you meet with your property manager and check up on your properties.
• Saturday: you check out the Rock and Roll Hall of Fame.
• Sunday: you catch a Browns game.
• Monday: you meet with your property manager and check up on your properties.
• Tuesday: you fly back home.

You can deduct every day of your qualifying travel expenses because they all count as business days!

However, unless they had a business purpose (e.g., you took out your property manager), you will not be able to deduct such as expenses as your ticket to the Browns game or your ticket to the Rock and Roll Hall of Fame. But food, lodging, dry cleaning, and other things on that list above? Fair game!

Logan is a practicing CPA and founder of Choice Tax Relief and Money Done Right. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.

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How to Make Your Travel Tax-Deductible in 2024

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We all know there has been a boom in business and personal travel these last few years. Maximizing tax deductions on these travels can significantly reduce your tax liabilities. 

In general, business travel expense deductions are only available to business owners. However, as you shall see, this doesn’t mean you don’t qualify.

This post explores the ins and outs of business travel deductions, ensuring you make the most of every business trip.

Business-related travel expenses are deductible

The IRS provides details on business travel tax deductions in IRS publication 463 , and the good news is the rules allow a variety of travel expenses to be deducted, including:

• Airplane, train, bus, or car travel between your home and business destinations
• Transportation costs like taxi fares from airports to hotels
• Shipping of baggage and business materials
• Use of a personal car for business purposes
• Lodging and meals (subject to the 50% rule for meals)
• Dry cleaning, laundry, business calls, and tips related to these expenses
• Other similar expenses deemed ordinary and necessary

As with all tax deductions, maintaining detailed records of your expenses is key, including bank and credit card statements and receipts. This basic documentation is vital to substantiate your deduction during an audit. 

Tools like Quicken make this process easy and organized. Just take photos of any documents you need and attach them to their underlying transactions.

Defining a business trip

A trip is considered business related if its primary purpose is business. Again, it’s critical to document the business reasons for your travel, particularly when combining personal activities or family time. The IRS audit guides provide examples of good documentation, including keeping minutes of meetings and maintaining schedules of conferences attended.

Family travel considerations

But what if you bring your family with you? Unfortunately, travel expenses for family members are generally non-deductible unless they’re employees of your business and their travel has a business purpose. If sharing a hotel room, the cost remains fully deductible as there’s no additional expense.

Mixing business with pleasure

When combining business with leisure, like attending a conference in Orlando, separate the expenses. The travel costs for the conference are deductible, but personal activities, like a day at Disney World, are not.

Non-business owners

If you don’t own a business, your tax deduction opportunities for travel are limited. One strategy is to invest in rental properties at popular destinations. Travel expenses for managing these properties, like visiting a rental condo in Orlando for maintenance check-ins or association meetings, are typically deductible.

Engage a tax professional

Tax laws can be complex and vary by individual situation. Consult a tax professional for advice tailored to your specific circumstances, especially for complex travel deduction scenarios.

Understanding and utilizing business travel deductions is a smart strategy for reducing tax liabilities. Always prioritize accurate documentation and stay informed about IRS guidelines. By doing so, you ensure that your business travel is not only productive but also financially savvy. 

Remember, every journey offers opportunities, not just for business growth but also for tax savings. Plan your trips wisely, document meticulously, and consult professionals as needed to fully leverage the tax benefits of business travel.

Quicken has made the material on this blog available for informational purposes only. Use of this website constitutes agreement to our Terms of Use and Privacy Policy. Quicken does not offer advisory or brokerage services, does not recommend the purchase or sale of any particular securities or other investments, and does not offer tax advice. For any such advice, please consult a professional.

About the Author

Charles Renwick

Charles Renwick is a Chartered Financial Analyst (CFA) and Certified Public Accountant (CPA). He is the author of the best-selling book, All the Presidents’ Taxes , the founding member of the accounting firm CMR Associates , and an accomplished corporate executive.

Charles previously worked for Ernst & Young and Novelis Aluminum. A Magna Cum Laude graduate of the University of Georgia, he holds degrees in accounting, economics, and political science. For three years, as a student, Charles worked for US Congressman John Barrow as a Congressional Staffer. Charles is also a member of multiple community organizations and serves on the State and Local Tax (SALT) Committee and the Forensic, Litigation & Valuation Services Committee for the Louisiana Society of CPAs.

He and his wife, Lauren, live in Covington, Louisiana, where he enjoys playing tennis, watching his kids play youth sports, and reading and writing about history, politics, and taxes.

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What is a Tax Home, and How Does it Impact Travel Expenses?

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Written by Liz Farr, CPA

• Modified Aug 8, 2019

Today’s super-mobile workforce means that you may have clients who are splitting their time between multiple work locations. In these situations, understanding the concept of a tax home will help clarify the treatment of travel expenses.

What is a Tax Home?

The IRS defines a tax home as the city or general area where someone’s main place of business or work is located. If your client travels away from their tax home for work purposes, their travel expenses may be deductible.

“May be deductible” has taken on new meaning since the  Tax Cuts and Jobs Act  was passed in late 2017. Under prior law, employees could deduct unreimbursed work expenses, including travel expenses, as a miscellaneous itemized deduction. However, from 2018 though 2025, that deduction has been suspended, except for Armed Forces reservists, qualified performing artists, and fee-basis state or local government officials.

The best bet for employees who no longer qualify to deduct their travel expenses is to set up an  accountable plan  with their employer. Reimbursed travel expenses under an accountable plan are not taxable to the employee, while reimbursements under a non-accountable plan are included in the employee’s wages.

However, self-employed individuals can still deduct expenses for travel away from their tax home as business expenses.

A tax home may or may not be the same place as the family home, or a place that your client returns to regularly. For clients who work in more than one place, their tax home is their main place of business or work. This is determined by considering the following factors:

• The total time spent in each place.
• The level of business or work activity in each place.
• The relative amount of income earned in each place.

Expenses for work-related travel away from someone’s tax home are deductible or can be reimbursed tax-free under an accountable plan. Travel expenses include transportation, meals, lodging, laundry and dry cleaning, and incidentals.

For example, Ryan is a self-employed consultant living in Denver. He spends one week of every month working onsite for a client in Salt Lake City. Ryan spends the remaining three weeks of the month working with clients in the Denver area. Ryan’s tax home is Denver, so his travel, lodging and meal expenses for his monthly trips to Salt Lake City are deductible.

Over time, Ryan’s client in Salt Lake City becomes a bigger part of his work. Eventually, Ryan is spending all of his working time in Salt Lake City and flying home to Denver on the weekends. Now, his tax home is Salt Lake City, and neither his living expenses in Salt Lake City nor his plane fare between Denver and Salt Lake City are deductible.

What About Temporary Work Assignments?

It’s not unusual for an employee to be sent to work in a different location. If that assignment is temporary and the employee maintains a home in the original location, the tax home is still the original location. Travel expenses will be deductible for a contractor. Employee reimbursements under an accountable plan will be tax-free.

But, if the assignment is permanent or indefinite, then the person’s tax home is the new location, so travel expenses are not deductible. Accountable plan reimbursements are now taxable to the employee.

The IRS defines “temporary” as a work assignment that’s expected to last a year or less. If a work assignment that started out as a temporary posting is extended to more than a year, then it becomes an indefinite assignment when the anticipated duration changes.

For example, Kimberly has been working for a company in Boston and is sent to Los Angeles for an eight-month project. Kimberly’s tax home is still Boston. Her employer reimburses her for her travel, lodging and meals under an accountable plan, and those reimbursements are tax-free.

However, seven months into the project, Kimberly’s employer decides to extend her posting in Los Angeles for another eight months, to a total of 15 months. At that point, Kimberly’s assignment becomes indefinite, so her tax home changes to Los Angeles. If her employer continues to reimburse her for living expenses, even if it’s done under an accountable plan, those reimbursements are now taxable.

This only scratches the surface of the tangled web that results when people live and work in multiple locations. Depending on the states involved, your clients may also have state tax issues. IRS  Publication 463 ,  Travel, Gift, and Car Expenses , is a good resource, so be sure to check it out if you have clients in this situation.

Editor’s note: This article was published on the Firm of the Future blog .

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Liz spent 15 years working as an accountant with a focus on tax work as well as working on audits, business valuation, and litigation support. Since 2018, she’s been a full-time freelance writer, and has written blog posts, case studies, white papers, web content, and books for accountants and bookkeepers around the world. Her current specialty is ghostwriting for thought leaders in accounting. More from Liz Farr, CPA

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Can You Deduct Your Trip From Your Taxes? Experts Weigh In

P eople are traveling like crazy these days. The Sunday after Thanksgiving 2023 was the biggest single travel day in U.S. aviation history, with TSA screening more than 2.9 million passengers on November 26.

If you're one of those travelers racking up frequent flier miles as quickly as you can fasten your seat belt, you may be looking for ways to recoup some of the cost. Can you legally write off your trip? If you're self-employed (for example, if you're an entrepreneur, freelancer, or consultant, or have an online business) and you did some work while on the road, there's a good chance you can.

Here's what it takes to get two thumbs up from the IRS.

Pass these four tests

For starters, your trip must have a business purpose, meaning it must include activities such as client meetings, attending a conference, being a guest speaker at a conference, doing research and development for the business, or holding a board meeting or annual shareholders' meeting. The activity should have the potential to generate revenue.

"Don't think you can take a personal trip, talk business for an hour and then try and deduct the whole amount of your trip. The intent of the trip needs to be business," says Caitlynn Eldridge, founder and CEO of Eldridge CPA .

The second and third requirements deem that the trip must be both "ordinary and necessary," according to IRS guidelines on business travel expenses . "An ordinary expense means it's typical in your business, both [in terms of] amount [as well as in] frequency and purpose. Necessary means it actually helps you increase your profits or expand your business," explains Tom Wheelwright, a certified public accountant and author of the book Tax-Free Wealth (BZK Press, 2018).

Lastly, every expense must be properly documented. To get a deduction for travel, Wheelwright said that you must spend more than half your time during the business day doing business and have everything documented. "So, if you spend four and a half hours a day doing business, it becomes deductible. You also must have documentation, which includes receipts, of what you did, and a log of your expenses," says Wheelwright.

On receipts, write the name of the client who you had the meal with for further proof. "Save the emailed confirmation and receipt from the hotel reservation or conference ticket payment that show the dates, times, and name of the events as well as the receipts from the travel it took to get there and back [such as for gas or flights]," says Ben Watson, founder of Fiscal Fluency , a personal finance and business coaching company.

Note that for 2024, the IRS mileage reimbursement rate is 67 cents for employees or a self-employed individual traveling for work, up from 65.5 cents in 2023.

Know, too, that you must be away from home overnight-the IRS requires an overnight stay for the trip to qualify as business travel, Wheelwright says.

Domestic travel versus travel abroad

There's a big difference between how you calculate deductions if the work trip was taken in the United States versus abroad. According to Wheelwright, "It's an all-or-nothing test in the U.S., so either you spent more than 50 percent of your time on business, and it's all deductible, or you spent 50 percent or less and none of it's deductible."

For international business travel, the deductions work differently. He explained that when you travel to another country, the deduction is proportionate. "For example, if you spent 40 percent of your time doing business in Italy, then 40 percent is deductible," says Wheelwright.

Stick to the rules

It has to be a legitimate business trip. "You can't simply do some work while on the beach and call it a business trip," says Watson. But if you make it a "bleisure trip" by adding a couple days at the beach onto your preplanned business trip to the coast, you could still write off at least some of your lodging fees, he explained. If you do extend your trip for vacation, you can only deduct the expenses that were directly related to work and took place on the days that you conducted business. If you are traveling to multiple cities, keep in mind that each must have a business purpose.

You do have to work. If you are at a conference, make sure you fully participate, which means not just attending one or two sessions. If you only attend a small number of the business-related events, the entire purpose of the trip would be considered a personal trip with "incidental" business activities, Watson points out. Remember you need a log of what you did, and if it's thin on details, it could prove problematic. "You don't want to lose the ability to deduct transportation, lodging, meals, and other expenses," says Watson.

If it's a business trip of your own making, be sure it includes meetings with clients or participating in some work-related activity. "To demonstrate evidence of these events, it's wise to put calendar appointments down in your phone in advance and hold onto receipts when the time comes to file your tax return and claim your deductions. Remember, the primary purpose of this trip is [supposed to be] for work," says Riley Adams, a CPA and CEO and founder of WealthUp , a financial literacy website.

Don't try to bend what "ordinary and necessary" means. "If you have the ability to accomplish the same business tasks while staying at a modest hotel as you would at the Four Seasons, you'll have a hard time justifying the extra cost if you're ever audited," Watson cautions.

Stay at a place that is similar to places you normally stay on a business trip, so your expenses are considered "ordinary." Wheelwright explains that if you usually stay at five-star hotels for your business trips, then the Four Seasons would fall into the same category. However, if you usually stay at hotels like the Comfort Inn, and suddenly switch to a luxury hotel, the high-end venue could raise red flags with the IRS. He says that it doesn't matter whether you stay at a hotel or a vacation rental, the quality level and price tag should be similar to what is typical for your business trips.

When traveling with non–business companions, such as a spouse or family members, you may only deduct the cost of the lodging you would have paid if you were traveling alone-for example, if a single room costs $150 per night, and you paid $200 for a double room, you could only deduct at the $150 rate.

What can you deduct?

Personal meals are not deductible, but half the cost of food expenses related to business can be deducted. Expenses for your family's meals and entertainment cannot be deducted unless they are actively engaged in the business and you can show that their expense is both ordinary and necessary.

Travel expenses are only deductible on the days in which the work-related event occurs. "For example, a taxi ride to the meeting, train to a conference, or plane ride to the event [are deductible]," says Adams. "Lodging, much like travel expenses, is deductible on the days in which business is set to occur."

Understand too, that if you're provided with a plane ticket paid for by your company, or you're riding free because you're redeeming frequent flier miles, your cost is zero, so you can't deduct it.

But there are a couple of things you may not be aware of. For example, if you have to ship your baggage, you can deduct that cost; you also can deduct for tips for services, such as a tip to the waiter during a meal with a client.

Be strategic

It's best to put your "vacation" days in the middle of the business days, advises CPA Greg O'Brien. "For example, if [a] business owner took a seven-day trip to Florida and spent five days meeting with clients or prospects and two days relaxing on the beach, this would still qualify as a deductible business trip. The trick is to stick the ‘vacation' days in the middle of the business days," he says.

By placing the vacation days in the middle, the travel days to and from are still considered business related, rather than personal.

Watson offers another tip: "Laundry, dry-cleaning and shoe-shine expenses are perfectly acceptable expenses if incurred shortly after returning home."

Houston Tax Attorneys | Mitchell Tax Law

IRS Documentation for Travel Expenses

Business travel expenses are deductible. These are expenses for business trips and work trips, such as car and truck expenses, airfare and hotels and lodging. It can also include travel meals.

Those looking to deduct business trip expenses are running a risk as the IRS frequently disallows these expenses on audit. It does so even if the taxpayer maintains detailed bank statements and credit card statements that detail the date, amount and location of the expenses. It may even disallow these expenses when the taxpayer has actual receipts for their travel expenses.

Disallowance by the IRS is the rule and not the exception. This is a common dispute that arises on audit by the IRS .

This can leave you wondering whether travel expenses are actually deductible. You may also be wondering whether you can claim travel expenses without receipts?

The answers are “yes” and “yes,” sometimes they are deductible and sometimes even if you do not have receipts. The Nelson v. Commissioner , Docket No. 892-19 (2022) provides an example. The IRS denied the taxpayer’s travel expenses in Nelson , but the tax court allowed them. This case is an example that helps illustrate when these expenses are deductible.

• 1 About Nelson v. Commissioner
• 2 Tax Deductions for Business Trip Expenses
• 3 How to Identify Business Travel Expenses
• 4 Are Receipts for Travel Expenses Required?
• 5 Can Bank and Credit Card Statements Suffice?
• 6 The Takeaway

About Nelson v. Commissioner

The facts in the Nelson are fairly typical for travel expenses. Let’s use those facts to consider travel expenses.

The taxpayer in Nelson was employed by a company that manufactured skin creams. The business had its principal business operations in Washington D.C. and is owned by the taxpayer’s uncle.

The taxpayer performed his job duties in Washington D.C. and in Dallas, Texas. He oversaw production in Washington D.C., and bottling in Dallas, Texas.

The taxpayer lived in Maryland with his girlfriend. He also rented an extended stay hotel room in Dallas. He paid for the Dallas hotel room for extended periods to take advantage of a reduced nightly rate.

The court described the unreimbursed travel expenses as follows:

Mr. Nelson incurred expenses of $18,709 for lodging in Dallas, $4,910 for air travel to Dallas and from Dallas to Washington, D.C., and $6,207 for car rentals in Dallas.

The IRS conducted an audit and disallowed the taxpayer’s travel expenses. It did not believe that the expenses were for business trips.

The taxpayer filed a petition to ask the U.S. Tax Court allow his business trip travel expenses.

Tax Deductions for Business Trip Expenses

The Tax Cuts & Jobs Act (“TCJA”) of 2017 eliminated the deduction for unreimbursed employee expenses, including business trip travel expenses (it also impacted entertainment expenses ).

The impact of this change by the TCJA can be negated if the employer reimburses the employee’s business trip expenses. If the employer has adopted an accountable plan for these expenses, the employer’s reimbursement for the business trip expenses is not considered income to the employee. And the employer can deduct the expenses as ordinary and necessary business expenses.

The same concepts that applied to employees before the TJCA, such as the taxpayer in Nelson as the dispute involved the 2014 tax year, still apply to self-employed workers who deduct business travel expenses . Self-employed workers are still able to deduct their travel expenses. This includes contractors as they are considered to be self-employed.

These self-employed workers usually report their travel expenses on Form 1040, Schedule C. They may also be reported on the taxpayer’s business tax return if they operate using a legal entity, such as a LLC taxed as an S corporation.

How to Identify Business Travel Expenses

The first step in determining whether the business trip expenses are deductible is to determine where the taxpayer’s tax home is. The tax home generally means the principal place of business . IRS Publication Publication 463, Travel, Gift, and Car Expenses , provides the following example:

You live in Cincinnati where you have a seasonal job for 8 months each year and earn $40,000. You work the other 4 months in Miami, also at a seasonal job, and earn $15,000. Cincinnati is your main place of work because you spend most of your time there and earn most of your income there.

It goes on to provides the following factors that help establish where your tax home is if you do not have a primary place of business:

• You perform part of your business in the area of your main home and use that home for lodging while doing business in the area.
• You have living expenses at your main home that you duplicate because your business requires you to be away from that home.
• You haven’t abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging.

The second step is to determine what business trips are eligible. Generally, travel to and from a tax home and a residence is not deductible. These expenses are considered personal commuting expenses. The deduction is limited to business trips.

The third step is to identify the expenses associated with the qualifying business trips. Travel expenses usually include mileage, air transportation, lodging (such as costs for a hotel room), and related expenses. It can even include rental car costs. Yes, the costs for rental cars are tax deductible.

Are Receipts for Travel Expenses Required?

This brings us back to the question in the Nelson case. The question is what substantiation is required to document travel expenses?

The general rule is that travel expenses have to be separated into three categories or buckets: (1) meals and lodging, (2) vehicle expenses, and (3) everything else.

The first category for meals and lodging are subject to higher substantiation requirements. Section 274(d)(1) says that meals and lodging while away from home have to be substantiated by adequate records or by sufficient evidence corroborating the taxpayer’s own statement:

• The amount of the expense or other item;
• The time and place of the travel, entertainment, amusement, recreation, or use of the facility or property, or the date and description of the gift;
• The business purpose of the expense or other item; and
• The business relationship to the taxpayer of persons entertained, using the facility or property, or receiving the gift.

We’ll come back to these requirements in the next section. Suffice it to say that the IRS requires that the primary purpose of the trip be for business purposes and that records are kept to establish the business purpose.

It should also be noted that meals are subject to a 50 percent exception. This exception only allows you to deduct 50 percent of the costs of the meal.

The second category, vehicle expenses, can overlap with the first category. Any vehicle expense requires a mileage log. This is true even if the vehicle expense is for the use of a car and you use actual cost rather than mileage to compute the tax deduction (the rule is that you can deduct the actual cost or mileage times a standard mileage rate; the deduction is usually larger if mileage rather than actual costs are used). No mileage log, no deduction when it comes to these expenses. Note: there is an exception for qualified nonpersonal use vehicles ).

The third category includes everything else. Examples include parking fees, dry cleaning, baggage and shipping, cleaning, telephone, tips, computer rental fees, etc. These expenses are not subject to the limitations above.

Can Bank and Credit Card Statements Suffice?

Most travel expenses are subject to the higher substantiation retirement in Section 274(d) noted above. The IRS is quick to cite this rule on audit . It cites the rule to disallow travel expenses.

Taxpayers who have their travel expenses often wonder what type of records would ever suffice. The Nelson case provides the answer. In Nelson , the taxpayer presented the following records:

Mr. Nelson offers receipts (Ex. 3-P), his annotated bank and credit card statements for 2014 (Exs. 6-P, 7-P, & 8-P), and his testimony and detailed categorization (Ex. 5-P) regarding business purpose.

The IRS did not accept these records. Presumably the IRS Office of Appeals also did not accept the records.

The U.S. Tax Court did accept them:

Mr. Nelson’s receipts, bank statements, and credit card statements substantiate the time and place of each amount and are sufficiently specific to corroborate his credible testimony regarding their respective business purpose. The exhibits show the names and locations of hotels used for lodging, and the names of passengers as well as the departure and destination cities for flights. The dates of the charges for flights correspond approximately to the dates of hotel and other charges on Mr. Nelson’s statements to corroborate his being in the destination cities. We will allow deductions for business travel expenses that are verifiable from Mr. Nelson’s exhibits….

This confirms that bank and credit card statements are generally sufficient if coupled with credible testimony.

The courts have also considered repetitive travel. The repetitive nature of the trips to impose a lesser record keeping requirement, as in this court case .

The Takeaway

Taxpayers whose travel expense deductions are denied by the IRS on audit should read the Nelson case and be ready to cite it to the IRS auditor. The IRS is not likely to agree with the position, as its normal practice is to simply disallow travel expenses.

The Nelson case should then be raised with the IRS Office of Appeals. Generally, IRS Appeals is more likely to accept the substantiation than the IRS audit function.

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Tax Deductions for Travel Expenses

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The ability to deduct travel expenses from tax is often an overlooked perk that can significantly reduce your taxable income and turn costly trips into smart financial maneuvers. However, navigating the maze of tax rules surrounding these deductions can be difficult to understand. 

In this article, we’ll delve into the intricacies of what qualifies as travel expenses and unravel how you can turn your business ventures into valuable tax-saving opportunities. 

What Are Travel Expenses in Taxation?

In business taxation, travel expenses refer to costs you incur when traveling away from your primary work location for business reasons. This includes expenses like airfare, mileage for using your personal vehicle, hotel stays, and meals. 

These are the costs you have to pay during business trips that last longer than a regular workday. It’s worth noting that these expenses must be both common in your industry and important for your business activities to be considered valid for tax purposes.

Can You Deduct Your Travel Expenses?

In short, yes, you can deduct your travel expenses. These deductions apply when the expenses are both “ordinary” and “necessary” for your business. This includes costs like airfare, lodging, and meals during business trips. However, it’s crucial to understand the specific criteria these expenses must meet to qualify for deductions. 

Allowable Tax Deductions for Travel Expenses

Having established that you can deduct travel expenses, it’s important to look at what exactly you can deduct from your taxes. In the next section, we’ll break down the types of travel expenses that the IRS considers deductible. 

Airfare is a deductible expense when traveling for business purposes. This includes flights to and from your business destination. It’s important to note that if you extend your trip for personal reasons, only the portion of airfare directly related to business activities is deductible. 

2. Vehicle Expenses

When using your personal vehicle for business travel, you can deduct expenses using either the standard mileage rate or actual expenses like gas, oil changes, and maintenance. The standard mileage rate is simpler, but actual expenses might yield a higher deduction if you have significant costs.

Hotel or motel costs incurred while on business travel are deductible. This only covers the nights necessary for the business aspect of your trip. Any additional nights for personal enjoyment are not deductible. 

Meal expenses during business travel are partially deductible — typically, you can deduct 50% of the cost. This includes meals alone or with business associates, as long as the meal has a clear business purpose. 

5. Baggage and Shipping

Costs for baggage and shipping related to business travel, like transporting display materials to a conference, are deductible. This also includes fees for checking bags on a flight.

6. Dry Cleaning and Laundry

If your business trip lasts longer than one day, you can deduct expenses for dry cleaning and laundry. These costs are often overlooked but are legitimate deductions as they are necessary for maintaining a professional appearance during business engagements.

7. Tips and Gratuity

Tips you pay for services related to any of the above expenses, like tipping a hotel bellhop or a taxi driver, are also deductible. These small expenses can add up, so it’s important to keep track of them during your travels. 

For more ideas on tax write-offs, check out our blog on 30 creative tax deductions you should know . 

Travel Expenses that You Cannot Claim as Tax Deductions

While there are numerous travel expenses that qualify for tax deductions, it’s equally important to recognize those that do not. In the following section, we’ll outline specific travel expenses that are not eligible for deduction under IRS rules.

1. Personal Vacation Expenses

Expenses incurred during personal vacation time, even if it’s part of a trip that includes business activities, are not deductible. For example, if you extend a business trip for personal leisure, additional lodging and meal costs related to the vacation portion cannot be claimed.

2. Commuting Costs

Costs related to commuting between your home and your regular place of work are not deductible as travel expenses. This includes daily transportation costs, regardless of whether you are using public transport or a personal vehicle. These expenses are considered personal commuting costs and are not eligible for tax deduction.

3. Family or Companion Travel Costs

If you bring family members or companions on a business trip, their travel costs are not deductible, unless they are employees and the travel is for a bona fide business purpose. 

4. Luxury or Excessive Expenses

Extravagant or lavish expenses that are not necessary for conducting business are not deductible. This includes luxury accommodations or first-class air travel that goes beyond what is reasonable and necessary for business purposes. 

5. Non-Business Activities or Entertainment

Expenses for non-business activities or entertainment during a business trip are not deductible. This includes sightseeing tours, golf outings, or other leisure activities that do not have a clear business purpose. 

6. Fines and Penalties

Any fines or penalties incurred while on a business trip, such as traffic tickets or parking fines, are not deductible. The IRS does not allow deductions for expenses that arise from illegal activities or breaches of law, including minor infractions like speeding tickets.

Understanding the Importance of Recordkeeping

Transitioning from what you can and cannot deduct, it is important to emphasize the importance of careful record keeping. Proper documentation of travel expenses is not only a good business practice, but also a necessity for tax purposes. The IRS requires detailed records to substantiate all deductions claimed.

This means you must keep receipts, logs of business activities, dates, locations, and the purpose of each expense. Accurate records not only confirm your deductions in the event of a tax audit but also help you monitor your business expenses and budget more effectively.

Essentially, accurate record-keeping is the backbone of expense reporting. It ensures compliance with tax laws and can protect you from potential disputes or penalties from the IRS, ensuring the financial integrity of your business.

How to Claim Write-Offs for Travel Expenses on Your Tax Return?

The next step is to learn how to claim these travel expenses as write-offs on your tax return. This procedure ensures that you receive the rightful deductions and thus contributes to a more accurate and favorable tax result . Here’s a step-by-step guide:

Determine Eligibility

First, confirm that your travel expenses are indeed business-related and meet the criteria of being ordinary and necessary. Ensure you’re not including any non-deductible expenses like personal activities or luxury expenditures.

Gather Documentation

Collect all relevant receipts, logs, and records related to your travel expenses. This includes airfare, accommodation, meals, and other allowable expenses. The more organized and detailed your records, the easier the claiming process.

Fill Out the Appropriate Tax Forms

For self-employed individuals, these expenses are typically reported on Schedule C of the IRS Form 1040 . If you’re an employee, consult current tax laws, as recent changes may affect how you claim these deductions.

Calculate Deductions

Calculate the total amount of your travel expenses based on your records. Remember to apply the 50% limit for meal expenses and choose between the standard mileage rate or actual car expenses if you use your personal vehicle.

Report on Tax Return

Enter the total amount of your deductible travel expenses in the appropriate section of your tax form. Make sure the information is accurate, as discrepancies can lead to audits or penalties.

Keep Records Post-Filing

Do not throw away your documents after submitting your tax return. The tax office can review previous tax returns, usually up to three years after they were submitted.

Consider Professional Advice

If you are unsure about accounting for travel expenses, a tax advisor can provide you with clarity and certainty. They can also help you maximize your deductions while ensuring compliance with tax laws.

Entrepreneur’s Guide to Travel Expenses and Tax Deductions

Traveling for your business ventures is a clear sign that you are advancing in your career. But it’s not always easy to keep track, or fully understand the complicated tax jargon to get the most out of your tax return.

At doola, we understand the complexity of managing business finances. Our expert bookkeeping services streamline your financial records, ensuring accuracy and compliance. Let us handle the nuances of tax deductions so you can focus on growing your business. 

Are business insurance premiums tax deductible?

Yes, business insurance premiums are tax-deductible. This includes insurance for general liability, property, and professional liability, as these are considered necessary and ordinary business expenses.

Can I deduct the cost of hiring employees for my startup?

Absolutely! Costs associated with hiring employees, including wages, benefits, and recruitment expenses, are tax-deductible as they are essential operational expenses for your startup.

Are expenses for inventory and raw materials tax deductible for a startup?

Yes, expenses for inventory and raw materials are deductible for a startup. These costs are part of the cost of goods sold and are essential for providing the products or services your business offers.

Can I deduct the cost of business meals and entertainment?

You can deduct 50% of qualifying business meal expenses, provided they are not lavish or extravagant and have a business purpose. However, entertainment expenses are generally not deductible under current tax law.

Are expenses for business-related subscriptions and memberships tax deductible?

Yes, expenses for business-related subscriptions and memberships, like trade journals or professional organizations, are tax-deductible as long as they are relevant to your business and can be considered ordinary and necessary expenses.

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FS-2024-11, April 2024

A deduction reduces the amount of a taxpayer's income that's subject to tax, generally reducing the amount of tax the individual may have to pay. Most taxpayers now qualify for the standard deduction, but there are some important details involving itemized deductions that people should keep in mind.

Standard deduction

The standard deduction is a specific dollar amount that reduces the amount of taxable income. The standard deduction consists of the sum of the basic standard deduction and any additional standard deduction amounts for age and/or blindness.

In general, the IRS adjusts the standard deduction each year for inflation. It varies by filing status, whether the taxpayer is 65 or older and/or blind and whether another taxpayer can claim them as a dependent.

Taxpayers cannot take the standard deduction if they itemize their deductions. Taxpayers can refer to Topic no. 501, Should I itemize?  for more information.

Itemized deductions

Some taxpayers choose to itemize their deductions if their allowable itemized deductions total is greater than their standard deduction. Other taxpayers must itemize deductions because they aren't entitled to use the standard deduction.

Taxpayers who must itemize deductions include:

• A married individual filing as married filing separately whose spouse itemizes deductions.
• An individual who was a nonresident alien or dual status alien during the year (some exceptions apply).
• An individual who files a return for a period of less than 12 months due to a change in his or her annual accounting period.
• An estate or trust, common trust fund or partnership.

Schedule A (Form 1040) for itemized deductions

Taxpayers use Schedule A ( Form 1040, Itemized Deductions or 1040-SR, U.S. Tax Return for Seniors ) to figure their itemized deductions. In most cases, their federal income tax owed will be less if they take the larger of their itemized deductions or standard deduction.

Taxpayers can review the instructions for Schedule A (Form 1040), Itemized Deductions, to calculate their itemized deductions, such as certain medical and dental expenses, and amounts paid for certain taxes, interest, contributions and other expenses. Taxpayers may also deduct certain casualty and theft losses on Schedule A.

Interactive Tax Assistant can help with deduction questions

The Interactive Tax Assistant (ITA) provides answers to tax law questions based on a taxpayer's individual circumstances. It can help a taxpayer determine the answer to common questions, such as if they:

• Must file a tax return.
• Have the correct filing status.
• Can claim a dependent.
• Have taxable income.
• Are eligible to claim a credit.
• Can deduct expenses.

The ITA can help taxpayers with these deduction-related questions:

• How much is my standard deduction?
• Can I claim a deduction for student loan interest?
• Can I deduct my moving expenses?
• How do I claim my gambling winnings and/or losses?
• Can I deduct my medical and dental expenses?
• Can I deduct my mortgage-related expenses?
• Can I deduct my charitable contributions?
• Can I claim my expenses as miscellaneous itemized deductions on Schedule A?
• Can I deduct personal taxes that I pay as an itemized deduction on Schedule A?
• Are my work-related education expenses deductible?
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Maximizing Tax Savings: How to Write Off Deduct Your Family Vacation Travel Expenses as a Business Trip Expenses

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Antonio Del Cueto, CPA

April 8, 2024

Imagine you're a clever detective on a mission, where every clue you find is a piece of the puzzle to make your vacation a secret mission for work. As a business owner, you know that turning a trip into a business adventure can be like finding hidden treasure, turning your travel day and lodging into a tax deduction.

To do this, you plan each business day with care, filling it with business activities that are both ordinary and necessary to conduct business. It's like setting up a perfect disguise for your vacation, making sure every activity is business-related, so if an audit comes knocking, you're ready with your detective notebook filled with evidence. This secret mission requires smart planning to ensure your getaway can rightfully earn its place as a business-related trip.

Want an easier way to file your taxes? Download our FREE tax guide for individual filers.

Understanding Travel Expenses for Business Deductions

Let's learn about when you can use travel costs to lower your taxes. This is for when the travel helps your business. We will look at what costs are okay, how to know if a cost is for business or just for fun, and what proof you need to show it's for business.

What qualifies as a deductible business expense?

A cost is okay to lower your taxes if it's normal and needed for your work. Travel costs are okay if they help your business. This could be going to meetings or learning things important for your job. If your trip is mostly for work but you also have fun, you can still write off the work parts.

How to differentiate between personal and business expenses?

Knowing the difference between fun costs and work costs means you only use the work costs to lower your taxes. If your trip has both fun and work, only count the work parts. Use business cards for work costs to make this easy.

What documentation is required for business travel deductions?

You need to keep track of all your business travel costs. Keep all receipts, tickets, and other proofs. Also, write down why each trip was needed for work. This is important if the IRS asks about your tax deductions.

Maximizing Tax Savings on Business Travel

Now, let's talk about how to figure out which travel costs can lower your taxes the most. We will go over how to add up these costs and the rules to follow. This includes how to handle food costs on trips.

How to calculate deductible travel expenses?

To find out what you can deduct, add up all your business trip costs. This includes things like flights, hotels, and car rentals. Only include costs that were normal and needed for your work.

What are the IRS guidelines on deducting business travel expenses?

The IRS says your travel costs must be both normal and needed for your job. The trip should mainly be for work. You should also be away from your main work area for more than a day's work.

How to deduct food expenses during business trips?

You can use half of your food costs during trips to lower your taxes. Keep your meal receipts or use a set amount the IRS says is okay. Remember, very expensive meals might not count as much.

Further Reading: How To Create Expense Reports

Tips for deducting expenses for family on a business trip.

Ready to take note these tips for deducting travel expenses for your family business trip!

Can you deduct expenses for family on a business trip?

When traveling for work on a business-related trip around the country, you can deduct travel expenses for yourself, but not for your family. However, if your family members must spend time doing business at the place of business with you, their expenses may qualify as business related. To qualify for a tax home for longer period, such as five days meeting with clients, every expense you incur can be deduct 100. Make sure to only deduct transportation and accommodation expenses for the time doing business.

When filing your taxes, it's important to learn how to write off only expenses that are deemed “ordinary and necessary” for your business. If the trip is longer than a normal domestic travel and involves more paid and what you actually spent, you can deduct those expenses. However, expenses for family members who aren't directly involved in the business activities can’t write be deducted as a deduction you don’t qualify for.

What are the limitations for deducting family travel expenses?

Limitations for deducting family travel expenses on your tax return can be tricky. In order to deduct travel expenses, the trip must be entirely for business purposes. If you mix business and personal activities, you can only deduct 50 percent of your business-related expenses. You must also spend the majority of the days on your trip doing business activities in order for the entire trip to qualify as a business trip.

For a trip to qualify as business-related, you must leave your tax home and travel to a business destination where you will conduct business meetings or other activities related to business. If you extend your trip for vacation days or include entertainment expenses, those expenses may not be tax deductible . Be sure to track business miles and keep records of actual expenses in order to still deduct expenses related to business.

How to document family-related costs for business trips?

When documenting family-related costs for business trips, it is important to distinguish between expenses that are tax-deductible and those that are not. Small business owners who incur travel costs while traveling for business may be able to deduct their transportation expenses, such as their plane ticket and other travel-related costs. However, it is crucial to ensure that the primary purpose of the trip is business-related. If the majority of your trip is considered business days, you may still write off the expenses incurred during those days.

Before attempting to deduct travel expenses from your taxes, it is advisable to consult with a CPA to ensure that your expenses qualify as business-related. The IRS requires that the purpose of the trip be primarily for business in order to deduct the cost of the trip from your taxes. If you are traveling for business and have a few days meeting with clients, you may be eligible to deduct 50% of your expenses incurred during those days as tax write-offs.

Further Reading: What You Should Know About Small Business Accounting, Tax, And Bookkeeping Services

Key takeaways:.

• Business Purpose : The trip needs to be mainly for business, like going to a conference or meeting clients.
• Documentation : Keeping track of things like receipts and schedules to show the trip is for business.
• IRS Rules : Rules made by the tax people to decide if your trip can be counted as a business expense.
• Deductible Expenses : Costs that you can subtract from your income before paying taxes, like travel or hotel.
• Mixing Business with Pleasure : Sometimes you can do fun things on your trip, but the main reason for the trip must be for business.

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A Bunch of IRS Tax Deductions and Credits You Need to Know

Lowering your taxable income is the key to paying less to the IRS. Several federal tax deductions and credits can help.

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Tax season can be stressful and complicated. Thankfully, tax credits and tax deductions can reduce your tax bill and ease the frustration of owing too much money to the IRS.

Here are some common IRS tax deductions and credits. Whether you are a homeowner, parent, charitable giver, older adult, or self-employed person, there are various ways to optimize your tax savings. 

IRS tax return common credits and tax deductions

If you haven’t filed your taxes yet ( Tax Day is April 15), you can use these and other tax breaks (if you are eligible for them) to reduce tax liability. If you have already filed, this information can help you plan to maximize your tax savings for the 2024 tax year (returns you file in early 2025).

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Consult with a qualified tax professional to ensure you take full advantage of the credits and deductions available to you in compliance with tax laws. Doing so can help you to keep more of your hard-earned money and achieve greater financial stability. 

Note: This is a list of common tax deductions and credits that may be available to you. Please note that it is not exhaustive and does not include any particular order or ranking.

The standard deduction

If you are like most taxpayers, you take the standard deduction instead of itemizing deductions. 

• The standard deduction reduces your taxable income by a predetermined, fixed dollar amount.
• Itemized deductions can also reduce your taxable income, but the amount varies and is not predetermined.

However, to decide whether to itemize, you must know the standard deduction amount for each tax year. See What’s the Standard Deduction for 2023 and 2024 ?

Family-focused tax credits

Child Tax Credit: The child tax credit (CTC) allows eligible parents and caregivers to reduce their tax liability, possibly resulting in a tax refund. However, not everyone can claim the CTC, and credit amounts can differ for those who can. The child tax credit is based on income, filing status, the number of children, and whether the IRS considers your dependent a qualifying child. For more information on the 2023 CTC (for tax returns filed now, see Child Tax Credit 2023: What You Need to Know .

Earned Income Tax Credit (EITC): Aimed at individuals and families with low to moderate income, the EITC is a refundable tax credit based on earned income and family size. It can financially boost working individuals, especially those with children, but is also available to some taxpayers without children. Unfortunately, many eligible individuals are unaware of the credit or don’t know how to claim it, resulting in it being overlooked.

Child and Dependent Care Credit: The Child and Dependent Care Tax Credit can help you pay for childcare or dependent care services to enable you to work or search for a job. 

• You can claim up to $3,000 of eligible childcare expenses for one qualifying individual or up to $6,000 for two or more qualifying individuals. 

This is a non-refundable tax credit, meaning it can reduce your federal income tax bill, but you cannot receive the credit as a tax refund. Learn more at Summer Camp Tax Breaks for 2023 .

Adoption Credit: The adoption credit is available for taxpayers who adopt or start the adoption process in a given tax year. The credit can be applied to international, domestic, private, and public foster care adoptions. However, it does not apply to those who adopt their spouse's child. The federal adoption tax credit for the 2023 tax year is worth up to $15,950 (inflation-adjusted yearly), but income limits apply.

Homeowner tax deductions

Mortgage Interest Deduction: Homeowners can deduct the interest paid on mortgage loans, reducing taxable income. This deduction can be particularly beneficial during the early years of a mortgage when interest payments are higher. How much you can deduct might depend on when you bought your home and your filing status. For more information, see Deducting Mortgage Interest on Your Tax Return .

Mortgage Points : Points paid at the time of mortgage origination can often be deducted in the year they were paid, potentially lowering taxable income.

Gains on Home Sale: Individuals who sell their primary residence may qualify to exclude a portion of the capital gains from their taxable income, provided they meet certain ownership and use requirements. This is known as the capital gains tax exclusion for home sales .

Energy-Efficient Home Improvements: Taxpayers who invest in energy-efficient home improvements may be eligible for tax credits. For example, homeowners can lower their federal income tax bills by installing new energy-efficient windows, doors, water heaters, furnaces, air conditioners, and solar panels.

Medical deductions

Medical Expenses: Taxpayers who itemize deductions can deduct qualifying medical expenses that exceed a certain percentage of their adjusted gross income (AGI), which can provide some relief for substantial healthcare costs.

Health Savings Account (HSA) Contributions: Contributions to an HSA are tax-deductible and can be used to pay for qualified medical expenses, offering a tax-efficient way to save for healthcare costs.

Long-term Care Insurance Premiums: Long-term care insurance provides benefits to policyholders dealing with long-term care expenses. If your insurance premiums are substantial, you may be eligible to claim a deduction for some or all of the amount you pay to keep your policy. This can help decrease your tax liability. However, it is important to remember that this tax benefit has certain IRS limitations.

Education credits and deductions

Student Loan Interest Deduction: If you paid interest on your student loan last year, you might be eligible for a tax deduction worth up to $2,500. By using this deduction, you can lower your taxable income. 

• However, the IRS has specific rules for who can claim the student loan interest deduction; only some are eligible for the maximum amount. 

For more information, see How to Claim the Student Loan Interest Deduction .

AOTC: The American Opportunity Tax Credit (AOTC) is a partially refundable tax credit available to those currently enrolled in college. Eligible taxpayers can claim 100% of the first $2,000 spent on qualified education expenses and 25% of the next $2,000. The maximum credit is $2,500 per qualifying student. If the credit exceeds the tax owed, you can receive a refund for 40% of the remaining amount, up to $1,000 per qualifying student.

Lifetime Learning Credit: The Lifetime Learning Credit (LLC) is worth up to $2,000 per tax return and can be claimed for an unlimited number of years. However, the credit is not refundable. Unlike the American Opportunity tax credit, graduate students are eligible to claim the LLC, and students do not need to attend college at least half-time to qualify. 

For more information, see 11 Education Tax Credits and Deductions .

Work-related tax deductions

Home Office Tax Deduction: Self-employed individuals are typically eligible to deduct expenses related to their home office. Here's more about the home office tax deduction .

Educator Expense Deduction: The educator expense tax deduction (also called the teacher deduction) allows some teachers, counselors, principals, or other instructors to write off classroom expenses and supplies on federal income tax returns. For the current tax season (i.e., the 2023 tax year), the maximum educator expense deduction is $300.

Military Moving Expenses: Active-duty U.S. military personnel who relocate due to a military order and permanent change of station may be able to deduct certain moving expenses not reimbursed by the military.

Special deductions for older ddults

Qualified Charitable Distributions: If you are 70½ or older, you can make qualified charitable distributions (QCDs) directly from your IRA to eligible charitable organizations. 

• These distributions can be helpful for retirees who want to support charitable causes while minimizing their tax liability. 
• QCDs fulfill required minimum distributions (RMDs) without being included in adjusted gross income (AGI).

Extra Standard Deduction: Once you turn 65, you become eligible for an extra standard deduction in addition to the regular standard deduction. This extra deduction reduces taxable income, potentially allowing retirees to keep more of their hard-earned money.

Energy tax credits

EV Tax Credit: To encourage people to purchase electric vehicles (EVs), the federal government offers a tax credit of up to $7,500 for certain "clean vehicles." The EV tax credit amount depends on factors like the vehicle's sourcing, assembly, and when it was put into service.  Used EVs may also qualify for a tax credit of up to $4,000. Due to new EV tax rules, beginning January 1, 2024, you may be able to take the clean vehicle credit as a discount when purchasing the vehicle from a registered dealer. (Income limits apply to the EV credit.)

EV Charger Tax Credit: If you install an electric vehicle charging station at home, you can receive a federal EV charger tax credit equal to 30% of the cost of hardware and installation expenses. The maximum credit amount is $1,000. Additionally, starting last year, the EV charger tax credit for home and business installations applies to other EV charger equipment like bidirectional (two-way) chargers.

Miscellaneous tax deductions and credits

Charitable Contributions : Donations made to qualifying charitable organizations are tax-deductible for those who itemize, which can incentivize philanthropic giving. Be sure to contribute to legitimate charities and get and keep receipts for your donations. The IRS says that in most cases, the amount of charitable cash contributions taxpayers can deduct as an itemized deduction is usually limited to 60% of the taxpayer’s adjusted gross income.

Jury Duty Pay Returned to Employer: If an employer continues to pay an employee's salary while serving jury duty and requires the employee to turn over the jury duty pay, the employee can deduct the amount turned over to the employer. Keep in mind that jury pay is taxable income.

Gambling Losses: While gambling winnings are taxable, taxpayers can deduct gambling losses up to the amount of their winnings if they itemize deductions. For more information, see Taxes on Gambling Winnings and Losses .

Bad Debt (Uncollected): If you have previously included an amount in your income and cannot collect it, you may be able to deduct it as a bad debt. Check out IRS Topic 453 for more information.

Saver’s Credit : People with low to moderate incomes who contribute to retirement savings accounts may qualify for a tax credit designed to encourage retirement savings.

•  If your income falls within the credit limits, you can claim up to $1,000 for single filers or $2,000 for joint filers.

As Kiplinger has reported, for those who qualify for the Saver's Credit , the lower your income, the higher the percentage of retirement plan contributions you get back on your tax return.

• Types of Income the IRS Doesn’t Tax
• Seven IRS Tax Changes to Know Before You File
• Most-Overlooked Tax Credits and Deductions
• Federal Tax Brackets and Income Tax Rates

As the senior tax editor at Kiplinger.com, Kelley R. Taylor simplifies federal and state tax information, news, and developments to help empower readers. Kelley has over two decades of experience advising on and covering education, law, finance, and tax as a corporate attorney and business journalist. 

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Small Business Trends

25 small business tax deductions- what’s new for 2023.

You work hard enough to ensure that your small business survives, and you don’t want to overlook any potential tax deductions that can maximize your savings.

In this article, we’ll cover the most important small business tax changes for 2023 and also provide information about solar energy installation credits and EV vehicle credits. Then, we’ll list all possible tax write-offs you can use, whether you’re a sole proprietor or running a small business with employees.

Remember that different deductions are available depending on your business’s structure – sole proprietorship, LLC, S-Corp or other classification.

Let’s dig right in and help you maximize potential benefits. We’ll start with a list of key changes for 2023, provide updated information about solar energy installations, and then list the top 25 tax deductions for small businesses.

IRS Reports Small Business Tax Changes for 2023

Maximum net earnings.  The maximum net self-employment earnings subject to the social security part of the self-employment tax is $160,200 for 2023. There is no maximum limit on earnings subject to the Medicare part.

Standard mileage rate.  For 2023, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use during 2023 increased to 65.5 cents a mile.

Redesigned Form 1040-SS.  For 2023, Schedule(s) C and SE (Form 1040) are available to be filed with Form 1040-SS, if applicable. For additional information, see the Instructions for Form 1040-SS.

Bonus depreciation.  The bonus depreciation deduction under section 168(k) begins its phaseout in 2023 with a reduction of the applicable limit from 100% to 80%.

Form 7205, Energy efficient commercial buildings deduction.  This form and its separate instructions are used to claim the section 179D deduction for qualifying energy efficient commercial building expenses that are now reported on new line 27b of Schedule C (Form 1040). See Form 7205 and its instructions for more information.

Commercial clean vehicle credit.  Businesses that buy a qualified commercial clean vehicle may qualify for a clean vehicle tax credit. See Form 8936 and its instructions for more information.

Business meal expense.  The temporary 100% deduction for business meal expenses has expired. The business meal deduction reverts back to the previous 50% allowable deduction beginning January 1, 2023.

Did You Install Solar Energy?

There are two types of tax credits available for small business owners who installed solar energy.

The Investment Tax Credit (ITC)

The ITC is a tax credit that reduces the federal income tax liability for a percentage of the cost of a solar system that is installed during the tax year. For 2023, as long as the project meets federal labor requirements, that’s a 30% of the cost tax credit.

The production tax credit (PTC)

The PTC is a per kilowatt-hour (kWh) tax credit for electricity generated by solar and other qualifying technologies for the first 10 years of a system’s operation. It reduces the federal income tax liability and is adjusted annually for inflation. In other words, check for the latest update on that number.

In general, solar systems that were placed in service in 2022 or later and begin construction before 2033 are eligible for a 30% ITC or a 2.75 ¢/kWh PTC if they meet labor requirements issued by the Treasury Department or are under 1 megawatt (MW) in size.

Top Tax Deductions for Small Business

Tax-deductible business expenses can help reduce your annual tax liability, so it’s important to know what deductions are available. Here are the top 25 small business tax deductions:

1. Home Office Deduction

If you use a portion of your home exclusively for business, then you can often claim the associated expenses, such as utilities, repairs, and insurance, as home office deductions . You can also deduct a portion of your rent or mortgage payments. This is calculated using a percentage – for example, if your home is 1,000 square feet and you use a 100-square-foot office, you can deduct 10% of your home expenses, such as mortgage payments and utilities.

2. Real Estate Taxes

If you own a business property, such as an office or retail store, then you can claim the associated real estate taxes as a tax deduction. You’ll need to provide proof of payment, such as a receipt or bank statement.

3. Business Meals

Meals consumed while conducting business can be deducted as long as they are reasonable. This includes meals with employees, clients, and vendors. In order to qualify for the deduction, the meal must be directly related to business and not personal in nature. However, for 2023, the deduction for meals was cut from 100% to 50% of the cost of the meal.

4. Legal and Professional Fees

Fees paid to attorneys, accountants, and other professional services can be deducted as business expenses. Services such as filing fees, audits, and incorporation costs can also be deducted.

5. Business Property Rental

Any rental payments for business property such as an office, warehouse, or equipment can be deducted. For example, if you’re a contractor and you lease a storage unit for supplies and tools, you can deduct that as a business expense. You’ll need to provide a lease agreement or rental receipt as your proof of payment. While you can’t deduct the total amount of your rent, you can deduct a portion that is equal to your business use.

6. Mortgage Interest

If you own a business property, you can claim the associated mortgage interest as a business expense and tax deduction. The deduction is limited to the amount of your loan’s principal balance and the associated interest rate.

7. Health Insurance Premiums

If you pay health insurance premiums for yourself or your employees, these can be deducted as a business expense. Note that in some cases, the IRS may limit the amount you can deduct, so it’s best to check with your tax advisor first.

8. Business Education Expenses

If you attend a seminar or take classes related to your business, the associated costs can be deducted as a business expense. This includes tuition, registration fees, and travel expenses. Online courses can also be deducted.

9. Internet Expenses

Do you pay for an internet connection for your business? If so, then the associated fees can be deducted. This includes monthly charges, equipment rental fees, and installation fees. Since every business is online these days, this deduction can be quite helpful.

10. Business Equipment

If you purchase business equipment, such as computers or furniture, the cost can be deducted. You may also be able to deduct any associated repair and maintenance costs. Make sure to keep your receipts and documentation.

11. Business Insurance Premiums

The cost of business insurance premiums can be deducted as a business expense. This includes liability, property, and life insurance. Note that some types of insurance may only be deductible if they are related directly to your business operations.

12. Business Travel Expenses

If you travel for business purposes, then the associated expenses can be deducted. This includes airfare, hotel stays, car rentals, and meals. Be sure to keep all receipts and documentation for your trips in case the IRS requests it.

13. Office Supplies Business Expense

Office supplies like paper, ink, and toner are all deductible business expenses. You can also deduct the cost of any other supplies that you use for your business, such as invoices and stationery.

14. Advertising & Marketing Costs

Advertising and marketing costs related to promoting your business, such as website design, can be deducted. This includes the cost of business cards, flyers, and other promotional materials. Online marketing expenses can also be deducted.

15. Phone Expenses

The cost of your business phone and associated charges can be deducted as a business expense. This includes cellular bills, landline charges, and long-distance calls. You may also be able to deduct any extra costs for business-specific features, such as a dedicated fax line.

16. Business Vehicle Expenses

Does your business have a company car or truck? If so, then the associated fuel and maintenance costs can be deducted. You can also deduct any mileage that is related to business trips. If your business has a fleet of vehicles, then this deduction can add up quickly. If you’re a sole proprietor and your vehicle is for both personal and business use, you can claim the mileage, but you must have accurate records detailing when the vehicle was used specifically for business.

17. Employee Compensation

If you have employees, then the cost of their salaries and wages can be deducted. You’ll also need to deduct any other compensation that is provided, such as bonuses and stock options. Be sure to comply with all applicable tax laws when deducting employee compensation.

18. Startup Costs

If your business is new, then you may be able to deduct the cost of launching it. This includes legal fees, accounting expenses, and other costs associated with setting up your business. Make sure to keep all of your receipts and documentation for this deduction as well.

19. Professional Service Fees

The cost of hiring a professional such as an accountant or lawyer is deductible. This includes any fees associated with filing taxes. It also includes any fees for legal advice or representation for any business-related matters, such as a contract review. Hiring a professional can save you time and money in the long run, so make sure to take advantage of this deduction.

20. Retirement Contributions

Contributions to a retirement plan for yourself and your employees can be deducted. This includes contributions to 401(k)s, IRAs, and other types of retirement plans. This deduction can help you save for your future and also provide benefits for your employees. These deductions are specific by state and can be found at the Small Business Administration website (http://sba.gov/business-guide/manage-you-business/pay-taxes.)

21. Bad Business Debt

Any debt that is deemed uncollectible can be deducted. This includes any money that is owed to you by customers or vendors but cannot be collected. This deduction can help offset any losses that your business may have incurred due to bad debt.

22. State Tax Deductions

Deductions on state and local taxes for businesses can vary from state to state, so be sure to check with your local tax authority for more information. Some states offer deductions on sales taxes or income taxes, while others have specific deductions that apply to certain industries. Make sure to take advantage of any available state tax deductions in order to reduce your business’s taxable income.

23. Employee and Client Gifts

If you give out client gifts or provide employee perks, such as holiday bonuses, those expenses can be deducted. This includes any items that are given out in appreciation of a job well done, such as gift cards or dinner vouchers. Just make sure to keep track of all gifts and bonuses to ensure that you take advantage of the deduction.

24. Foreign Earned Income Exclusion

If your business earns income in a foreign country, then you may be able to take advantage of the foreign-earned income exclusion. This can help reduce the amount of taxable income that you owe on your business earnings.

25. Charitable Contributions

Any donations that you make to a qualified charity can be deducted. This could include money, goods, or services that you provide to a charitable organization. Charitable giving can help to support a good cause while also providing you with a tax break.

Tips for Documentation and Record-Keeping

Effective documentation and record-keeping are pivotal for maximizing tax deductions. It’s essential to maintain organized records of all business-related expenses throughout the year. Utilize digital tools or accounting software to track expenses in real time.

Keep digital or physical copies of all receipts, invoices, and bank statements. Categorize expenses for easier reference and ensure that each expense is substantiated with appropriate documentation. Regularly reviewing and updating your records can significantly ease the tax filing process and support your deduction claims.

Common Mistakes to Avoid

Common mistakes in claiming tax deductions can lead to missed opportunities or, worse, trigger audits. One frequent error is the commingling of personal and business expenses.

That’s why often the first advice given to new small business owners is to start a business bank account and obtain a business credit card. Any fees related to banking services, such as wire transfers and international transactions, can be deducted. This includes any monthly or annual fees that you may be charged for having a business bank account. Be sure to keep track of any fees that you incur so that you can deduct them at tax time.

Overestimating deductions is another pitfall; only claim deductions for expenses that are ordinary and necessary for your business.

Neglecting to track small expenses or failing to stay updated on tax law changes can also result in losing out on valuable deductions. Being meticulous and conservative in your approach can help avoid these common mistakes.

Impact of Deductions on Overall Tax Strategy

The strategic use of tax deductions should be an integral part of your overall business tax strategy. Deductions can significantly lower taxable income and, consequently, the tax liability.

However, it’s crucial to understand how these deductions align with your business goals and financial plans. For instance, investing in equipment or technology may provide immediate deductions, but consider how these investments contribute to long-term business growth.

Also, assess how deductions like home office or vehicle expenses fit into your broader financial picture. A holistic approach to tax planning can optimize financial outcomes for your business.

Don’t forget you can use the latest  accounting software for small business  to find out what your tax liabilities are for the year.

Utilizing Professional Tax Assistance

Navigating the complexities of tax deductions can be challenging, especially for small business owners who juggle multiple responsibilities. Professional tax assistance can be invaluable in this regard.

Tax professionals can provide expert advice tailored to your specific business needs, ensuring you take advantage of all eligible deductions while remaining compliant with tax laws.

They can also offer strategic guidance on tax planning and help you prepare for future tax years. Investing in professional tax services can lead to significant long-term benefits for your business, including potential savings and reduced risk of errors.

How to Claim Small Business Tax Deductions

When it comes to claiming deductions on your small business income taxes, there are a few key things to keep in mind. Here is a step-by-step guide on exactly how to claim small business tax deductions:

Step 1: Gather the necessary documents

Before you start claiming deductions, make sure to gather all necessary documents, such as receipts or invoices for any expenses you are deducting.

Step 2: Fill out the appropriate tax forms

You will need to fill out all of the appropriate tax forms in order to claim deductions. This may include business income tax forms, as well as any state-specific tax forms.

Step 3: Calculate deductions

Once you have all the necessary paperwork in place, you can begin to calculate your deductions. This includes calculating all applicable business expenses, as well as any state or federal credits that may be available.

Step 4: File taxes

After calculating your deductions, you can file your income taxes using the appropriate forms. Make sure to double-check all information to avoid any issues with incorrect filings. It is important to learn as much as possible about  how to file self-employment taxes  if you are doing it yourself.

Step 5: Submit taxes

Once the tax forms are completed and filed, you can submit them to the IRS. After submitting, you should receive a confirmation that your taxes have been processed.

It is also worth noting the  top small business tax mistakes  owners make when they file so you can learn from their mistakes.

Here’s a comparison table of the above steps for quick and easy reference:

How to Maximize Your Tax Deductions and Cut Your Taxable Income

Tax deductions are an important way to reduce your taxable income and save money. With the right strategy, you can maximize your deductions and reduce your tax burden. Here are five ways to maximize tax deductions:

• Track all of your business expenses. If you want to maximize your deductions, you need to make sure you track any and all business expenses throughout the year. This includes anything from office supplies to travel expenses.
• Take advantage of deductions for self-employed individuals. If you are self-employed, you may be eligible for a variety of deductions, such as the  self-employed health insurance  deduction and the home office deduction.
• Look for any available state tax deductions. Many states offer additional deductions for businesses, such as research and development credits or sales tax deductions.
• Make sure to keep accurate records. Accurate records are essential for claiming any deductions. Make sure to keep track of all expenses, such as receipts and invoices.
• Consult with a tax professional. If you’re unsure how to maximize your deductions, it can be helpful to consult with a tax professional who can give you tailored advice.

What is the section 163(j) limitation on the deduction for business interest expense?

Generally, taxpayers can deduct interest expenses paid or accrued in the taxable year. However, if the section 163(j) limitation applies, the amount of deductible business interest expense in a taxable year cannot exceed the sum of:

• the taxpayer’s business interest income for the taxable year;
• 30% of the taxpayer’s adjusted taxable income (ATI) for the taxable year; and
• the taxpayer’s floor plan financing interest expense for the taxable year.

What’s going on with Net Loss Deductions?

The Tax Cuts and Jobs Act (TCJA), section 11012, as amended by the CARES Act, section 2304, and as further amended by the Inflation Reduction Act, section 13903, revised section 461(l) to limit the amount of losses from the trades or businesses of noncorporate taxpayers that the taxpayer can claim each year, beginning after 2020 and ending before 2029. You can’t deduct net losses in excess of a threshold amount in the current year. The amount of the excess business loss is treated as an NOL for the current year for purposes of determining any NOL carryover for later tax years. You’d use IRS Form 461 to figure the excess business loss.

Standard Deductions vs. Itemized Deductions?

Standard deductions are a set amount that taxpayers can deduct from their taxable income to reduce overall tax liability. This deduction is available to those who do not itemize their deductions on their tax return. For 2023, the standard deduction for a single filer is $14,600.

Itemized deductions are a list of expenses that can be used to reduce your taxable income if the total of the expenses is more than your standard deduction. Itemized deductions include medical bills, charitable donations, mortgage interest payments, and more.

Tax Deductions vs Tax Credits?

Tax deductions are an important tool for reducing one’s taxable income and the amount of taxes one must pay. They are different from tax credits, which are a dollar-for-dollar reduction in taxes owed.

Tax deductions reduce the amount of taxable income subject to tax, while tax credits reduce the total amount of taxes paid. It is important to understand the difference between these two types of tax relief in order to maximize your savings.

What is the 20% Business Tax Deduction?

That’s the qualified business income deduction (QBI). The QBI is a tax deduction that allows eligible self-employed and small-business owners to deduct up to 20% of their qualified business income on their taxes.

In general, total taxable income in 2023 must be under $182,100 for single filers or $364,200 for joint filers to qualify.

This deduction applies to businesses that are organized as pass-through entities, such as sole proprietorships, partnerships, and S-corporations. The deduction is based on the business’s net income from taxable activities and is limited by a variety of factors, such as the type of business, wages paid to employees, and the number of capital investments.

What types of business expenses are tax deductible without receipts?

Navigating the world of business expenses can be complex, especially when it comes to determining which costs are tax deductible without physical proof like receipts. The IRS understands the challenges businesses face and, thus, allows for the deduction of certain expenses even in the absence of receipt documentation. This provision, however, should be exercised with caution, ensuring that the expenses claimed are legitimate and justifiable.

Some business expenses that can typically be deducted without receipts include:

• Transportation: Costs associated with business-related travel, such as mileage or fuel for company vehicles.
• Office Supplies: Items like pens, paper, or other common supplies used in daily operations.
• Tools & Equipment: Essential tools or machinery required for business processes or services.
• Professional Services: Fees paid to professionals, including accountants or legal consultants.
• Marketing & Advertising: Expenses related to promoting the business, like online advertisements, brochures, or promotional events.

While these categories offer some flexibility, it’s still advisable for businesses to maintain thorough documentation whenever possible. Keeping organized records, even in the absence of receipts, can provide support during tax audits or financial reviews.

Businesses can still deduct certain expenses without needing receipts as evidence. Basic costs such as transportation, office supplies, and tools, services such as accountant fees, and marketing can be deducted without needing receipts.

What is the maximum tax refund you can get?

The maximum tax refund you can get is largely dependent on your individual income and filing status. Generally, the more money you make and the more deductions you take, the higher your refund amount will be. Additionally, tax credits and deductions can significantly increase your refund amount. Your best bet for maximizing your refund is to consult a tax professional who can provide you with tailored advice for your individual situation.

How can you lower your income tax?

There are several strategies you can use to lower your income tax bill. First, maximize deductions by tracking all of your business expenses and taking advantage of any applicable tax credits or deductions. Second, consider restructuring your business to take advantage of lower tax rates for entities such as S-corporations or LLCs. Finally, consider contributing to a retirement plan such as an IRA, 401(k), or SEP-IRA. These contributions can be deducted from your taxable income, reducing your overall tax liability.

How much can an LLC write off?

The amount an LLC can write off depends on the type of deductions it is taking. Generally, business expenses such as advertising costs, employee salaries, and office supplies are fully deductible. Additionally, LLCs may be eligible for various tax credits and deductions, such as the 20% business tax deduction discussed above. Consult a tax professional to determine the exact amount you can write off.

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Money Talk with Liz Weston: Avoid deducting personal expenses

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Dear Liz : I am the sole owner of a condo. I am getting ready to realize a dream of mine by traveling around the world. I will be gone indefinitely. Thus, I am thinking about renting out my condo. I know I get a write-off for repairs on the unit, cleaning supplies, etc. What about the storage unit where I will need to store my things from my unit. Can I write off the storage unit?

Answer : Congratulations on your upcoming adventure! You’ll have excitement enough without defending yourself in an IRS audit, so avoid deducting personal expenses such as a storage unit.

The IRS says you can deduct the “ordinary and necessary” expenses for managing and maintaining a rental property. That includes mortgage interest, taxes, operating expenses, depreciation and repairs.

“If the storage unit was used in conjunction with the rental activity, such as storing maintenance supplies for doing work on the rental property, a deduction could perhaps be justified,” says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.

However, you won’t be around to do that work, so deducting the storage unit isn’t going to fly.

Dear Liz : I am 85 and have been living (unmarried) with a man since about 1977. We have always filed our tax returns separately and now we both collect Social Security. I have been told that when one of us passes, the other cannot collect the deceased one’s benefits. We have been thinking about getting married and would like to know if there is a time regulation involved.

Answer : You generally must be married for at least nine months to qualify for Social Security survivor benefits. Keep in mind that the survivor will collect only the larger of a couple’s two checks; the smaller benefit goes away.

So marriage could benefit the lower earner financially, and give the higher earner peace of mind, knowing that their lower-earning partner will have access to the larger benefit. Marriage has a number of other financial and legal benefits, including the ability to make decisions for your spouse should they become incapacitated.

Marriage would end your ability to collect a divorced spousal benefit from a previous spouse, however. If either of you have been married before and the marriage lasted at least 10 years, investigate whether you might qualify for a larger benefit based on that partner’s work record. If the previous spouse has passed, you may qualify for a divorced survivor benefit. Unlike divorced spousal benefits, divorced survivor benefits don’t end at remarriage as long as you’re 60 or older when you remarry.

Dear Liz : I have an 834 credit score, with three credit cards. I don’t carry debt or pay annual fees. I’m considering closing one of my cards and replacing it with one available through my credit union. Is it worth the hassle?

Answer : Closing accounts won’t help your credit scores and may hurt them. If there’s no compelling reason to close a card, you might consider leaving the account open and using the card occasionally to prevent the issuer from closing it.

You also might want to rethink your stance on annual fees. These days, few cards without annual fees offer rewards, while many cards offer rewards that more than offset their fees. If you’re new to the rewards card world, consider getting a simple cash-back card. If you’re interested in travel benefits, look for a card that gives you points that you can transfer to frequent traveler programs.

If you’re determined to close the account and open another, apply for the new card first since the closure may drop your scores.

Liz Weston, Certified Financial Planner®, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com .

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Liz Weston, Certified Financial Planner, is a personal finance columnist for the Los Angeles Times and NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.

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