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Bradford Tax Institute

12 Answers to Questions About Proving Business-Travel Expenses

July 27, 2023

“12 Answers to Questions About Proving Business-Travel Expenses”

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business travel expenses reading answers

Do you operate your business as a corporation or as a proprietorship?

Either way, you need to record your tax-deductible travel expenses in an IRS-approved manner.

(Failure to do so means the possible loss of valuable deductions.)

That’s why I wrote this article for the Tax Reduction Letter.

I wanted to explain how to keep your tax records the right way and give you a FREE Tax Diary System as a gift that you won’t want to miss!

Stick with me and I’ll show you how to keep your travel expense-records audit proof!

Here are 12 important questions I’ll answer in detail

Corporation or proprietorship?
Do I Have to Keep a Tax Diary for My Business Travel?
Is There an Easy Way to Keep a Tax Diary? (Yes. Use my FREE Tax Diary System! )
Why Are Travel Meals Separated from Other Travel Expenses?
Do I Need Receipts?
What Exactly Is a Receipt?
Credit Card Statement and Canceled Checks
What Is a Timely Kept Record?
$75 Rule Allows Cheating
Should I Keep Receipts If the Expense Is Under $75?
What Are Legitimate Travel Expenses?
How Do I Submit Travel Expenses to my Corporation?

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Bradford Tax Institute Blog

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12 Answers to Questions on Proving Expenses for Business Travel

Q&A 1: Corporation or proprietorship?

Question. Are the business travel documentation rules different if I operate my business as a corporation versus as a proprietorship?

Answer. Yes and no.

Not different. Regarding deductions for lodging, meals, or other travel expenses, the rules governing receipts, business reasons, and canceled checks are the same for corporations, proprietorships, individuals, and employees.

Different. If you operate as a corporation, the corporation is a separate legal entity from you. You are an employee of that corporation. To get the best tax results, you

need the corporation to reimburse you for the travel expenses, or
have the corporation pay the travel expenses.

Either way, you have to document the travel expenses as explained in the answers below.

Big change. The Tax Cuts and Jobs Act eliminated for the years 2018–2025 your ability to deduct employee business expenses on Form 1040. Thus, as an employee of your corporation, the only way to realize the tax benefit for travel is via direct corporate payment of the travel (say, via a corporate credit card) or reimbursement to you.

Q&A 2: Do I Have to Keep a Tax Diary for My Business Travel?

No, but the timely records you keep must prove the four elements below:

Amount. The amount of each expenditure for traveling away from home, such as the costs of transportation, lodging, and meals.
Time. Your dates of departure and return and the number of days on business.
Place. Your travel destination, described by city or town.
Business purpose. Your business reason for the travel or nature of the business benefit derived or expected to be derived.

Q&A 3: Is There an Easy Way to Keep a Tax Diary?

Yes. Use a Tax Diary. Here is what the entries for a day of travel would look like:

The diary captures the four elements that the IRS requires, including the date—the date is above the snippet you see in this image.

Yes, this is a paper copy, and there are dozens and dozens of smartphone apps for travel. We’re sure some of them are good, but we haven’t tested them in depth and don’t know which ones to recommend, so we don’t have a recommendation.

But this we know for sure: spending a little time putting your travel expenses in the Tax Diary helps you make sure you capture all the expenses and record the necessary information.

Q&A 4: Why Are Travel Meals Separated from Other Travel Expenses?

Lawmakers don’t like the meals you eat while traveling. To prove their point, they enacted a 50 percent cut in your tax deductions for travel meals.

In the image above, travel meals and snacks total $123 for the day. On your individual or corporate tax return, you enter half that amount as a tax deduction. On the corporate return, the other half is a Schedule M-1 adjustment.

Q&A 5: Do I Need Receipts?

Yes and no!

When in tax-deductible travel status, you need a receipt, paid bill, or similar documentary evidence to prove

every expenditure for lodging, and
every other travel expenditure of $75 or more, except transportation, for which no receipt is required if one is not readily available.

Q&A 6: What Is a Receipt?

The receipt is a document that establishes the amount, date, place, and essential character of the expenditure.

Hotel example. A hotel receipt is sufficient to support expenditures for business travel if the receipt contains the

name of the hotel,
location of the hotel,
separate amounts for charges such as lodging, meals, and telephone.

Restaurant example. A restaurant receipt is sufficient to support an expenditure for a business meal if it contains the

name and location of the restaurant,
date and amount of the expenditure,
number of people served, and
if a charge is made for an item other than meals and beverages, an indication that such is the case.

Q&A 7: Credit Card Statement and Canceled Checks

Question. Can’t I simply use my credit card statement as a receipt?

Answer. No. Your credit card statement is like a canceled check. It proves only that you paid the money, not what you purchased.

To prove the travel expenditure, you need both the receipt (proof of purchase) and the canceled check or credit card statement (proof of payment).

Q&A 8: What Is a Timely Kept Record?

The IRS says that a log maintained on a weekly basis that accounts for activity during the week creates a timely kept record. This is good. In other words, the IRS deems that you meet the requirement to record your travel expenses at or near the time you spend the money when you keep a weekly or more frequent log.

Q&A 9: $75 Rule Allows Cheating

Question . Since I don’t need a receipt for a travel expense under $75 other than lodging, how does the IRS know that I’m not cheating?

Answer. Where did you get the cash to pay the expense? Did you make an ATM withdrawal? Did you cash a check? You can see that the IRS has many ways to know.

Q&A 10: Should I Keep Receipts If the Expense Is Under $75?

Yes. We can think of no reason not to keep the receipt, regardless of the amount.

Think about it. The receipt is proof positive. When the travel expense is less than $75, the IRS allows you to simply write down the expense, but doing so is not proof positive as it is with the receipt.

We advocate proof positive for your travel records. This helps the IRS imagine that you have great records for all your expenses.

Q&A 11: What Are Travel Expenses?

In a nutshell, a travel expense is an expense of getting to and from the business destination and an expense of sustaining life while at the business destination. Here are some examples from the IRS:

Costs of traveling by airplane, train, bus, or car between your home and your overnight business destination
Costs of traveling by ship (subject to the luxury water travel rules and cruise ship rules)
Costs of renting a car or taking a taxi, commuter bus, or airport limo from the airport to the hotel and to work destinations, including to restaurants for meals
Costs for baggage and shipping of business items needed at your travel destination
Costs for lodging and meals (meal costs include tips to waitstaff)
Costs for dry cleaning and laundry
Costs for telephone, computer, internet, fax, and other communication devices needed for business
Tips to bellmen, maids, skycaps, and others

Q&A 12: Submitting Travel Expenses to Your Corporation

When you operate your business as a corporation, keep in mind that the corporation is a separate legal entity (person) from you.

If you incur travel expenses on behalf of the corporation, you can’t deduct those expenses personally as employee business expenses because such expenses are not deductible for years 2018–2025 thanks to the Tax Cuts and Jobs Act.

This means that you need to submit the expenses to the corporation for reimbursement. You want to do this under an “accountable plan.” Essentially, this means you will submit the expenses in a manner that documents the expenses in accordance with the IRS rules.

One simple way to do this is to give your corporation your Tax Diary System pages for reimbursement, supported by the appropriate receipts.

If you prefer, you can submit an expense report to the corporation that satisfies the IRS requirements for the travel deductions. This means proving where you were and why, along with documenting that the travel record submitted or summarized was kept on a timely basis and that the expense report contains the required receipts.

Finally, consider using a corporate credit card and properly documenting the expenses. With this method, make sure you settle any cash advances and cash out-of-pocket payments with the corporation on a timely basis, meaning within a week. You can do this with entries in the books of account, reimbursement to/from petty cash, or by check to/from the corporation.

My name is Christopher Ragain, I am the founder of Tax Planner Pro. I love helping small business owners find creative and legal ways to beat the TaxMan. My team and I love to write and you can find all of our insights on this blog!

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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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Everything You Need to Know About the Business Travel Tax Deduction

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What tax write-offs can I claim?

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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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 ."

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Managing business travel expenses

Best practices for travel expense management, what exactly are business travel expenses, need to get better control of your business travel spend, what business travel expenses can employees claim.

The actual costs of the travel (the flight, train ticket, hotel cost, etc)
The subsistence expenditure (your food and drink consumed during the time you travel)
Any other costs that came about because you made the journey such as entertainment.

What is not a legitimate travel expense

Commuting to and from your usual office
Any travel taken for private reasons.

How to manage the travel & expense process

1. decide on the employee payment method.

Ask employees to pay them upfront using personal card/bank account/cash and then have them submit expense claims.
Pay expenses directly from a company bank account or company card.

1. The company credit/spending card

2. pay with personal cards and submit expense claims, 2. set out a clear process for expense submission & reimbursement.

Pre-trip expense projection - ask employees to complete a projection prior to their trip, this will force them to consider their spend.
Receipt and invoice types - Be sure to state in what format you expect evidence to be provided (e.g. tax invoice in PDF/ physical receipt)
Expense claim submission timeline - Ensure that expense claims are all made within 5 working days of the business trip finishing.
Expense reimbursement period - The company commits to reimburse staff within 15- 30 days of the expense claim, during which period the company can query expenses.

3. Communicate the expense policy

Company-wide emails every quarter - Send an email with the policy every quarter, this may not be necessary if you are a small team.
Talk about it at all-hands meetings - Your job is important and saves the company money , and people need to know the rules. At the next meeting ask to speak for a few minutes giving examples (not naming names) of good and bad expense claims
Post it on your company intranet - Make sure it is a live document and easily accessible. Link it to a Google doc or whatever tool you use, this means updates don’t require you to ask employees to delete or disregard previous versions,

How to calculate and track business travel expenses like a pro

1. record everything and tag each expense.

By trip type (existing client, sales, corporate event)
By department
By expense type

2. Calculate every trip

Travel cost - plane, train, car hire, this includes the petrol you put in the car
Accommodation - Hotel, Airbnb, or wherever you stayed
Food & drink
Entertainment - either for clients or if permitted in policy
Wi-Fi connections , or anything else you needed to get your business done on the road.

3. Categorize your spend

Project your travel expenses, need more tips on managing business travel, how to reduce travel expenses for small businesses, 1. do you have to stay the night, 2. get the point(s), 3. cut the taxis, 4. get corporate rates, 5. get the per diem right, 6. recover the tax, travelperk makes calculating your recoverable vat simple, 7. get cashback.

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Topic no. 511, Business travel expenses

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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Complete Guide To Business Trip Expense Management

Home » B2B » Complete Guide To Business Trip Expense Management

Among all controllable business costs, business travel and subsistence expenses rank second highest after employee wages. Business travel expenses are imperative as employees, business owners, and consultants must travel for myriad reasons. These include business expansion, project work, customer retention, client servicing, networking, training, and branch office management. Business travel is a principal driver of MICE tourism, catering to meetings, incentives, Exhibitions, and conferences, bringing large groups of employees, professionals, traders, and consultants together. Business trip expense covers a broad spectrum of costs comprising transportation, accommodation, meals, and other incidental expenses.

Organizations strive to control business travel costs while ensuring a better travel experience and policy compliance for the well-being of employees. Online expense and travel management software programs like Paxes help businesses control every business trip expense to improve ROI.

Types of business trip expenses

A business trip expense can include several expense heads according to the travel and expense policy of the individual organization. Each company develops its own travel policies according to the travel budget, business travel objectives, travel frequency, geographical coverage, and the number of employees undertaking business trips. These are standard types of business trip expenses in most business setups.

1. Transportation expenses

The cost of transportation to reach business destinations may include airfare, rail ticket, or fuel expenses. Companies can decide the type of transportation employees should use besides the reimbursement process. These may include toll and parking expenses. Reimbursing mileage at actual is common practice if employees use personal vehicles for business travel.

2. Accommodation expenses

Employees stay at hotels when going to outstation locations on business assignments. They need accommodation in upscale hotels, providing a safe and comfortable stay. Businesses also decide these hotel accommodation expenses for an employee.

3. Subsistence expenses

Employees must spend for food during business travel to sustain themselves. Companies reimburse bills for breakfast, lunch, and dinner. All organizations allow employees to claim subsistence expenses for categories such as food and drinks.

4. Ancillary expenses

Finance teams and travel managers should list types of personal expenses, such as laundry, office stationary, tips, commuting, and entertainment expenses. These are minor expenses to support business travel.

What are the business travel expenses that employees can claim?

The following business travel and subsistence expenses qualify for reimbursement that the employee claims by submitting expense reports.

Travel expenses: Expenses for traveling by train, bus, plane, or car to the business destination from home.
Use of the personal car: Employees using a personal car for business travel can claim mileage reimbursement.
Ground or local transportation: Local transport such as cab service or public transport to travel between hotel and business location or airport and hotel.
Shipping expenditure: Expenditure for shipping baggage, exhibition display material, equipment, samples, and other material for business events.
Hotel stay: Expenses for temporary accommodation like lodging and hotel expenses. These comprise expenses for food and drink for self.
Laundry expenses: Employees can claim dry-cleaning and laundry expenses while on a business trip.
Official communications: Communication costs (Wi-Fi, telephone, and courier charges for business purposes).

Business travel cost: how can you calculate it?

Real-time tracking and monitoring of travel expenses are necessary for calculating travel expenses. Online travel management platforms enable finance teams to get real-time analytics and reports. They can determine travel expenses by employees, teams, departments, and routes for a particular period.

Create a comprehensive business travel budget template in excel format to track monthly travel expenses to assess budget utilization.
Recording every travel expense detail is challenging unless one uses an advanced software program. Enter trip details such as type of trip, type of expense, employee name, travel destination, and department into a business trip expenses excel template.
Calculate travel costs by summing up all expenditures under different heads, like accommodation and transportation.
SaaS-based travel management tools like Paxes allow the categorization of every expense to determine areas that account for higher travel costs.

Required documents for expense claims

To successfully claim travel expenses, one must submit numerous documents as suggested by the company. However, some of the documents are common for every organization such as:

Travel expense claim form provided by the organization which include personal and travel details of the employee
A copy of travel itinerary in detail should be attached with the expense claim form
All the receipts for business travel and meal expenses should be attached to the same
Some organizations may also require boarding pass along with the ticket
Approvals of various parties and heads involved should be provided with the whole paperwork

Tax implications of business trip expenses

The tax implications of business trip expenses are highly dependent on the country in concern. One should consult an accountant or tax professional in the country for filing tax as per the laws of specific country. Here are some of the key takeaways that is common for most of the countries:

Business trips expense such as transportation, meals, accommodations, etc. are tax-deductible
Companies should provide proper documentation such as invoices, receipts, etc. to claim tax deduction
Businesses should clearly differentiate between personal and corporate expenses
One should consult a tax professional for reimbursement regulations and international trips laws

Importance of expense management in business travel

Business travel expenses are among the top expenditure that an organization incur as daily activity. For growth, each business activity should be converted into the profit it is generated for the business. Monitoring expenses and managing it effectively can help cost control and increase the overall return. Effective cost management systems provide transparency and promote accountability. Additionally, accurate budgeting and expense management builds the pavement for future trips and optimize them through data.

How to control business trip expenses?

These tips are helpful for controlling and minimizing travel expenses without affecting the employee travel experience or curtailing business trip:

1. Creating a travel expense policy

Companies can bring discipline to business travel and expense processes by developing a travel expense policy. Employees get clarity about eligible expenses, avoiding expense deductions. Travel policy can avoid expense fraud and mitigate gray areas. You can include expense limits as per employee levels for greater clarity. The policy should cover expense reporting and reimbursement guidelines with proper timelines. Setting approval hierarchies in the policy will speed up business travel processes.

2. Avoid planning air travel on weekends

Employees should fly on weekdays or during off-peak periods to benefit from cheaper airfares. Booking travel well in advance ensures better cost-efficiency of air travel.

3. Leverage online travel management platform

Automation of travel processes like booking using SaaS-based travel management platforms like Paxes improves employee travel experience. The platform allows access to a curated inventory of hotels and other travel suppliers. Paxes is well-connected with multiple GDS and LCCs for saving travel costs while booking. Employees can save time with the app-based booking features.

4. Economical local transport

Encourage employees to use public transport wherever possible. Using shared taxis can reduce ground transportation costs. One can also negotiate with the hotels for free airport transfers.

5. Collect refunds without fail

Keep track of travel services eligible for refunds and ensure collecting these to save travel costs. One should also maintain a list of such dates for future references.

6. Explore loyalty benefits

Most travel suppliers encourage businesses to purchase their services by providing loyalty rewards. Ensure your employees use the same airlines or chains of hotels to get loyalty benefits, such as extra amenities and loyalty discounts.

7. Revise travel and expense policy periodically

As the business scales up, there are more employees undertaking business trips. Revisiting the travel and expense policy to make relevant changes is crucial. Travel management solutions allow integration and modification of travel policy.

8. Accommodation and meal expense limits

Companies should put a cap on the accommodation and meal expenses. The cost can vary depending upon the location and types of business travel. However, one should ensure to keep budget in mind before trading cost for experience. The best ways to manage meal expense is by using per diem system.

Choosing the right expense management tools

Manual management of expenses can result in errors and inefficiency. Hence, it is important for corporates to utilize simple to use management systems for record keeping and future analysis. The tools should provide real-time data and smoothen the reimbursement process. It should have the capabilities to be integrated with corporate travel management platform such as Paxes and popular HRMSs available in the market.

Strategies for pre-trip budgeting

Here are some of the points for pre-trip budgeting:

Set comprehensive and realistic budgets
Negotiate discounts with service providers
Refer to company travel policies
Clearly communicate expenditure limits to employees
Allocate funds for unexpected expenses or emergencies
Emphasize accurate and real time record-keeping
Establish a pre-approval process for significant expenses
Integrate budgeting tools with travel and expense systems
Establish a feedback loop for continuous improvement

Educating employees on expense management best practices

Any system or policy can’t work unless the employees are well aware about them. Travel admins and managements should ensure to provide training and communicate the basic postulates of company’s travel policy. They should further inculcate a feeling of ownership and considerably reduce the expenses. Employee education is a key component of successful expense management. Educated employees contribute to a culture of financial responsibility within the organization.

Small business travel expense management challenges

Small businesses face unique challenges in managing travel expenses. These include limited resources and manpower. Addressing these challenges requires creative solutions, such as the use of technology, negotiating favorable rates and terms with suppliers, and implementing cost-effective travel policies to ensure high ROI.

Optimizing business travel expenses is vital for controlling travel costs to improve ROI. These tips help businesses minimize travel expenditures and streamline the travel management program. Setting up a custom travel and expense policy is the first step to achieving cost optimization. SaaS-based travel management programs such as Paxes help organizations control travel costs by automating travel policy implementation. Paxes enhances the business travel program by ensuring a better travel experience and streamlining expense reporting and reimbursement.

Suggested Read: Major Benefits Of Automating The Travel And Expense Process

Business Trip Expense FAQs

What expenses are not eligible as business travel expenses.

Personal expenses like commuting to the permanent workplace location, purchasing gifts for family and friends, fines, and companion expenses do not qualify as business travel expenses.

What are business travel expenses?

Business travel expenses include costs that an employee may incur while undertaking a business trip to meet business goals.

What is a travel reimbursement policy?

The travel reimbursement policy describes the rules and procedures to claim and reimburse travel expenses employees may incur during business trips.

What are the three main business travel costs?

Transportation, accommodation and subsistence costs are the three main business travel costs.

Does commuting for work qualify as business travel?

No commuting is not business travel.

What qualifies as a business trip expense?

Business trip expenses typically include costs directly related to your work-related travel. This can encompass transportation, accommodation, meals, conference or event fees, and any other expenses necessary to conduct business while away from your usual place of work.

How should I keep track of my business trip expenses?

Keeping receipts, using expense tracking apps, and maintaining a detailed expense log are effective ways to record and track business trip expenses. It is essential to document expenses as you incur them to ensure accuracy and compliance.

What are per diem rates, and how do they work for business travelers?

Per diem rates are daily allowances set by employers or government agencies to cover meals and incidental expenses during business travel. These rates simplify expense tracking by providing a fixed amount for each day, regardless of actual spending.

Can I deduct business trip expenses on my taxes?

In many cases, you can deduct legitimate business trip expenses on your taxes, but there are specific rules and limitations. Consult a tax professional or the tax authority in your country for guidance on what qualifies and the allowable deductions.

Can I Combine Personal and Business Activities on a Trip?

Yes, you can combine personal and business activities on a trip, but it can affect the deductibility of expenses. To claim tax deductions, you must allocate expenses between business and personal use, only deducting the business-related portion.

What Are the Best Practices for Business Trip Expense Management?

Best practices for expense management include diligent record-keeping, adhering to company travel policies, using digital tools for tracking, seeking pre-approval for expenses, and promptly submitting expense reports after the trip.

How Can I Save Money on Business Trip Expenses?

Saving money on business trip expenses involves strategies like booking in advance, seeking discounts, using loyalty programs, opting for cost-effective accommodation, and minimizing unnecessary expenses while on the trip.

What If My Expenses Exceed the Budget?

If your expenses exceed the budget, it is crucial to communicate with your supervisor or travel manager promptly. They may approve the overage if it was necessary for business purposes, or they might offer guidance on how to manage the excess costs while ensuring future compliance with the budget.

What is the timeline for receiving reimbursement?

The timeline can be defined as expense submission, expense review and approval, processing, reimbursement payment.

Pratyush is a traveling enthusiast who always looks for innovations in business travel management. He has 5 years of experience writing content on corporate travel management and working closely with expert business travel facilitators.

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15 Ways to Reduce Business Travel Expenses

Business man at the airport looking through the window with a plane departing

Whether it’s conferences and tradeshows or closing a deal, business travel often yields a return or it gets cut. Yet it still represents a big outlay for many companies, one which – if not managed correctly – can quickly eat into your bottom line.

This article arms business owners and finance professionals with the strategies and tools necessary to make smarter business travel expense decisions. We'll explore the top ways to get the most out of accommodation, flights, and transport; and examine how digital solutions are revolutionising business and corporate travel expense management, saving both money and valuable time for finance teams.

How to Save Money on Employee Accommodation

Accommodation represents a significant portion of business travel expenses, making it a prime area for cost-cutting without sacrificing employee comfort. By exploring alternatives to traditional hotels, venturing out beyond bustling city centres, taking advantage of loyalty programs, negotiating corporate rates, and considering the benefits of 'bleisure' stays, business owners and finance professionals can significantly reduce accommodation costs associated with business travel. Here are some ideas:

1. Sign up for loyalty programs : Understand the long-term value of hotel loyalty programs for your company. Points accumulated during employee business trips will often translate into free nights or upgrades, directly reducing future accommodation costs. Proactive enrollment and management of these programs should be a priority for business owners and finance managers.

2. Negotiate corporate rates: If your company has frequent business travel needs, contact hotels directly to negotiate corporate rates. Even smaller businesses may be able to secure some discounts and remember, if you don’t ask, you don't get!

3. Consider “bleisure” stays : Combining business and leisure travel, known as "bleisure," is growing in popularity, as it benefits both employers and employees. Consider booking properties that offer discounts for extending stays over a weekend, providing employees the option to incorporate a personal holiday. This can improve employee retention, boost morale, and reduce business expenses costs.

How to Pay Less for Business Flights

Securing the best possible deals on business flights requires a combination of careful planning, flexibility, and an understanding of the factors that influence pricing. Here are a few ways to increase your business travel expense savings across short-haul and long-haul journeys:

4. Subscribe to travel alerts: Sign up for price alerts on booking sites like Skyscanner and Google Flights to ensure you're notified of price fluctuations and deals.

5. Be flexible with dates : Flexibility in travel dates can directly translate to higher savings on business travel expenses. For example, flights departing on Tuesdays, Wednesdays, and Saturdays often result in lower fares, as do flight times like red-eyes and early departures.

6. Use comparison sites : Improve cost-effective decision-making by using comparison sites like Skyscanner, Kayak, or Google Flights. These tools facilitate a comprehensive analysis of options across multiple airlines, helping you to secure the best value for your corporate travel budget.

Reduce Costs with Environmentally-Friendly Transportation

Ground transportation can quickly add up and inflate overall business travel expenses. Here are a few ways to promote budget-consciousness and efficient travel and ensure your employees navigate their business trips cost-effectively.

7. Utilise city passes : Investigate the availability and potential cost benefits of city passes. These passes often provide unlimited access to public transportation for a fixed duration and provide substantial savings compared to purchasing individual fares, especially for employees with extensive itineraries.

8. Explore bike-sharing programs : Encourage employees to take advantage of public bike-sharing schemes, a cost-effective and environmentally-friendly option for short-distance travel, allowing them to experience the city in a unique way while reducing transportation expenses.

9. Promote the use of public transport : Encourage employees to use trains, buses, or subways as their primary mode of transportation, especially in cities with reliable and extensive public transit systems.

Reducing Costs on Food Expenses

Food expenses can easily escalate during business trips. By encouraging efficient spending strategies, you can help your employees dine smart without sacrificing quality or breaking the bank. Here’s how:

10. Take advantage of complimentary breakfasts : Ensure all employees are fully aware of any included hotel breakfasts and actively encourage them to take full advantage of this significant cost-saving opportunity.

11. Promote local eateries: Guide employees towards a more authentic culinary experience by recommending locally-owned restaurants and cafes, where they can often discover unique flavours, higher quality food, and better value than in tourist-centric establishments.

12. Set Meal Allowances : Establish daily or per-meal allowances within your business travel expense policy, providing employees with clear guidelines on spending while also offering them the flexibility to make their own dining choices within a budget.

Revolutionise Your Travel Expense Management

Traditional credit cards and reimbursement processes can often lead to overspending, unauthorised purchases, and a mountain of administrative work for both your finance team and travelling employees.

Digital solutions like CleverCards revolutionise business travel expense management, streamline processes and enable business owners and finance managers to exercise greater control over employee spending. Here’s how!

13. Control employee spending remotely : CleverCards are prepaid digital Mastercards that can be distributed remotely to travelling employees with a specific amount loaded onto each card. This allows you to establish spending limits by category (hotels, meals, transport, etc.), prevent unauthorised spending, and ensure employees adhere to business travel budgets.

14. Reduce time spent on finance admin: CleverCards digital prepaid Mastercards can be emailed to employees worldwide, eliminating time-consuming pre-travel paperwork. As well as that, the absence of traditional reimbursement forms and the need to collect and process receipts upon return, provides significant time savings for your finance team.

15. Per diems made easy : CleverCards enables you to provide ongoing financial support to your employees throughout their travels. You can easily allocate per diems or top-up allowances in real-time, ensuring they have the resources they need. This eliminates financial stress and allows them to focus fully on their business trip objectives.

Ready to Reduce Your Business Travel Expenses?

Business travel expenses don’t have to break the bank. By implementing the strategies outlined in this guide, you can regain control over your employee’s spending while abroad or visiting a different city in Ireland. From accommodation and flights to local transportation and meals, a few smart choices can lead to significant savings over time.

By switching to CleverCards, not only will you experience direct savings and greater control, but you'll free up valuable time for your finance team and give your travelling employees a smoother and more focused experience.

For more information, contact the CleverCards team by filling out the enquiry form below. We look forward to hearing from you soon!

Business Travel Etiquette: Appropriate Spending Habits for Work Trips

There’s one question that almost always arises when it comes to business travel etiquette: can I put that on the company card?

One of the more nuanced aspects of work travel is spending. What luxuries are consistent with proper business travel etiquette, and what’s going overboard? AppZen , an automated expense software, has some ideas of how to answer that. In a January 2019 report, they look beyond accommodation and transportation, featuring unusual expenses from the last quarter and how company policies can affect road warrior habits.

What NOT to charge

AppZen studied the spending reports of close to 1,000 companies, concentrating their efforts to the previous quarter. One aspect of their findings reveals what they call “high risk” expenses. Essentially, these receipts aren’t suitable for the company card, highlighting why corporate travel managers might need to be extra careful when skimming down expense reports. Most of us wouldn’t even dream of trying to get reimbursed for a tattoo, yet this is on the list along with things like:

Strip Clubs
Dog kennels
And “payments to politically exposed people”

business travel etiquette, business travel life 2

Yikes! What were those employees thinking? While it’s unlikely that your company will fund bribes or personal addictive habits, other expenses are not so clear-cut. In the end, it all comes down to company policy.

What’s more likely to be approved

For approved expenses, AppZen gathered some interesting data in regards to company policies. Here, we’ll break down those findings by category:

Productivity: Unsurprisingly, companies are willing to cough up more dough to give business travelers the tools they need to stay productive. As such, 41% and 37% of employers cover mobile and Internet charges, respectively. While we’d expect that latter number to be a bit higher, the presence of complimentary Wifi at most accommodations might deem paid Internet unnecessary (though we’d encourage it in the name of Internet security ).

Health: It seems that you’ll have better luck working out at your hotel and paying for laundry services than you would exercising at a health club. Laundry expenses and health club visits were reimbursed by 39% and 11% of employers, respectively.

Insurance: Insurance reimbursement numbers came in pretty low in AppZen’s report. Roadside assistance insurance was covered by just 3% of employers while personal accident insurance was covered by 16%. Granted, many corporate credit cards actually include some insurance options for business travel, making it less urgent for employers to invest in paid coverage.

Food: In regards to business travel etiquette, food is where some road warriors might find a reason to pause and think. While it’s as necessary as transportation and accommodation, there are certain luxuries that companies would prefer to see work travelers pare down on. AppZen reported that less than 20% of employers were willing to cover charges for room service and the mini bar.

Interestingly, a Dinova study found that road warriors take things like authenticity and nutritional value into consideration when dining on the go, so it’s possible that preferences are shifting along with policies. After all, why stay in when you can go out?

Luxuries: Think you can expense golf outings, sports tickets, and movies? At some companies, you can. Each of the above was approved by a handful of employers in AppZen’s study. Of course, if client entertaining is involved, you should be able to get reimbursed almost all the time.

business travel etiquette, business travel life 3

Final thoughts

At the end of the day, it’s up to your company to outline what business travel etiquette is appropriate when it comes to spending, and your responsibility to ask ahead of time if you’re unsure. Smaller companies might appreciate a more conservative approach from their road warriors, while corporate teams might have more resources to fund things like client meals.

“A well-defined spend policy clearly conveys a company’s expectations for what business activities can be reimbursed.” – Anant Kale, Co-founder and CEO of AppZen

Be sure to take a look at the full infographic from AppZen at the bottom of this article, and if you have any thoughts on business travel etiquette and spending, please share in the comments.

Business Travel Life

Business Travel Life is an online resource supporting the road warrior lifestyle. We give business travelers the tools they need to maintain their wellness and productivity when traveling. The topics we cover include business travel tips, travel workouts, healthy travel hacks, travel products, general travel tips, and industry trends. Our goal is to make business travel a healthier experience – and to make healthy travel practices more accessible to all road warriors.

Mellisa Pascale

Mellisa is a writer and traveler. She’s studied in London, backpacked in Europe, and road-tripped around Iceland. Most recently, her travels took her to New Zealand, where she worked and volunteered while participating in the Working Holiday Visa program.

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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.

Let a local tax expert matched to your unique situation get your taxes done 100% right with TurboTax Live Full Service . Your expert will uncover industry-specific deductions for more tax breaks and file your taxes for you. Backed by our Full Service Guarantee . You can also file taxes on your own with TurboTax Premium . We’ll search over 500 deductions and credits so you don’t miss a thing.

Get unlimited advice, an expert final review and your maximum refund, guaranteed .

~37% of taxpayers qualify. Form 1040 + limited credits only .

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How to Determine When Business Travel Expenses are Deductible

The tax rules surrounding travel expenses can be confusing. The confusion increases in a business environment that has a traveling sales team and part-time or full-time remote workers.

Below is a summary of key definitions and an overview of the nuances that may exist under certain work arrangements.

When are business travel expenses deductible?

Business travel expenses can be deducted when an employee must travel away from their tax home or main place of work for business purposes. The expense must be ordinary and necessary and not extravagant or personal in nature.

What is a tax home?

In general, an employee’s tax home is their regular place of business, not their personal residence. The term tax home can include the general area where the individual's work or business is located. If the individual has more than one regular place of business, their tax home is their main place of business or work. An individual's main place of business or work is determined by 1) the total time the employee ordinarily spends in each place, 2) the level of business activity in each place, and 3) how much money the employee earns at each place.

A tax home may change under the following circumstances:

Indefinite work assignments. If an employee is given an indefinite work assignment at a different location, the worker's tax home changes to the new work location. In this situation, the employer can't deduct the employee's expenses as business travel expenses while they are working at the new location because the employee isn't traveling away from their tax home . Additionally, any amounts an employee receives for living expenses for their new tax home must be included in their taxable compensation.
If an employee is hired as a full-time remote worker, but their tax home is concluded to be the employer location per their employment contract, any amount an employee receives for commuting to or from the employer location is taxable compensation to the employee.
If an employee is hired as a full-time remote worker and their tax home is the employee’s home per the employment agreement, then employer-paid travel between the employee’s home and the employer’s office is tax-free to the employee and deductible by the employer as a business travel expense.
Hybrid and part-time remote work assignments . These situations become a bit more complex and require a facts and circumstances approach. If the employment agreement is silent, all factors should be taken into account including, but not limited to, the number of days in the office and workstation assignment of the employee while in the office.

Which business travel expenses are deductible?

Examples of deductible business travel expenses include:

Travel by airplane, train, bus, or car between the individual's home and business destination
Fares for taxis or other types of transportation between an airport or train station and a hotel, or from a hotel or to a work location
Rental cars
Shipping baggage and sample or display material between regular and temporary work locations
Using a personal car for business travel
Lodging and meals while away
Dry cleaning and laundry while away and tips paid for services related to any of these expenses
Other similar ordinary and necessary expenses related to the business travel
Conventions, seminars, and meetings, including the above related expenses as well as the cost of the event

Documentation is key

Each business travel expense should be substantiated by the business purpose, the date and time of the travel, and the amount of the expense. Receipts should be retained as they will likely be requested upon a federal or state tax examination. Businesses should require each employee to abide by a standard practice wherein the above is satisfied on a contemporaneous basis.

If you have questions about determining when certain expenses are deductible, please contact any member of our Tax Strategies group.

Brian D. Kitchen is a director with Kreischer Miller and a specialist for the Center for Private Company Excellence. Contact him at Email .

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Brian D. Kitchen, CPA, MT

Director, Tax Strategies

Business Tax Specialist, Individual Tax Specialist

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As Travel Takes Off, Companies Can Avoid Turbulence by Optimizing Travel Processes

Max Lillard

Header image for the blog article "As Travel Takes Off, Companies Can Avoid Turbulence by Optimizing Travel Processes"

92% of business travelers say tracking expenses is a challenge—here's how tech can clear the skies.

Despite shaky economic conditions and pressure within organizations to cut down on travel costs, business travel is making a comeback.

A recent Capterra survey found that 46% of business travelers report going on more trips compared to before the pandemic and that a majority of employees are adding on personal vacation time to trips. * However, more than half of travelers feel that travel is only getting more expensive, underlining the need for companies to revamp their travel and expense policies or risk burning cash due to outdated or inefficient processes.

Though many businesses have started to leverage technology to optimize these processes, an alarming number are still bound to manual methods. Your business might be hesitant to spend the time and resources to overhaul these systems, but technology can play a crucial part in helping your employees minimize costly mistakes while allowing you to ensure every travel dollar is well spent.

/ Key findings

46% of business travelers say they’re going on more trips compared to before the pandemic, even as the cost of travel rises.

85% say the economy has impacted their company’s travel spending, forcing them to set tighter budgets, explore more cost-effective options, and reduce spending on travel overall.

47% say their company still relies on spreadsheets to handle recording and reporting expense reports, and 42% of respondents share that they tackle this process by manually tracking receipts.

92% say they encounter challenges associated with expense reporting and 90% admit to making mistakes when handling the process.

93% say they engage in bleisure travel, which is when employees add personal vacation time to corporate trips, motivated by the ability to foster work-life balance, travel cost-savings, and stress relief.

Corporate travel resurges, but so do travel prices

Though the U.S. Travel Association predicts that domestic leisure travel should return to pre-pandemic levels by 2024, domestic corporate travel isn’t set to fully recover until 2025. [ 1 ]

Nevertheless, compared to before the pandemic, 46% of surveyed business travelers say they're going on more trips—on average, they travel six times a year, with trips lasting about three days. As more and more employees travel for business, many have taken to adding bleisure travel to their trips—in fact, 93% share that they’ve added personal vacation time to a corporate trip within the last year.

However, compared to pre-pandemic times, the cost of travel has increased by approximately 14%. [ 2 ] Our survey respondents confirm this—65% of business travelers say that they feel travel costs have risen within the past year. Employees say that, on average, they individually cost their business $5,000 in travel expenses in the past year.

2022 spend on business travel graphic for the blog article "As Travel Takes Off, Companies Can Avoid Turbulence by Optimizing Travel Processes"

Fuel costs, seasonal demands, and economic conditions make travel prices subject to volatile change. In light of the current economy, 85% of business travelers say that their company has taken measures to reduce costs in 2023. Beyond cutting back on overall travel spend and setting tighter budgets, some high-level strategies companies have used to adjust to rising travel costs include enacting spending limits. Notably, only 14% turned to technology to plan and report expenses.

/ Analyst's tip

Business travel yields dividends when it comes to improving business performance, but don’t forget that allowing your employees to bundle in bleisure time is also an organizational win. Employees are motivated to add personal vacation time to their trips to foster work-life balance, relieve stress, and save money. Offering the flexibility of bleisure travel is an attractive hiring perk and demonstrates that you care about their work-life balance and well-being, which can snowball into higher job satisfaction and increased retention.

Manual methods expose companies to costly errors and tedious time-sinks

Technology is being embraced by companies to assist in expense reporting—more than half of travelers say they use mobile apps or expense management software to record and report expenses.

However, 47% of companies rely on spreadsheets to handle these tasks, and an alarming 42% of businesses still manage these processes by manually tracking receipts.

Companies still rely on manual methods to track expenses graphic for the blog article "As Travel Takes Off, Companies Can Avoid Turbulence by Optimizing Travel Processes"

Manual methods can exacerbate challenges that business travelers face when filing expenses. Organizing and tracking receipts, filling out time-consuming paperwork, and navigating complex tax regulations frustrate employees the most. Furthermore, 18% say that they struggle with understanding and following their company’s expense policies.

Employes say that many of the common errors they’ve made when filing expense reports include missing receipts, submitting documents with incomplete information, and mathematical errors—missteps that are more likely to occur with manual methods. Even in the likelihood that travelers pass on pristine reports, finance teams can run the risk of making errors when transferring information.

Manual methods are more susceptible to mistakes graphic for the blog article "As Travel Takes Off, Companies Can Avoid Turbulence by Optimizing Travel Processes"

Keeping paper records of receipts or spending hours programming and editing formulas in spreadsheets is a waste of valuable time for your employees. As businesses scale, these manual methods become less effective and more error-prone as the volume of expenses and the complexity of travel increases.

While it’s easy to write off the consequences of making a few mistakes, businesses should know that the consequences can be costly. Poor and inefficient expense reporting processes can lead to inaccuracies in financial reporting, which can then potentially impact decision-making related to spending and budgeting forecasting. Moreover, 20% of employees admit to submitting reports that don’t align with company policies, putting businesses in a position to miss out on significant savings via tax deductions. Failing to maintain airtight expense practices also puts businesses at risk of regulatory non-compliance, which exposes them to tax penalties and potential outside audits in the future.

Business travel won’t be taking a vacation anytime soon—here’s how you can cut costs and maximize your travel processes

Given the current economy and increasing travel costs, finding ways for your business to optimize your travel processes and policies is more important than ever. To get you started on the right path, here are three recommendations that can help you save money and valuable time, all while ensuring that you and your employees get the most out of every business trip.

Forge travel partnerships for discounts and deals

Work with specific travel providers: More than half of travelers share that their company has a preferred airline or hotel for business travel. Working with a provider that offers flexible booking policies gives you and your employees more freedom to modify or cancel arrangements without incurring significant fees, and negotiating for cheaper rates with a provider based on the volume your business can generate for them is a great way to reduce overall costs.

Open corporate travel credit cards: Setting your employees up with corporate-travel credit cards is another way you can offset future costs, as many generate cashback, miles, or other points that can yield perks like free flights, room upgrades, and more.

Review, revamp, and re-communicate your travel policies

Adjust your travel policies to curb costs: Regularly reviewing your travel policies helps you identify potential areas for cost savings and ensures that you’re aligned with regulatory best practices. For instance, you can switch to providing travelers with a fixed daily stipend during trips, and since you’ll know the exact amount an employee will spend per day, you can control costs and simplify the budgeting process in one fell swoop.

Implement flexible time-off: Switching to flexible time-off policies allows your employees to make the most out of bleisure travel and also showcases that you care about work-life balance.

Clearly communicate changes: After you make any formal adjustments, be sure to share these changes with your employees and don’t forget to emphasize the proper protocol for recording and reporting expenses. Quarterly refreshers on policy and best practices can also be the best time to align on any glaring reporting challenges and to ideate on ways to eliminate common mistakes.

Calculate the cost and consequences of your business’ reporting methods

Reevaluate your reporting methods: An overwhelming number of corporate travelers (92%) say they encounter challenges with expense reporting, and a strikingly similar number (90%) admit to making mistakes when handling the process. If your business still relies on manual methods, it’s time to explore the benefits of software, which can help your business cut down on travel costs while minimizing the common errors.

Leverage the capabilities of software: Unlike manual methods, expense management and mobile app reporting software can enable businesses to do everything from creating policy checks within their systems to verifying that employees are using approved vendors to qualify for discounts or benefits. Mobile apps can make physically keeping track of receipts a thing of the past, as they empower your employees to take a photo of receipts, which are recorded and uploaded to databases in a matter of minutes. In their more advanced forms, some expense software harnesses the power of artificial intelligence (AI) and machine learning (ML) to fully automate things like expense approvals and more.

Times are changing—don’t let outdated practices keep you from soaring off into the sunset

In a post-pandemic world, business travel is resurging and it benefits both you and your employees to find new solutions to make recording and reporting expenses easier. Travelers also want to get more out of their trips, and the rise of bleisure travel means they have an opportunity to decompress and explore destinations after taking care of business initiatives. You can encourage and enhance this opportunity by thoughtfully tweaking travel strategies and accommodations.

As 2023 presses on, budgeting and planning ahead for the next fiscal year are perfect ways to ensure that, whatever is on the horizon, your business can soar off into the future with confidence.

Methodology

*Capterra’s Travel Survey was conducted in July 2023 among 398 business travelers in the U.S. to learn more about the changing travel economy, how their organization approaches recording and reporting travel expenses, and about business travelers' preference for bleisure travel.

Travel Forecast (2023), U.S. Travel Association

Travel Inflation Report: July 2023, Nerdwallet

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About the author.

Max Lillard is a senior analyst at Capterra covering accounting and finance. Past research of his has explored the rise of digital commerce alongside advanced customer support solutions for contact centers. When he’s not snuggled up with his two cats enjoying a good book, he can be found painting, skating, or seeing live music around Austin, Texas.

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EPL Financial SERVICES

Aug 4, 2023

Simplifying Business Travel Expenses: 12 Essential Answers for Tax Debt and Preparation

Updated: Aug 7, 2023

Are you a business owner who frequently travels for work? If so, you may have encountered the challenge of proving your expenses for tax deductions and reimbursements, especially when dealing with tax debt and preparation. To help you navigate this aspect of business travel and optimize your tax services, we've compiled a list of 12 important questions and their answers. Let's dive in!

Q&A 1: Corporation or Proprietorship?

The documentation rules for business travel expenses remain largely the same whether you operate your business as a corporation or a proprietorship, a crucial aspect to consider during tax debt and preparation. Deductions for lodging, meals, and other travel expenses are subject to similar rules concerning receipts, business reasons, and canceled checks for corporations, proprietorships, individuals, and employees.

However, there is a key difference for those operating as a corporation, which can significantly impact your tax debt and preparation strategy. As the corporation is a separate legal entity, you are considered an employee of the corporation. To achieve the best tax results and manage tax debt, you need the corporation to either reimburse you for the travel expenses or directly pay for the expenses.

Q&A 2: Do I Have to Keep a Tax Diary for My Business Travel?

While maintaining a tax diary is not mandatory, timely records are essential for efficient tax services, especially when dealing with tax debt and preparation. These records should prove four key elements:

1. **Amount:** Keep track of all expenditures related to your travel, including transportation, lodging, and meals, which are important for tax debt calculations.

2. **Time:** Record the dates of your departure and return, as well as the number of days spent on business to assist with tax debt and preparation.

3. **Place:** Clearly state the destination of your travel, specifying the city or town, which is relevant for tax debt and preparation purposes.

4. **Business Purpose:** Document the reason for your travel or the expected business benefit, vital information for tax debt and preparation evaluations.

Q&A 3: Is There an Easy Way to Keep a Tax Diary?

Yes, you can use the Tax Diary System, which simplifies the process and helps with your tax debt and preparation efforts. This system captures the necessary information required by the IRS. While several smartphone apps for travel exist, the Tax Diary System ensures you record all expenses and information accurately, crucial when dealing with tax debt and preparation.

Q&A 4: Why Are Travel Meals Separated from Other Travel Expenses?

Lawmakers have imposed a 50 percent cut in tax deductions for travel meals. To claim this deduction and optimize your tax services, you must enter half of the total amount spent on meals and snacks during your travel on your tax return. The other half is treated as a Schedule M-1 adjustment on the corporate tax return, a valuable point to remember during tax debt and preparation.

Q&A 5: Do I Need Receipts?

Receipts are essential for tax-deductible travel expenses, especially for lodging and any travel expense of $75 or more, except for transportation, where a receipt might not be required if unavailable, critical when managing tax debt and preparation.

Q&A 6: What Is a Receipt?

A receipt serves as evidence of an expenditure and must contain essential details such as the name and location of the hotel or restaurant, the date of the expense, and separate amounts for specific charges like lodging, meals, and telephone, vital for tax debt and preparation purposes.

Q&A 7: Credit Card Statement and Canceled Checks

Your credit card statement only proves payment, not the details of the purchase. Therefore, you need both the receipt (proof of purchase) and the canceled check or credit card statement (proof of payment) to validate your travel expenditure, a key point for tax debt and preparation.

Q&A 8: What Is a Timely Kept Record?

The IRS considers a log maintained on a weekly basis to be a timely kept record. Recording your expenses weekly or more frequently satisfies the requirement to document your expenses promptly, benefiting your tax debt and preparation efforts.

Q&A 9: $75 Rule Allows Cheating

Although a receipt might not be required for travel expenses under $75, the IRS has ways of verifying your expenses, such as checking your ATM withdrawals or cashed checks, which can have implications for tax debt and preparation.

Q&A 10: Should I Keep Receipts If the Expense Is Under $75?

Keeping receipts for all expenses, regardless of the amount, is advisable. Having receipts provides solid proof of your expenses, ensuring you maintain accurate travel records, which is helpful for your tax debt and preparation process.

Q&A 11: What Are Travel Expenses?

Travel expenses include costs incurred while traveling to and from your business destination, as well as expenses related to sustenance during your stay. Examples include transportation costs, lodging and meal expenses, communication expenses, and tips to service staff, all important for tax debt and preparation calculations.

Q&A 12: Submitting Travel Expenses to Your Corporation

If your business operates as a corporation, you cannot deduct travel expenses personally due to the Tax Cuts and Jobs Act. Instead, you need to submit expenses to the corporation for reimbursement under an "accountable plan." This involves providing the corporation with your Tax Diary System pages and the necessary receipts or submitting an expense report that meets IRS requirements, which can be efficiently managed through tax debt and preparation services.

In conclusion, proper documentation is crucial when it comes to proving expenses for business travel, especially when dealing with tax debt and preparation. By keeping accurate records and following IRS guidelines, you can ensure smooth tax deductions and reimbursements for your business travel expenses, aided by reliable tax debt and preparation services. Happy travels!

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Everything You Need to Know About the Business Travel Tax Deduction

What counts as business travel?

What counts as "mostly business"?

Special rules for traveling abroad

What is an “ordinary and necessary” expense?

What is your tax home?

What's your main place of business?

How large is your tax home?

Rules for business travel

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

2. You should be working regular hours

3. The trip should last less than a year

What about digital nomads?

Requirement #1: A tax home

Requirement #2: Some work-related reason for traveling

The travel expenses you can write off

🛫 All transportation

🥡 Meals while traveling

🌐 Wi-Fi and communications

👔 Dry cleaning

Travel expenses you can't deduct

The cost of bringing your child or spouse

Some hotel bill charges

Where to claim travel expenses when filing your taxes

What happens if your business deductions are disallowed?

When does the penalty come into play?

How much is the penalty?

7 Rules You Should Know About Deducting Business Travel Expenses

Charges on Your Hotel Bill

Combined Business/Personal Trips

Frequently Asked Questions (FAQs)

Key Takeaways

What Is Your "Tax Home"?

Using Per Diems To Calculate Employee Travel Costs

The Cost of a Cruise (Within Limits)

How do you write off business travel expenses?

What are standard business travel expenses?

The Bottom Line

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What is not a legitimate travel expense

How to manage the travel & expense process

1. The company credit/spending card

3. Communicate the expense policy

How to calculate and track business travel expenses like a pro

2. Calculate every trip

3. Categorize your spend

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