Some of the most common questions we get at Allec CPA are about tax 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.
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!
Whatever your business is, I can help you with all things tax and accounting.
If you want to get the conversation going, please book me for a free 30-minute consultation on the calendar below!