Travel Expense Deductions

The tax law allows you to deduct two types of travel expenses related to your business.

1. Firstly you can deduct local transportation expenses incurred for business purposes—the expense of getting from one location to another, but not meals or incidentals.
   
2. Second, you can deduct away from home travel expenses—including meals and incidentals. Deduction limits can be eased if your employer reimburses your travel expenses.

This post explains "away from home travel expenses."
You can deduct one-half of the cost of meals and all of the expenses of lodging incurred while traveling away from home.
To be deductible, travel expenses must be "ordinary and necessary"—though "necessary" is liberally defined as "helpful and appropriate", not "indispensable". Deduction is also denied for that part of any travel expense that is "lavish or extravagant", though this rule does not bar deducting the cost of first class travel, or deluxe accommodations or (subject to percentage limitations below) deluxe meals.

What does "away from home" mean? To deduct the costs of lodging and meals (and incidentals—see below) you must generally stay somewhere overnight. Otherwise, your costs are considered local transportation costs, and the costs of lodging and meals are not deductible.
Here's a list of some deductible away-from-home travel expenses:

• Meals (limited to 50%) and lodging while traveling or once you get to your away-from-home business destination.
• The cost of having your clothes cleaned and pressed away from home.
• Costs for telephone, fax or modem usage.
• Costs for secretarial services away-from-home.
• The costs of transportation between job sites or to and from hotels and terminals.
• Airfare, bus fare, rail fare, and charges related to shipping baggage or taking it with you.
• The cost of bringing or sending samples or displays, and of renting sample display rooms.
• The costs of keeping and operating a car, including garaging costs.
• The cost of keeping and operating an airplane, including hangar costs.
• Transportation costs between "temporary" job sites and hotels and restaurants.
• Incidentals, including computer rentals, stenographers' fees.
• Tips related to the above.

Travel and Entertainment: Maximizing the Tax Benefits

Post Updated May 2, 2015