Are My Travel Expenses Tax-Deductible?

Lezlie Reeves, Client CFO walks us through what to consider when traveling for work and what you can and can not write off. Don't feel like watching? Read on below! 

Traveling for business can be a perk, a pain, and everything in between. Regardless, you want to make the most of the opportunity, and that could include deducting your travel expenses. Let’s explore this idea together. Please fasten your seatbelts and return your tray table to its full upright and locked position – we are cleared for takeoff!

The IRS sets guidelines regarding what is and what is not a deductible expense. In order for your business trip to be tax-deductible, you need to be able to check three boxes: was the trip ordinary and necessary for the business, was the primary purpose of the trip for business, and did the trip take place away from your home base? In this post we will look at the criteria for each requirement.

Is the trip ordinary and necessary for the business?

The first box you need to be able to check is: Is this expense ordinary and necessary to the business? Another way to phrase this, is this expense something that will further the business objectives?

Examples of tax-deductible trips would include traveling to:

• Clients
• Conferences
• Educational events
• Business development opportunities

The business MUST benefit from your trip, without question. This is key!

Is business the primary purpose of the trip?

The next box you need to be able to check is: Is this trip’s purpose first and foremost for business? For travel expenses to be tax-deductible, the IRS states it must be. 

A couple things to note:

• Travel days count as business days.
• During the days between travel days, you must be working on business for the majority of the time.

If you take a vacation and plan occasional business calls here and there, that will not qualify as a tax-deductible business trip. This isn’t to say you can’t have fun on your trip! You just need to dedicate most of your time to business activities.

Is the trip’s location away from your home base?

The final box to check is the location of your business trip. Travel expenses are deductible if they occur away from your home base. For example, if you rent a hotel a couple miles down the road to get some work done because the office is too hectic, that would not qualify as a tax-deductible business travel expense since it is so close to your home base. The IRS doesn’t specify an exact distance away from your home base required to consider expenses tax-deductible, so we encourage business owners to use their best judgement.

Which expenses are tax-deductible?

Even though you might meet all three requirements for a business trip, not ALL expenses are tax-deductible. Let’s discuss which exact costs incurred on the trip would be deductible, and which would not. 

Deductible expenses would include:

• Transportation
• Lodging
• Meals
• Normal business expenses (wifi, meeting spaces, printed material)

Non-deductible expenses would include:

• Costs associated with bringing a non-employee
• Entertainment expenses
• Extravagant expenses

If you have tax-deductible expenses, it is essential to maintain proper records. This way, if your financials come into question with the IRS, you have clear justification for your taxable expenses. Here are a few tips:

• Keep all receipts – ideally in a digital format
• Utilize a travel log that will record your trip dates, travel details, meetings, and more

Thanks for voyaging into the topic of business travel with us – we hope you enjoyed the flight!

You can always reference the IRS website for more information, or you can reach out to us at Dillon Business Advisors for additional guidance. We would welcome the opportunity to assign a team of three fractional financial experts to your small business to help you navigate tax deductions and other business topics.

Looking for additional ways to save on taxes? Check out these informative posts from other DBA experts:

• Charles Jenkins Jr, CPA addresses another popular question: Can I Write Off Meals If We Talk About Business?
• Marcus Dillon, President and owner of DBA (Dillon Business Advisors) walks through tax savings you may be missing, which will support your efforts to maximize savings and reduce your tax liability.