If you’ve ever asked yourself on how to write-off travel expenses while staying IRS compliant, read on. We’ll cover some of the basic rules as well as tips to maximize your travel deductions. For an article going over some more concrete examples on travel write-offs, go here.
Before getting ahead of ourselves, let’s start by understanding when are you in business travel.
When Are You In Business Travel
The basic rule is that you’re in business travel when you travel from your home overnight. Another good rule of thumb is if you travel for enough time that it requires you to sleep.
You must also be traveling for a business purpose and/or in order to advance your business. We’ll go over more on this with the business days vs. non-business days distinction when traveling.
The Rules For Travel Deductions
The first thing to understand for travel deduction rules is the treatment for business and non-business days. In general, a business day will include days spent on transportation to and from the location. Other than transportation days, a business day must include a business activity, such as a meeting with a client or colleague, attending a seminar.
You can deduct on-the-road costs for business days only. On-the-road costs are expenses necessary to sustain yourself while on your trip. These can include hotels, meals, laundry and dry cleaning, etc.
However, even though you’re able to deduct 100% of most of your on-the-road expenses, the exception is on-the-road meals. You are only able to deduct 50% of your on-the-road meals while traveling on business days. Meals while on your trip with a business purpose purchased from a restaurant or caterer would still be 100% deductible in tax years 2021 & 2022. For more information on the rules for meals deductions go to this article.
The Rules For Transportation Deductions
Transportation expenses are incurred in the process of getting to and from the destination. Airfare, taxis, or your vehicle costs if you drove yourself.
In general, if you’ve spent more than 50% of your trip as business days, you’re can take 100% of the transportation deduction.
This applies to North America, as with foreign travel it’s harder to prove deduction and has slightly different rules. North America includes the U.S. and its possessions, Mexico, Canada, Jamaica, Barbados, Grenada, Costa Rica, and others.
See the image below for more details on specific rules for transportation deductions.1
Tips For Maximizing Your Travel Deductions
- ENJOY YOUR VACATION! Even if most of your day is spent in non-business activities, if your presence is required for a business purpose during that day, even if brief, that counts as a business day.
- DEDUCT YOUR WEEKENDS: Weekend and government-deemed holidays count as business days as long as you “sandwich” them with business days. Ex) Friday: business day, Monday: business day = Saturday and Sunday are business days.
- ATTEND CONVENTIONS/SEMINARS: As long as they’re geared toward advancing your business, and you spend more than four hours out of your day in it, it counts as a business day.
- VISIT BUSINESS ASSOCIATES/COLLEAGUES: As long as there’s a business purpose to the visit, it counts as a business day. The good part is, even if you’re just improving your business skills from those visits, it counts. Ex) You discuss sales strategies with your business colleague.
- INVEST IN REAL ESTATE OUT OF TOWN: Taking routine visits to oversee and engage in operations would qualify your visit as business travel. Even if it’s managed by a property management company, you still need to check on them and attend other matters related to your property from time to time. Use that to your advantage and lower your taxes! (Check out this article on the before- and after-tax results of investing in real estate compared to other kinds of investments).
- Botkin, Sandy. Lower Your Taxes – Big Time! 2023-2024 Edition. Pp. 29. Print.
Botkin, Sandy. Lower Your Taxes – Big Time! 2023-2024 Edition. Pp. 29. Print.