What Are Business Travel Expenses? (Plus Benefits and Tips)
Updated July 25, 2023
If you have a job that requires travel, your employer often reimburses you for any work-related expenses you incur on your trip. If you're a self-employed employee, though, you may be able to deduct most of your business travel expenses from your taxes. Understanding how to qualify for these deductions and which expenses you can use can help you optimize your travel costs and save money on your taxes.
In this article, we explain what business travel expenses are, with targeted examples, review the benefits of tracking them and provide tips to help you deduct them.
Self-employed professionals can claim work-related travel expenses on their Schedule C.
The IRS considers where someone's primary job location, or "tax home," is when approving claims.
Tracking these expenses as you encounter them can help you improve your reporting and money management.
What are business travel expenses?
Business travel expenses are the necessary expenses a person has while traveling away from their home for something that relates to their job or business. In many situations, travel expenses occur when professional duties require someone to travel to another area longer than a day, which may force them to eat and sleep in the new location. The IRS considers a person's “tax home” when deciding whether costs someone deducts are eligible, and this term refers to where someone's job or business is. Self-employed professionals use Schedule C, which is a component of Form 1040, to claim their travel expenses.
Some of the most common business expenses for travel you can deduct include:
Direct travel: This can include expenses like plane, train and bus tickets or car expenses. If the tickets were free or a gift, you can't deduct them because the IRS considers their cost to be zero.
Local transportation: These costs may be taxis or ride-hailing services you use to get from an airport to your hotel and from the hotel to your work location.
Shipping personal baggage or supplies: If you use samples or display materials for your work, you can deduct the cost of shipping them from your regular location to your temporary work site.
Personal car: You can deduct any costs you have from using your car at your new destination, including gasoline, tolls and parking fees. This applies only to business travel purposes, meaning you can't deduct gas you purchased to visit a friend in your new location.
Temporary accommodations: This can include hotel rooms or short-term lodging services, and it also includes the costs of necessary meals.
Laundry: The IRS considers any materials you buy to clean your work clothes or money you spend to have a professional clean them for you to be eligible expenses you can deduct.
Business-related communication: If you track how much time you use on your phone or any other communication for work purposes, you can deduct those costs.
Other expenses: Anything else you spend money on that relates only to your business travel may be eligible, such as equipment rental fees and the gas you use between your accommodations and a restaurant.
Related: How To Report Business Expenses
Benefits of tracking business travel expenses
Some of the main ways you can benefit from keeping track of your business travel expenses include:
Improves money management: Tracking travel expenses can help a professional know how much they're spending and on what items. Monitoring cash flow can be important because it makes it easy for you to create and follow a monthly budget, increasing your financial awareness.
Expedites reimbursement process: In some situations, employees may pay out-of-pocket for various expenses, like meals and local transportation. Keeping track of receipts and submitting them can allow for easier verification and prompt reimbursement.
Creates detailed records: Tracking and organizing documentation of your expenses can help you prepare for a potential audit. This can help you easily account for every expense you submitted and prove they were necessary for your work.
Keeps you in good standing with the IRS: Constantly tracking all business travel expenses makes it easier to deduct them when tax season arrives.
Tips for managing business travel expenses
Consider these tips when tracking, organizing and reimbursing business travel expenses:
Keep notes with your receipts
To help ensure the IRS approves your deductions, consider writing notes with your receipts to help provide detail and prove the expenses relate to your work. For example, if you have a business dinner, you can write who attended and explain what you talked about. This also can help with travel expenses, such as when you use a taxi or hail a ride through an app. Documenting where you went and how it relates to your work can help you provide context for your expenses.
Create a documentation system
To improve how you organize and track every receipt, expense report and invoice, consider creating a filing system. You can do this with physical folders or on a computer, whichever you find easier to manage. For example, you can create a main folder on your computer for all of your work travel; inside of it, you can have folders for each trip. You can organize this even more by making smaller folders inside your trip ones for each day you traveled. You can upload copies of all your receipts or invoices to access them easily if you need to.
Remember your cash payments
It may be easier for you to find documentation for purchases you make with a card or check, so consider being extra mindful about tracking any expenses you pay with cash. If you withdraw cash from an ATM to pay for dinner, for example, the IRS might not accept the ATM receipt as proof of a business expense. So consider keeping a journal in which you track all of your cash payments, including the location, what you purchased, how much it cost and how it relates to your work.
This article is for informational purposes only and does not constitute financial advice. Consult with a licensed financial professional for any issues you may be experiencing.
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