Most small business owners incur, to a greater or lesser extent, travel expenses for their business. You probably know how to treat the most common costs — hotel rooms, airline tickets, business meals — but there are a slew of other travel-related costs that you may incur. Some are deductible and some are not. Here’s a rundown.
5 Deductible Travel Expenses
As a general rule, the cost of out-of-town travel is deductible. This includes airfare, lodging, and 50% of the cost of meals. Examples of other deductible expenses:
It’s common to book a hotel room or a flight but later be forced to cancel…for business or personal reasons. If the travel would have been deductible (i.e., for business), then any cancellation fees are also deductible.
Gratuities to porters, baggage carriers, and hotel staff may seem like minor expenses, but during the course of a trip they can add up. What’s more, unlike tips on meals that show up on your credit card bill, there’s no paper trail for cash. It’s up to you to keep a record of your cash outlays for tips.
Another cash outlay that’s common on business trips is for the purchase of water, coffee, or other beverages throughout the day. On a four-day business trip, how many of these beverages do you think you consume? Try to obtain receipts for any purchases.
A growing number of airlines and hotels offer free Internet access, but others charge you (or charge you for upgraded service). You may charge the access to your credit card; it may not be part of your hotel bill. Don’t overlook the charge as a deductible business expense
Laundry and Dry Cleaners
On a short trip, you may not have any of these costs, but if you’re away for a while, or if you have a mishap, the hotel laundry services may be needed. Usually, it shows up on your hotel bill so you won’t overlook the cost. But if you go outside of the hotel (e.g., to use a one-hour cleaners), don’t overlook the cost as a deductible business expense.
5 Nondeductible Travel Expenses
There are various tax rules that may prevent you from deducting a cost that you view as arguably related to business travel. The tax law has some specific rules against certain deductions:
Airline and Hotel Clubs
The annual fee to belong to a special travel club, such as one that gives you access to airline lounges or hotel discounts, is not deductible. The tax law prohibits any deduction for most types of club dues.
Traffic Tickets and Parking Fines
But for the travel, you may not have received a speeding ticket or a fine for overtime parking. Nonetheless, the tax law bars any deduction for fines and penalties.
You have to get to and from work, but the tax law views this as a nondeductible personal expense. There are some minor exceptions, but by and large, the cost of commuting, including any tolls and parking, are not deductible.
Carpooling is merely a variation on the commuting theme. It’s a nondeductible personal expense.
Travel Costs of a Companion
If you bring your spouse or someone else with you who is not there on business, you can’t deduct the cost of that person’s airfare, meals, or any other additional cost. Of course, there’s no added cost for riding along in your car, or in most cases, sharing your hotel room so the cost is nominal to not be lonely.
As with other business expenses, your ability to maximize your write-offs depends on good recordkeeping. Use your smartphone to capture receipts for minor expenses so you don’t have to accumulate the paperwork or risk misplacing it. Check with your CPA and IRS Publication 463 to learn other deductible travel costs and the records you need to keep in order to claim them on your return.
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