write off business travel expenses even while on vacation

Tax Pro Center | Intuit
Blog Post Archive
Tax Law and News

How to deduct business expenses while on vacation

Written by Alexandra Francel, EA, MST

Published Jul 7, 2023

Whether it’s summer or any other time of the year when you feel as if you just have to get away, there’s a big question on the minds of employers and business owners. Can I mix my business travel and a vacation, and if so, am I allowed to deduct those expenses?

Good news: Yes, it may be possible. With proper planning and recordkeeping, business expenses may be deducted, as long as certain requirements are met. There are rules and limitations on them, so be sure to help your clients understand what they need to do in order to be eligible for these deductions. Here’s what they need to know.

IRS guidelines

First, let’s go over some guidelines given by the IRS regarding travel expenses. The IRS states that travel expenses must be ordinary and necessary. They cannot be lavish, extravagant, or for personal purposes. Deductions for business travel can be available when someone must travel away from their tax home or main place of work for business reasons. A taxpayer is considered to be away from home when they are away for longer than an ordinary day’s work, and need to sleep to meet the demands of their work while away. Travel expenses for conventions are deductible if the attendance benefits the business.

When traveling within the United States, there are several ways business trips can take place. Either the main purpose of the trip is for business or the main purpose is pleasure. There are different types of deductions for each one, so let’s take a look at them separately.

Business trips that are 100% for business

For trips that are all business, make sure your clients establish the rule of having a prior set business purpose by scheduling your appointments and business purpose prior to leaving for your trip. When your trip is 100% business, the IRS states travel expenses incurred for yourself are 100% deductible. This includes all costs associated with travel by airplane, train, bus, or car between your home and your business destination.

Other expenses that are deductible include the following:

Fares for taxis or other types of transportation.
Shipping of baggage, sample, or display materials.
Use of your personal vehicle for business trips.
Lodging and non-entertainment meals (50% of meals).
Dry cleaning and laundry.
Business calls and communications.
Tips paid for services related to any of the above expenses.
Any other similar ordinary and necessary expenses related to this business travel.

To make sure these items are all deductible, make sure to document the purpose of the travel, and maintain proper receipts for the expenses incurred.

Mix of business and personal travel

When you have a trip that is primarily for business purposes, but extend your stay for vacation, make a personal side trip, or have other personal activities, you can only deduct your business-related travel expenses. However, certain weekends and holidays might be allowable for personal purposes depending on the planning. The IRS states that you can count weekends, holidays, and other necessary standby days as business days if they fall between business days. But if they follow your business meetings or activity, and you remain at your business destination for non-business or personal reasons, you can’t count them as business days.

For example, if you are at a business destination on a Friday, and also required to be there on the following Monday for business purposes, then the weekend days in between are considered business days. This is true even if you use the weekend for non-business activities. However, if your business ends on a Friday, and you choose to stay that weekend, any expenses incurred after the business day are not deductible.

When taking a trip that is business and family joins you, only those expenses that apply to you are deductible. For example, if you are traveling by vehicle, the entire cost would be deductible because you would have incurred that cost regardless of whether the transportation is used for business or leisure. However, if you are traveling by plane, only the cost of your airfare is deductible. For lodging expenses with family, the allowable deductible cost is what you would have paid for a single room rather than a double room.

In order to substantiate these expenses, make sure to keep proper documentation that shows what the rate of a single room would have been for the time away. The same applies for non-entertainment meals. You can deduct 50% of the non-entertainment meals relating to your individual expense—not the entire family’s meals.

Unfortunately, trips that are primarily for personal reasons or vacations are completely nondeductible. However, if you do conduct any business while you are at your destination, only expenses that are 100% directly related to your business are deductible.

Maintain good records

When planning your travels this summer or any other time of the year—business or personal—just remember that the IRS pays close attention to expenses incurred. Always make sure to keep logs, documentation, and receipts to properly support the business purposes and expenses associated with the travel.

For more information, please see IRS Publication 463 , Travel, Gift, and Car Expenses , which provides more detail regarding these expenses, including those that are out of the country, for conventions, and other venues and scenarios.

Note: All information provided above is relevant for the tax years covered in the above mentioned Publication. For future tax years, please be sure to reference any updates issued by the IRS.

Editor’s note: Check out the Intuit® Tax Pro Center for more IRS-related content . This article was previously published in the CPA Practice Advisor .

Best practices in cryptocurrencies

August 2023 tax and compliance deadlines

Alexandra Francel, EA, MST, is a tax content analyst currently working on the Globalization team bringing Spanish to TurboTax at Intuit. She started with Intuit in 2019 after 18 years of experience in public accounting, where she provided tax services to individuals, small businesses, estates, and trusts. Alexandra enjoys working with taxpayers to help them learn, and become more familiar with, their tax situations so they can maximize their tax savings. More from Alexandra Francel, EA, MST

Comments are closed.

Browse Related Articles

What your clients need to know about business-related t…

IRS Updates Per-Diem Guidance for Business Travelers an…

What is a Tax Home, and How Does it Impact Travel Expen…

Travel-Related Tax Tips for Your Self-Employed Clients

How small business owners can deduct their home office …

Top 10 Surprising Tax Deductions

How S Corporation clients can use an accountable plan t…

Tax Implications for Airbnb Hosts

IRS Issues Guidance on TCJA Changes to Business Expense…

Tax Reform Makes Changes to the Meals and Entertainment…

Everything You Need to Know About the Business Travel Tax Deduction

Justin is an IRS Enrolled Agent, allowing him to represent taxpayers before the IRS. He loves helping freelancers and small business owners save on taxes. He is also an attorney and works part-time with the Keeper Tax team.

You don’t have to fly first class and stay at a fancy hotel to claim travel expense tax deductions. Conferences, worksite visits, and even a change of scenery can (sometimes) qualify as business travel.

What counts as business travel?

The IRS does have a few simple guidelines for determining what counts as business travel. Your trip has to be:

Mostly business
An “ordinary and necessary” expense
Someplace far away from your “tax home”

What counts as "mostly business"?

The IRS will measure your time away in days. If you spend more days doing business activities than not, your trip is considered "mostly business". Your travel days are counted as work days.

Special rules for traveling abroad

If you are traveling abroad for business purposes, you trip counts as " entirely for business " as long as you spend less than 25% of your time on personal activities (like vacationing). Your travel days count as work days.

So say you you head off to Zurich for nine days. You've got a seven-day run of conference talks, client meetings, and the travel it takes to get you there. You then tack on two days skiing on the nearby slopes.

Good news: Your trip still counts as "entirely for business." That's because two out of nine days is less than 25%.

What is an “ordinary and necessary” expense?

“Ordinary and necessary” means that the trip:

Makes sense given your industry, and
Was taken for the purpose of carrying out business activities

If you have a choice between two conferences — one in your hometown, and one in London — the British one wouldn’t be an ordinary and necessary expense.

What is your tax home?

A taxpayer can deduct travel expenses anytime you are traveling away from home but depending on where you work the IRS definition of “home” can get complicated.

Your tax home is often — but not always — where you live with your family (what the IRS calls your "family home"). When it comes to defining it, there are two factors to consider:

What's your main place of business, and
How large is your tax home

What's your main place of business?

If your main place of business is somewhere other than your family home, your tax home will be the former — where you work, not where your family lives.

For example, say you:

Live with your family in Chicago, but
Work in Milwaukee during the week (where you stay in hotels and eat in restaurants)

Then your tax home is Milwaukee. That's your main place of business, even if you travel back to your family home every weekend.

How large is your tax home?

In most cases, your tax home is the entire city or general area where your main place of business is located.

The “entire city” is easy to define but “general area” gets a bit tricker. For example, if you live in a rural area, then your general area may span several counties during a regular work week.

Rules for business travel

Want to check if your trip is tax-deductible? Make sure it follows these rules set by the IRS.

1. Your trip should take you away from your home base

A good rule of thumb is 100 miles. That’s about a two hour drive, or any kind of plane ride. To be able to claim all the possible travel deductions, your trip should require you to sleep somewhere that isn’t your home.

2. You should be working regular hours

In general, that means eight hours a day of work-related activity.

It’s fine to take personal time in the evenings, and you can still take weekends off. But you can’t take a half-hour call from Disneyland and call it a business trip.

Here's an example. Let’s say you’re a real estate agent living in Chicago. You travel to an industry conference in Las Vegas. You go to the conference during the day, go out in the evenings, and then stay the weekend. That’s a business trip!

3. The trip should last less than a year

Once you’ve been somewhere for over a year, you’re essentially living there. However, traveling for six months at a time is fine!

For example, say you’re a freelancer on Upwork, living in Seattle. You go down to stay with your sister in San Diego for the winter to expand your client network, and you work regular hours while you’re there. That counts as business travel.

What about digital nomads?

With the rise of remote-first workplaces, many freelancers choose to take their work with them as they travel the globe. There are a couple of requirements these expats have to meet if they want to write off travel costs.

Requirement #1: A tax home

Digital nomads have to be able to claim a particular foreign city as a tax home if they want to write off any travel expenses. You don't have to be there all the time — but it should be your professional home base when you're abroad.

For example, say you've rent a room or a studio apartment in Prague for the year. You regularly call clients and finish projects from there. You still travel a lot, for both work and play. But Prague is your tax home, so you can write off travel expenses.

Requirement #2: Some work-related reason for traveling

As long as you've got a tax home and some work-related reason for traveling, these excursion count as business trips. Plausible reasons include meeting with local clients, or attending a local conference and then extending your stay.

However, if you’re a freelance software developer working from Thailand because you like the weather, that unfortunately doesn't count as business travel.

The travel expenses you can write off

As a rule of thumb, all travel-related expenses on a business trip are tax-deductible. You can also claim meals while traveling, but be careful with entertainment expenses (like going out for drinks!).

Here are some common travel-related write-offs you can take.

🛫 All transportation

Any transportation costs are a travel tax deduction. This includes traveling by airplane, train, bus, or car. Baggage fees are deductible, and so are Uber rides to and from the airport.

Just remember: if a client is comping your airfare, or if you booked your ticket with frequent flier miles, then it isn't deductible since your cost was $0.

If you rent a car to go on a business trip, that rental is tax-deductible. If you drive your own vehicle, you can either take actual costs or use the standard mileage deduction. There's more info on that in our guide to deducting car expenses .

Hotels, motels, Airbnb stays, sublets on Craigslist, even reimbursing a friend for crashing on their couch: all of these are tax-deductible lodging expenses.

🥡 Meals while traveling

If your trip has you staying overnight — or even crashing somewhere for a few hours before you can head back — you can write off food expenses. Grabbing a burger alone or a coffee at your airport terminal counts! Even groceries and takeout are tax-deductible.

One important thing to keep in mind: You can usually deduct 50% of your meal costs. For 2021 and 2022, meals you get at restaurants are 100% tax-deductible. Go to the grocery store, though, and you’re limited to the usual 50%.

{upsell_block}

🌐 Wi-Fi and communications

Wi-Fi — on a plane or at your hotel — is completely deductible when you’re traveling for work. This also goes for other communication expenses, like hotspots and international calls.

If you need to ship things as part of your trip — think conference booth materials or extra clothes — those expenses are also tax-deductible.

👔 Dry cleaning

Need to look your best on the trip? You can write off related expenses, like laundry charges.

{write_off_block}

Travel expenses you can't deduct

Some travel costs may seem like no-brainers, but they're not actually tax-deductible. Here are a couple of common ones to watch our for.

The cost of bringing your child or spouse

If you bring your child or spouse on a business trip, your travel expense deductions get a little trickier. In general, the cost of bring other people on a business trip is considered personal expense — which means it's not deductible.

You can only deduct travel expenses if your child or spouse:

Is an employee,
Has a bona fide business purpose for traveling with you, and
Would otherwise be allowed to deduct the travel expense on their own

Some hotel bill charges

Staying in a hotel may be required for travel purposes. That's why the room charge and taxes are deductible.

Some additional charges, though, won't qualify. Here are some examples of fees that aren't tax-deductible:

Gym or fitness center fees
Movie rental fees
Game rental fees

{email_capture}

Where to claim travel expenses when filing your taxes

If you are self-employed, you will claim all your income tax deduction on the Schedule C. This is part of the Form 1040 that self-employed people complete ever year.

What happens if your business deductions are disallowed?

If the IRS challenges your business deduction and they are disallowed, there are potential penalties. This can happen if:

The deduction was not legitimate and shouldn't have been claimed in the first place, or
The deduction was legitimate, but you don't have the documentation to support it

When does the penalty come into play?

The 20% penalty is not automatic. It only applies if it allowed you to pay substantially less taxes than you normally would. In most cases, the IRS considers “substantially less” to mean you paid at least 10% less.

In practice, you would only reach this 10% threshold if the IRS disqualified a significant number of your travel deductions.

How much is the penalty?

The penalty is normally 20% of the difference between what you should have paid and what you actually paid. You also have to make up the original difference.

In total, this means you will be paying 120% of your original tax obligation: your original obligation, plus 20% penalty.

Justin W. Jones, EA, JD

Over 1M freelancers trust Keeper with their taxes

Keeper is the top-rated all-in-one business expense tracker, tax filing service, and personal accountant.

Everything You Need to Know About the Business Travel Tax Deduction

Get the tax info they should have taught us in school

Expense tracking has never been easier

What tax write-offs can I claim?

At Keeper, we’re on a mission to help people overcome the complexity of taxes. We’ve provided this information for educational purposes, and it does not constitute tax, legal, or accounting advice. If you would like a tax expert to clarify it for you, feel free to sign up for Keeper. You may also email [email protected] with your questions.

Voted best tax app for freelancers

How to Deduct Travel Expenses (with Examples)

Reviewed by

November 3, 2022

This article is Tax Professional approved

Good news: most of the regular costs of business travel are tax deductible.

Even better news: as long as the trip is primarily for business, you can tack on a few vacation days and still deduct the trip from your taxes (in good conscience).

I am the text that will be copied.

Even though we advise against exploiting this deduction, we do want you to understand how to leverage the process to save on your taxes, and get some R&R while you’re at it.

Follow the steps in this guide to exactly what qualifies as a travel expense, and how to not cross the line.

The travel needs to qualify as a “business trip”

Unfortunately, you can’t just jump on the next plane to the Bahamas and write the trip off as one giant business expense. To write off travel expenses, the IRS requires that the primary purpose of the trip needs to be for business purposes.

Here’s how to make sure your travel qualifies as a business trip.

1. You need to leave your tax home

Your tax home is the locale where your business is based. Traveling for work isn’t technically a “business trip” until you leave your tax home for longer than a normal work day, with the intention of doing business in another location.

2. Your trip must consist “mostly” of business

The IRS measures your time away in days. For a getaway to qualify as a business trip, you need to spend the majority of your trip doing business.

For example, say you go away for a week (seven days). You spend five days meeting with clients, and a couple of days lounging on the beach. That qualifies as business trip.

But if you spend three days meeting with clients, and four days on the beach? That’s a vacation. Luckily, the days that you travel to and from your location are counted as work days.

3. The trip needs to be an “ordinary and necessary” expense

“Ordinary and necessary ” is a term used by the IRS to designate expenses that are “ordinary” for a business, given the industry it’s in, and “necessary” for the sake of carrying out business activities.

If there are two virtually identical conferences taking place—one in Honolulu, the other in your hometown—you can’t write off an all-expense-paid trip to Hawaii.

Likewise, if you need to rent a car to get around, you’ll have trouble writing off the cost of a Range Rover if a Toyota Camry will get you there just as fast.

What qualifies as “ordinary and necessary” can seem like a gray area at times, and you may be tempted to fudge it. Our advice: err on the side of caution. if the IRS chooses to investigate and discovers you’ve claimed an expense that wasn’t necessary for conducting business, you could face serious penalties .

4. You need to plan the trip in advance

You can’t show up at Universal Studios , hand out business cards to everyone you meet in line for the roller coaster, call it “networking,” and deduct the cost of the trip from your taxes. A business trip needs to be planned in advance.

Before your trip, plan where you’ll be each day, when, and outline who you’ll spend it with. Document your plans in writing before you leave. If possible, email a copy to someone so it gets a timestamp. This helps prove that there was professional intent behind your trip.

The rules are different when you travel outside the United States

Business travel rules are slightly relaxed when you travel abroad.

If you travel outside the USA for more than a week (seven consecutive days, not counting the day you depart the United States):

You must spend at least 75% of your time outside of the country conducting business for the entire getaway to qualify as a business trip.

If you travel outside the USA for more than a week, but spend less than 75% of your time doing business, you can still deduct travel costs proportional to how much time you do spend working during the trip.

For example, say you go on an eight-day international trip. If you spend at least six days conducting business, you can deduct the entire cost of the trip as a business expense—because 6 is equivalent to 75% of your time away, which, remember, is the minimum you must spend on business in order for the entire trip to qualify as a deductible business expense.

But if you only spend four days out of the eight-day trip conducting business—or just 50% of your time away—you would only be able to deduct 50% of the cost of your travel expenses, because the trip no longer qualifies as entirely for business.

List of travel expenses

Here are some examples of business travel deductions you can claim:

Plane, train, and bus tickets between your home and your business destination
Baggage fees
Laundry and dry cleaning during your trip
Rental car costs
Hotel and Airbnb costs
50% of eligible business meals
50% of meals while traveling to and from your destination

On a business trip, you can deduct 100% of the cost of travel to your destination, whether that’s a plane, train, or bus ticket. If you rent a car to get there, and to get around, that cost is deductible, too.

The cost of your lodging is tax deductible. You can also potentially deduct the cost of lodging on the days when you’re not conducting business, but it depends on how you schedule your trip. The trick is to wedge “vacation days” in between work days.

Here’s a sample itinerary to explain how this works:

Thursday: Fly to Durham, NC. Friday: Meet with clients. Saturday: Intermediate line dancing lessons. Sunday: Advanced line dancing lessons. Monday: Meet with clients. Tuesday: Fly home.

Thursday and Tuesday are travel days (remember: travel days on business trips count as work days). And Friday and Monday, you’ll be conducting business.

It wouldn’t make sense to fly home for the weekend (your non-work days), only to fly back into Durham for your business meetings on Monday morning.

So, since you’re technically staying in Durham on Saturday and Sunday, between the days when you’ll be conducting business, the total cost of your lodging on the trip is tax deductible, even if you aren’t actually doing any work on the weekend.

It’s not your fault that your client meetings are happening in Durham—the unofficial line dancing capital of America .

Meals and entertainment during your stay

Even on a business trip, you can only deduct a portion of the meal and entertainment expenses that specifically facilitate business. So, if you’re in Louisiana closing a deal over some alligator nuggets, you can write off 50% of the bill.

Just make sure you make a note on the receipt, or in your expense-tracking app , about the nature of the meeting you conducted—who you met with, when, and what you discussed.

On the other hand, if you’re sampling the local cuisine and there’s no clear business justification for doing so, you’ll have to pay for the meal out of your own pocket.

Meals and entertainment while you travel

While you are traveling to the destination where you’re doing business, the meals you eat along the way can be deducted by 50% as business expenses.

This could be your chance to sample local delicacies and write them off on your tax return. Just make sure your tastes aren’t too extravagant. Just like any deductible business expense, the meals must remain “ordinary and necessary” for conducting business.

How Bench can help

Surprised at the kinds of expenses that are tax-deductible? Travel expenses are just one of many unexpected deductible costs that can reduce your tax bill. But with messy or incomplete financials, you can miss these tax saving expenses and end up with a bigger bill than necessary.

Enter Bench, America’s largest bookkeeping service. With a Bench subscription, your team of bookkeepers imports every transaction from your bank, credit cards, and merchant processors, accurately categorizing each and reviewing for hidden tax deductions. We provide you with complete and up-to-date bookkeeping, guaranteeing that you won’t miss a single opportunity to save.

Want to talk taxes with a professional? With a premium subscription, you get access to unlimited, on-demand consultations with our tax professionals. They can help you identify deductions, find unexpected opportunities for savings, and ensure you’re paying the smallest possible tax bill. Learn more .

Bringing friends & family on a business trip

Don’t feel like spending the vacation portion of your business trip all alone? While you can’t directly deduct the expense of bringing friends and family on business trips, some costs can be offset indirectly.

Driving to your destination

Have three or four empty seats in your car? Feel free to fill them. As long as you’re traveling for business, and renting a vehicle is a “necessary and ordinary” expense, you can still deduct your business mileage or car rental costs even when others join you for the ride.

One exception: If you incur extra mileage or “unnecessary” rental costs because you bring your family along for the ride, the expense is no longer deductible because it isn’t “necessary or ordinary.”

For example, let’s say you had to rent an extra large van to bring your children on a business trip. If you wouldn’t have needed to rent the same vehicle to travel alone, the expense of the extra large van no longer qualifies as a business deduction.

Renting a place to stay

Similar to the driving expense, you can only deduct lodging equivalent to what you would use if you were travelling alone.

However, there is some flexibility. If you pay for lodging to accommodate you and your family, you can deduct the portion of lodging costs that is equivalent to what you would pay only for yourself .

For example, let’s say a hotel room for one person costs $100, but a hotel room that can accommodate your family costs $150. You can rent the $150 option and deduct $100 of the cost as a business expense—because $100 is how much you’d be paying if you were staying there alone.

This deduction has the potential to save you a lot of money on accommodation for your family. Just make sure you hold on to receipts and records that state the prices of different rooms, in case you need to justify the expense to the IRS

Heads up. When it comes to AirBnB, the lines get blurry. It’s easy to compare the cost of a hotel room with one bed to a hotel room with two beds. But when you’re comparing significantly different lodgings, with different owners—a pool house versus a condo, for example—it becomes hard to justify deductions. Sticking to “traditional” lodging like hotels and motels may help you avoid scrutiny during an audit. And when in doubt: ask your tax advisor.

So your trip is technically a vacation? You can still claim any business-related expenses

The moment your getaway crosses the line from “business trip” to “vacation” (e.g. you spend more days toasting your buns than closing deals) you can no longer deduct business travel expenses.

Generally, a “vacation” is:

A trip where you don’t spend the majority of your days doing business
A business trip you can’t back up with correct documentation

However, you can still deduct regular business-related expenses if you happen to conduct business while you’re on vacay.

For example, say you visit Portland for fun, and one of your clients also lives in that city. You have a lunch meeting with your client while you’re in town. Because the lunch is business related, you can write off 50% of the cost of the meal, the same way you would any other business meal and entertainment expense . Just make sure you keep the receipt.

Meanwhile, the other “vacation” related expenses that made it possible to meet with this client in person—plane tickets to Portland, vehicle rental so you could drive around the city—cannot be deducted; the trip is still a vacation.

If your business travel is with your own vehicle

There are two ways to deduct business travel expenses when you’re using your own vehicle.

Actual expenses method
Standard mileage rate method

Actual expenses is where you total up the actual cost associated with using your vehicle (gas, insurance, new tires, parking fees, parking tickets while visiting a client etc.) and multiply it by the percentage of time you used it for business. If it was 50% for business during the tax year, you’d multiply your total car costs by 50%, and that’d be the amount you deduct.

Standard mileage is where you keep track of the business miles you drove during the tax year, and then you claim the standard mileage rate .

The cost of breaking the rules

Don’t bother trying to claim a business trip unless you have the paperwork to back it up. Use an app like Expensify to track business expenditure (especially when you travel for work) and master the art of small business recordkeeping .

If you claim eligible write offs and maintain proper documentation, you should have all of the records you need to justify your deductions during a tax audit.

Speaking of which, if your business is flagged to be audited, the IRS will make it a goal to notify you by mail as soon as possible after your filing. Usually, this is within two years of the date for which you’ve filed. However, the IRS reserves the right to go as far back as six years.

Tax penalties for disallowed business expense deductions

If you’re caught claiming a deduction you don’t qualify for, which helped you pay substantially less income tax than you should have, you’ll be penalized. In this case, “substantially less” means the equivalent of a difference of 10% of what you should have paid, or $5,000—whichever amount is higher.

The penalty is typically 20% of the difference between what you should have paid and what you actually paid in income tax. This is on top of making up the difference.

Ultimately, you’re paying back 120% of what you cheated off the IRS.

If you’re slightly confused at this point, don’t stress. Here’s an example to show you how this works:

Suppose you would normally pay $30,000 income tax. But because of a deduction you claimed, you only pay $29,000 income tax.

If the IRS determines that the deduction you claimed is illegitimate, you’ll have to pay the IRS $1200. That’s $1000 to make up the difference, and $200 for the penalty.

Form 8275 can help you avoid tax penalties

If you think a tax deduction may be challenged by the IRS, there’s a way you can file it while avoiding any chance of being penalized.

File Form 8275 along with your tax return. This form gives you the chance to highlight and explain the deduction in detail.

In the event you’re audited and the deduction you’ve listed on Form 8275 turns out to be illegitimate, you’ll still have to pay the difference to make up for what you should have paid in income tax—but you’ll be saved the 20% penalty.

Unfortunately, filing Form 8275 doesn’t reduce your chances of being audited.

Where to claim travel expenses

If you’re self-employed, you’ll claim travel expenses on Schedule C , which is part of Form 1040.

When it comes to taking advantage of the tax write-offs we’ve discussed in this article—or any tax write-offs, for that matter—the support of a professional bookkeeping team and a trusted CPA is essential.

Accurate financial statements will help you understand cash flow and track deductible expenses. And beyond filing your taxes, a CPA can spot deductions you may have overlooked, and represent you during a tax audit.

Learn more about how to find, hire, and work with an accountant . And when you’re ready to outsource your bookkeeping, try Bench .

Join over 140,000 fellow entrepreneurs who receive expert advice for their small business finances

Get a regular dose of educational guides and resources curated from the experts at Bench to help you confidently make the right decisions to grow your business. No spam. Unsubscribe at any time.

Access Leading Tax Experts And Technology In Our Global Digital Marketplace

Please select an option from dropdown.

Please enter your input in search field.

We Are Proven Connectors Worldwide >>> Ask Our Executive Search Services Division

Can you deduct business travel while on vacation.

At this time of year, a vacation is on many people’s minds. If you travel for business, combining a business trip with a vacation to offset some of the cost with a tax deduction can sound appealing. But tread carefully, or you might not be eligible for the deduction you’re expecting.

General Rules

Business travel expenses are potentially deductible if the travel is within the United States and the expenses are “ordinary and necessary” and directly related to the business. (Foreign travel expenses may also be deductible, but stricter rules apply than are discussed here.)

Currently, business owners and the self-employed are potentially eligible to deduct business travel expenses. Under the Tax Cuts and Jobs Act, employees can no longer deduct such expenses. The potential deductions discussed below assume that you’re a business owner or self-employed.

Business vs. Pleasure

Transportation costs to and from the location of your business activity may be 100% deductible if the primary reason for the trip is business rather than pleasure. But if vacation is the primary reason for your travel, generally none of those costs are deductible.

The number of days spent on business vs. pleasure is the key factor in determining whether the primary reason for domestic travel is business:

Your travel days count as business days, as do weekends and holidays — if they fall between days devoted to business and it would be impractical to return home.
Standby days (days when your physical presence is required) also count as business days, even if you aren’t called upon to work those days.
Any other day principally devoted to business activities during normal business hours also counts as a business day.

You should be able to claim business was the primary reason for a domestic trip if business days exceed personal days.

Deductible Expenses

What transportation costs can you deduct? Travel to and from your departure airport, airfare, baggage fees, tips, cabs, etc. Costs for rail travel or driving your personal car are also eligible.

Once at the destination, your out-of-pocket expenses for business days are fully deductible. Examples of these expenses include lodging, meals (subject to the 50% disallowance rule), seminar and convention fees, and cab fare. Expenses for personal days aren’t deductible.

Keep in mind that only expenses for yourself are deductible. You can’t deduct expenses for family members traveling with you — unless they’re employees of your business and traveling for a bona fide business purpose.

Substantiation Is Critica l

Be sure to accumulate proof of the business nature of your trip and keep it with your tax records. For example, if your trip is made to attend client meetings, log everything on your daily planner and copy the pages for your tax file. If you attend a convention or seminar, keep the program and take notes to show you attended the sessions. You also must properly substantiate all of the expenses you’re deducting.

Additional rules and limits apply to the travel expense deduction. Please contact William Rogers if you have questions.

William E. Rogers, MBA, CFP, EA is the founder of Ascend Business Advisory, a boutique tax and financial advisory firm in San Diego, CA. He has a BS in Business Management from the University of Redlands, an MBA from the University of Southern California, and an MS in Finance from Golden Gate University. His practice specializes in serving the needs of entrepreneurial start up companies.

Subscribe to TaxConnections Blog

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Current Articles

Impact Of Sales And Use Tax On Mergers And Acquisitions

Blogger List

Tax Blog Archives

NEVER MISS AN ISSUE OF TAXCONNECTION

Learn from tax advisors, straight to your inbox

KEEP ME INFORMED

INCREASE KNOWLEDGE WITH EVERY ISSUE OF TAXCONNECTIONS

Search Search Please fill out this field.
Building Your Business
Business Taxes

7 Rules You Should Know About Deducting Business Travel Expenses

What Is Your "Tax Home"?

Charges on Your Hotel Bill

The 50% rule for meals, the cost of bringing a spouse, friend or employee.

Using Per Diems To Calculate Employee Travel Costs

Combined Business/Personal Trips

International business travel.

The Cost of a Cruise (Within Limits)

Frequently Asked Questions (FAQs)

Helde Benser / Getty Images

The IRS has a specific definition for business travel when it comes to determining whether these expenses are tax deductible. The agency says business travel is travel that takes you away from your tax home and is "substantially longer than an ordinary day's work." It requires that you sleep or rest while you're away from home, and that you do so. The travel must be "temporary." This means it can't last a year or more.

Key Takeaways

You can deduct expenses that take you away from your tax home for a period of time that would require you to spend the night.
Your tax home is the city or area where your regular place of business is located.
You’re limited to 50% of the cost of your meals.
Your trip must be entirely business-related for costs to be deductible, but special rules apply if you travel outside the U.S.

What Is Your "Tax Home"?

Your tax home is a concept set by the IRS to help determine whether a trip is tax deductible. It's defined by the IRS as the entire city or general area where your regular place of business is located. It's not necessarily the area where you live.

Your tax home can be used to determine whether your business travel expenses are deductible after you've determined where it's located. You can probably count your expenses during travel as business deductions if you have to leave your tax home overnight or if you otherwise need time to rest and sleep while you're away.

Check with a tax professional to make sure you're accurately identifying the location of your tax home.

Charges for your room and associated tax are deductible, as are laundry expenses and charges for phone calls or for use of a fax machine. Tips are deductible as well. But additional personal charges, such as gym fees or fees for movies or games aren't deductible.

You can deduct the cost of meals while you're traveling, but entertainment expenses are no longer deductible and you can't deduct "lavish or extravagant" meals.

Meal costs are deductible at 50%. The 50% limit also applies to taxes and tips. You can use either your actual costs or a standard meal allowance to take a meal cost deduction, as long as it doesn't exceed the 50% limit.

The cost of bringing a spouse, child, or anyone else along on a business trip is considered a personal expense and isn't deductible. But you may be able to deduct travel expenses for the individual if:

The person is an employee
They have a bona fide business purpose for traveling with you
They would otherwise be allowed to deduct travel expenses

You may be able to deduct the cost of a companion's travel if you can prove that the other person is employed by the business and is performing substantial business-related tasks while on the trip. This may include taking minutes at meetings or meeting with business clients.

Using Per Diems To Calculate Employee Travel Costs

The term "per diem" means "per day." Per diems are amounts that are considered reasonable for daily meals and miscellaneous expenses while traveling.

Per diem rates are set for U.S. and overseas travel, and the rates differ depending on the area. They're higher in larger U.S. cities than for sections of the country outside larger metropolitan areas. Companies can set their own per diem rates, but most businesses use the rates set by the U.S. government.

Per diem reimbursements aren't taxable unless they're greater than the maximum rate set by the General Service Administration. The excess is taxable to the employee.

If you don't spend all your time on business activities during an international trip, you can only deduct the business portion of getting to and from the destination. You must allocate costs between business and personal activities.

Your trip must be entirely business-related for you to take deductions for travel costs if you remain in the U.S., but some "incidental" personal time is okay. It would be incidental to the main purpose of your trip if you travel to Dallas for business and you spend an evening with family in the area while you're there.

But attempting to turn a personal trip into a business trip won't work unless the trip is substantially for business purposes. The IRS indicates that “the scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip."

The rules are different if part or all of your trip takes you outside the U.S. Your international travel may be considered business-related if you were outside the U.S. for more than a week and less than 25% of the time was spent on personal activities.

You can deduct the costs of your entire trip if it takes you outside the U.S. and you spend the entire time on business activities, but you must have "substantial control" over the itinerary. An employee traveling with you wouldn't have control over the trip, but you would as the business owner would.

The trip may be considered entirely for business if you spend less than 25% of the time on personal activities if your trip takes you outside the U.S. for more than a week.

You can only deduct the business portion of getting to and from the destination if you don't spend all your time on business activities during an international trip. You must allocate costs between your business and personal activities.

The Cost of a Cruise (Within Limits)

The cost of a cruise may be deductible up to the specified limit determined by the IRS, which is $2,000 per year as of 2022. You must be able to show that the cruise was directly related to a business event, such as a business meeting or board of directors meeting.

The IRS imposes specific additional strict requirements for deducting cruise travel as a business expense.

How do you write off business travel expenses?

Business travel expenses are entered on Schedule C if you're self-employed . The schedule is filed along with your Form 1040 tax return. It lists all your business income, then you can subtract the cost of your business travel and other business deductions you qualify for to arrive at your taxable income.

What are standard business travel expenses?

Standard business travel expenses include lodging, food, transportation costs , shipping of baggage and/or work items, laundry and dry cleaning, communication costs, and tips. But numerous rules apply so check with a tax professional before you claim them.

The Bottom Line

These tax deduction regulations are complicated, and there are many qualifications and exceptions. Consult with your tax and legal professionals before taking actions that could affect your business.

IRS. " Topic No. 511: Business Travel Expenses ."

IRS. " Publication 463 (2021), Travel, Gift, and Car Expenses ."

IRS. " Here’s What Taxpayers Need To Know About Business-Related Travel Deductions ."

Life Stages
Tax Breaks and Money
View all Tax Center topics

Is Your Working Vacation Tax Deductible?

Would it not be nice to take a fantastic trip to a big city with endless things to do, and have the IRS let you take a tax deduction for it? In fact, with careful planning and detailed record keeping, the “bizcation” dream could easily be made a reality.

If your trip is primarily for business reasons and the stay is long enough to require sleep to continue business activities, transportation expenses are generally fully deductible. On the days where you conduct business, you are able to deduct 50% of your business-related food and entertainment costs and fully deduct other ordinary and reasonable expense incurred to do your business — i.e., lodging, taxis, rental cars, etc.

Planning Your Work Trip Is Key

The key to maximizing the business travel deduction is to plan meetings wisely to schedule in some “me” time to do some sightseeing. Travel days count as business days. Weekends and holidays falling between business days also count as business days. So, if you fly in early on Thursday to get a lower airfare or another common-sense reason not merely to extend your stay for personal purposes, you have a fully deductible business day to enjoy a nice city. A work meeting on Friday and another on Monday would mean that the weekend nights are business days for purposes of deducting lodging and meals. Staying longer than the workdays will not allow additional deductions for lodgings or meals for those personal days, but the transportation cost to the city would still be fully deductible.

With Working Vacations, The Proof is Always in the Pudding

It’s very important that you substantiate the business justification for deducting any expense on your taxes. However, travel and entertainment deductions are often abused and closely scrutinized by the IRS. You should retain any and all documentation that provides insight into the business activity you conduct while on your trip. Receipts are just the bare minimum here — keep itineraries, meeting agendas, and the like. If you have a smart phone, there are many applications that make it easy and simple to keep detailed information on your phone while on the go.

Bringing the Family Along

If you want to bring your significant other or maybe even your kids, you have to do a little extra planning. The key here is that you are only able to deduct expenses that only you would deduct if you traveled alone. Only your airfare is deductible, you may not deduct the travel costs of family. However, if you drive, the expenses associated with that drive are deducted because the expenses would be the same if you did not have a car full of family. Additionally, only your meals and business entertainment and those of business associates are eligible for the fifty percent deduction.

The bottom line is that you must be reasonable when claiming travel and entertainment deductions and keep meticulous tax return records . If contested, you should be able to show that your “bizcation” remained primarily for business purposes and did not co-mingle personal expenses with deductible business expenses.

Was this topic helpful?

Yes, loved it

Could be better

No one offers more ways to get tax help than H&R Block.

Can You Deduct Your Vacation From Your Taxes? Experts Weigh In

Know what’s deductible and what’s not when it comes to submitting travel expenses on your taxes..

Copy Link copied

Man on wood patio with laptop computer, on green hill overlooking sea

If there’s a certain amount of work involved, you may be able to claim travel costs on your taxes.

Photo by GaudiLab/Shutterstock

People are traveling like crazy these days. The Sunday after Thanksgiving 2023 was the biggest single travel day in U.S. aviation history, with TSA screening more than 2.9 million passengers on November 26.

If you’re one of those travelers racking up frequent flier miles as quickly as you can fasten your seat belt, you may be looking for ways to recoup some of the cost. Can you legally write off your trip? If you’re self-employed (for example, if you’re an entrepreneur, freelancer, or consultant, or have an online business) and you did some work while on the road, there’s a good chance you can.

Here’s what it takes to get two thumbs up from the IRS.

Pass these four tests

For starters, your trip must have a business purpose, meaning it must include activities such as client meetings, attending a conference, being a guest speaker at a conference, doing research and development for the business, or holding a board meeting or annual shareholders’ meeting. The activity should have the potential to generate revenue.

“Don’t think you can take a personal trip, talk business for an hour and then try and deduct the whole amount of your trip. The intent of the trip needs to be business,” says Caitlynn Eldridge, founder and CEO of Eldridge CPA .

The second and third requirements deem that the trip must be both “ordinary and necessary,” according to IRS guidelines on business travel expenses . “An ordinary expense means it’s typical in your business, both [in terms of] amount [as well as in] frequency and purpose. Necessary means it actually helps you increase your profits or expand your business,” explains Tom Wheelwright, a certified public accountant and author of the book Tax-Free Wealth (BZK Press, 2018).

Lastly, every expense must be properly documented. To get a deduction for travel, Wheelwright said that you must spend more than half your time during the business day doing business and have everything documented. “So, if you spend four and a half hours a day doing business, it becomes deductible. You also must have documentation, which includes receipts, of what you did, and a log of your expenses,” says Wheelwright.

On receipts, write the name of the client who you had the meal with for further proof. “Save the emailed confirmation and receipt from the hotel reservation or conference ticket payment that show the dates, times, and name of the events as well as the receipts from the travel it took to get there and back [such as for gas or flights],” says Ben Watson, founder of Fiscal Fluency , a personal finance and business coaching company.

Note that for 2024, the IRS mileage reimbursement rate is 67 cents for employees or a self-employed individual traveling for work, up from 65.5 cents in 2023.

Know, too, that you must be away from home overnight—the IRS requires an overnight stay for the trip to qualify as business travel, Wheelwright says.

Domestic travel versus travel abroad

There’s a big difference between how you calculate deductions if the work trip was taken in the United States versus abroad. According to Wheelwright, “It’s an all-or-nothing test in the U.S., so either you spent more than 50 percent of your time on business, and it’s all deductible, or you spent 50 percent or less and none of it’s deductible.”

For international business travel, the deductions work differently. He explained that when you travel to another country, the deduction is proportionate. “For example, if you spent 40 percent of your time doing business in Italy, then 40 percent is deductible,” says Wheelwright.

Stick to the rules

Square outdoor infinity pool with palm trees in background and facing sea at dusk

If you normally stay in more modest hotels, trying to deduct a luxe property stay could raise red flags.

Photo by Yokwar/Shutterstock

It has to be a legitimate business trip. “You can’t simply do some work while on the beach and call it a business trip,” says Watson. But if you make it a “bleisure trip” by adding a couple days at the beach onto your preplanned business trip to the coast, you could still write off at least some of your lodging fees, he explained. If you do extend your trip for vacation, you can only deduct the expenses that were directly related to work and took place on the days that you conducted business. If you are traveling to multiple cities, keep in mind that each must have a business purpose.

You do have to work. If you are at a conference, make sure you fully participate, which means not just attending one or two sessions. If you only attend a small number of the business-related events, the entire purpose of the trip would be considered a personal trip with “incidental” business activities, Watson points out. Remember you need a log of what you did, and if it’s thin on details, it could prove problematic. “You don’t want to lose the ability to deduct transportation, lodging, meals, and other expenses,” says Watson.

If it’s a business trip of your own making, be sure it includes meetings with clients or participating in some work-related activity. “To demonstrate evidence of these events, it’s wise to put calendar appointments down in your phone in advance and hold onto receipts when the time comes to file your tax return and claim your deductions. Remember, the primary purpose of this trip is [supposed to be] for work,” says Riley Adams, a CPA and CEO and founder of WealthUp , a financial literacy website.

Don’t try to bend what “ordinary and necessary” means. “If you have the ability to accomplish the same business tasks while staying at a modest hotel as you would at the Four Seasons, you’ll have a hard time justifying the extra cost if you’re ever audited,” Watson cautions.

Stay at a place that is similar to places you normally stay on a business trip, so your expenses are considered “ordinary.” Wheelwright explains that if you usually stay at five-star hotels for your business trips, then the Four Seasons would fall into the same category. However, if you usually stay at hotels like the Comfort Inn, and suddenly switch to a luxury hotel, the high-end venue could raise red flags with the IRS. He says that it doesn’t matter whether you stay at a hotel or a vacation rental, the quality level and price tag should be similar to what is typical for your business trips.

When traveling with non–business companions, such as a spouse or family members, you may only deduct the cost of the lodging you would have paid if you were traveling alone—for example, if a single room costs $150 per night, and you paid $200 for a double room, you could only deduct at the $150 rate.

What can you deduct?

One woman in dress and two men in suits at dining table with salads, bread, and wine

You can deduct 50 percent of the cost of business meals.

Photo by Rawpixel.com/Shutterstock

Personal meals are not deductible, but half the cost of food expenses related to business can be deducted. Expenses for your family’s meals and entertainment cannot be deducted unless they are actively engaged in the business and you can show that their expense is both ordinary and necessary.

Travel expenses are only deductible on the days in which the work-related event occurs. “For example, a taxi ride to the meeting, train to a conference, or plane ride to the event [are deductible],” says Adams. “Lodging, much like travel expenses, is deductible on the days in which business is set to occur.”

Understand too, that if you’re provided with a plane ticket paid for by your company, or you’re riding free because you’re redeeming frequent flier miles, your cost is zero, so you can’t deduct it.

But there are a couple of things you may not be aware of. For example, if you have to ship your baggage, you can deduct that cost; you also can deduct for tips for services, such as a tip to the waiter during a meal with a client.

Be strategic

It’s best to put your “vacation” days in the middle of the business days, advises CPA Greg O’Brien. “For example, if [a] business owner took a seven-day trip to Florida and spent five days meeting with clients or prospects and two days relaxing on the beach, this would still qualify as a deductible business trip. The trick is to stick the ‘vacation’ days in the middle of the business days,” he says.

By placing the vacation days in the middle, the travel days to and from are still considered business related, rather than personal.

Watson offers another tip: “Laundry, dry-cleaning and shoe-shine expenses are perfectly acceptable expenses if incurred shortly after returning home.”

How to find deductions for travel expenses

With more consultants and business travelers hitting the road for business travel, it's time for a brush-up on what expenses are eligible for tax deduction while they're away. If you're unsure about what qualifies, read on.

Find out more about Business Taxes

by Grace L. Williams

Grace L. Williams is a journalist. Her areas of expertise include small business, career, personal finance, and inve...

Key takeaways

What is business travel or a business trip, what is a business-related travel expense, what business travel expenses are tax deductible, are there other tax deductions for travel expenses, tracking expenses on your business trip, importance of documentation, combining business and personal travel, special considerations for self-employed individuals, getting help with tax deductions for travel expenses, frequently asked questions.

Business travel is back after the pandemic, and with that increase comes the age-old question every business traveler must ask at least once: "What can I deduct as a business expense while I'm on the road?"

You've likely heard the term "write-off" somewhere and may have used it somewhere within your business circles. But what exactly is it? You might wonder if you can book first-class travel or five-star lodging and eat in fancy dining establishments and then submit them as business write-offs. The short, overarching rule for those specifics is no, you probably cannot, but there is more to eligible business travel expenses than that.

A man looks at his cell phone while boarding a flight for business travel. Business travel deductions fall into three categories: costs related to how you will get to your destination (travel), where you will stay (lodging), and what you will eat and drink when you are there and in transit..

So before you book travel arrangements on your credit card (hopefully a designated business credit card), read on for more information about making expensing your business travel less stressful.

Understand IRS guidelines for deductible travel expenses to maximize tax savings.
Proper documentation is essential for claiming deductions, including meals and entertainment, with a clear business justification.
Utilize tax professionals and leverage technology to ensure accurate deductions, compliance with laws, and maximum savings on travel expense deductions.

A woman in a window seat on an airplane checks her phone during a business trip. business travel or a business trip is defined as any travel conducted that is business-related.

Simply put, business travel or a business trip is defined as any travel conducted that is business-related. To be considered eligible as a business trip, the travel itself must meet the following criteria:

The trip must be conducted for legitimate business purposes, not as leisure time, vacation, or personal purposes.
The trip must occur outside the bounds of a regular commute to and from work (or the main place of business) and home.

If the trip meets these criteria, it falls under the category of a business trip. It also means that you can deduct travel expenses whether you are a business owner sending an employee on your behalf or a self-employed individual.

To better understand business-related travel expenses, it's a good idea to look at overall business expenses. A business expense is incurred as part of the regular day-to-day operations of your employer (or for you if you are a self-employed individual) to conduct the business. Under current Internal Revenue Service (IRS) laws, special rules allow portions of business expenses to be deducted from the overall business income. These expenses are considered tax deductible, which means they are applied before any taxes are. The umbrella term "write-off" comes from this business tax deduction category.

In business, eligible tax deductions can have a significant impact. Being able to deduct expenses can often reduce the total overall taxable income . Cumulatively, tax-deductible expenses will likely reduce the total bill when it is time to file your tax return.

A deductible business travel expense is one that you or an employee incur during travel directly related to conducting business. In both instances (a business expense or a business travel expense), it is essential to ensure the expense falls under the category of being for bona fide business purposes. This means that deducting the travel expenses must be something genuinely related to conducting or doing a bona fide business purpose. If it is, its cost can be written off as part of business or business travel-related expenses. It applies to self-employed individuals or employees traveling for an employer or business owner.

So what exactly can you expense?

A man works on his laptop in an airport while waiting for his flight to board. In order to legally deduct business travel, specific criteria must be met.

First and foremost, consider the basics, or the "Big 3" in business travel. Essentials here include these three actual expenses: costs related to how you will get to your destination (travel), where you will stay (lodging), and what you will eat and drink when you are there and in transit. Each category within the Big Three can be an eligible travel expense and, therefore, a tax write-off, but they come with some criteria worth exploring.

Transportation expenses: If you plan to travel by car, and you will either use a vehicle you lease long-term or your car, there are two choices related to how this mode of transportation might be expensed. One choice is known as the “ standard mileage rate ." Under current IRS allowances, the standard mileage rate deduction for self-employed individuals and employees is 65.5 cents per mile for business-related travel. The rate per mile would apply to any driving conducted to or from the business destination. It would also apply to any driving conducted while you are at the destination if it is business-related. For instance, once at the destination, if driving must be done to run errands, those miles can be added to the total mileage count.

The other vehicle expense option for a business trip is to itemize the individual expenses. Eligible business costs, in this instance, include the lease, insurance, fuel, costs related to the upkeep and maintenance of the vehicle, such as oil changes or tune-ups, and any major repairs on the vehicle, such as fixing a flat tire.

If you are renting a car as part of your transportation expenses and it falls under the ordinary and necessary business travel expense category, the cost to rent a car would qualify as an eligible business expense. Other vehicle-related expenses that qualify for travel deductions include tolls and parking fees.

Actual expenses method

The actual expenses method involves calculating the total cost of vehicle use and multiplying it by the percentage used for business purposes. This includes:

Depreciation
Garage rent
Vehicle registration fees
Lease payments

To calculate the percentage of business use, divide the total business miles driven by the total miles driven in the year. While this method can lead to larger deductions, it requires detailed record-keeping and more complex calculations than the standard mileage method.

Standard mileage rate

The standard mileage rate allows you to claim a fixed rate per mile driven for business purposes, plus parking fees and tolls. The standard mileage rate for business in the United States is 65.5 cents per mile. The IRS determines This rate annually based on a study of the fixed and variable costs of operating a vehicle for business reasons, such as gas, maintenance, and depreciation.

This method can be used for self-employment, business-related travel, or when using a vehicle for work as an independent contractor. However, personal use of the vehicle is not eligible for this deduction.

Ticketed travel: For ticketed travel, like flights or trips by train, the cost of your ticket can be expensed as a travel deduction if your class fare qualifies as an eligible and reasonable expense. This means that while you likely won't be able to deduct first-class fare, you can deduct what is known as the ordinary and necessary expense related to the fare, which covers classes such as economy. You can also expense costs incurred while en route, such as baggage fees. And, if you are waiting at an airport or train station, any meal costs, snacks, or drinks would also qualify as business-related expenses.

Meal expenses and entertainment: Business meals cut eligible business expenses but with some stipulations, including the standard meal allowance. While current IRS laws permit for up to 50% of a business meal to be deducted, like ticketed travel, rental cars, and other business-travel-related costs, the meal must fall under an ordinary and necessary expense to be eligible as a tax-deductible business expense. If you are tempted to go all out and splurge on your dining, you might find that it is not an eligible business travel expense.

But changes have been made to the entertainment category. While entertainment used to be an allowed business expense, it is sometimes no longer eligible to claim tax deductions. This means that if you expect to take clients out as part of client meetings or conduct business, be sure to read the fine print since you might discover you cannot claim entertainment as a legitimate business expense.

Lodging expenses: Business travelers must consider where they will sleep while away. To be considered eligible as a business expense, the location of your stay must be outside of the main place of business and require overnight accommodation. Notably, in this expense category, IRS rules stipulate that for it to be an eligible business expense, the lodging cannot fall into the extravagant or considered recreational category.

Remember: With each of the "Big 3" and all other related business expenses to be deducted, the expenses must be ordinary and fall under the category of reasonable business expenses. If you opt for pricey vehicles, tickets, meals, and rooms instead of the available moderately-priced alternatives, you risk losing eligibility as legitimate business expenses.

There are some other expenses anyone traveling for business should consider submitting as tax-deductible expenses.

Event fees: These could come into play if you travel to an event such as a conference, convention, or trade show. In addition to the Big 3, certain expenses related to attending these events would qualify as eligible business travel expenses. The expenses are deductible if the event has an entry or booth fee. While you are there, if you attend workshops, lectures, or courses that require materials such as a workbook or registration, these would also be eligible as tax-deductible travel expenses. And, if you are running a booth or table at an event and need materials or supplies, the cost to purchase them would also qualify as legitimate business expenses.

Incidental expenses: Any reasonable additional expenses you incur while traveling for a business activity can be considered incidental expenses. For instance, if you incur expenses on ground transportation, a rideshare fee, taxi fare, or a subway ticket qualify as business expenses. Laundry and dry cleaning services are also eligible business activities. In addition, indirect expenses like office supplies can be eligible business expenses.

Organization before, during, and after the business trip will help you avoid potential pitfalls or headaches when filing expenses or taxes. From the outset, one great way to separate your business trips and expenses from personal expenses is to have a single credit or debit card that you designate for business use only. This de facto "corporate" card will come in handy and be a best friend on the road since it automatically creates a tally of itemized expenses courtesy of the real-time accounting and monthly statements that come with it.

Beyond the lone card designated for business expenses, your meticulous record-keeping will greatly help you when it's time to account for everything. If you don't want to use a third-party software program or expense-tracking app to track your expenses, a simple solution is to use a basic spreadsheet that tracks the date, the reason for the expense, and the cost. To set this up, once you have incurred an expense, note it down using the aforementioned basic information.

While on the trip, another simple organizational tool is keeping all receipts and other applicable hard-copy records and materials in one designated place. A pouch or envelope will work fine as the place to keep these items. Make sure you read the receipt or record, and if it does not have information such as the name and address of the business, write it on the back before you stash it away. Finally, if a receipt is for something like a business lunch, ensure the date and information about the place of business are on the receipt. Then, write the name of the person you shared your time with and the reason for meeting up somewhere on the receipt.

Claiming travel expense deductions requires proper documentation. This includes retaining receipts and records for all expenses incurred during your business trip. For meals and entertainment expenses, you'll need to note the nature of the meeting, including who you met with, when, and the topics discussed.

It's worth noting that lodging expenses on non-business days may still be eligible for deductions if specific strategies are employed, such as incorporating “vacation days" between workdays. In such cases, the total cost of lodging for the trip can still be tax deductible even when no work is taking place on the weekend. However, meals and entertainment expenses without a clear business justification won't be deductible and must be paid personally.

A man and woman enjoy fall foliage after a business trip to the Northeast U.S. The non-business portion of business travel expenses may be viewed as taxable income if paid by the individual or company.

Allocating expenses between business and personal activities is essential to ensure accurate deduction claims. Expenses must be allocated based on actual usage, so the non-business portion of the expenses may be viewed as taxable income if paid by the individual or company.

To accurately allocate expenses between business and personal activities for tax deductions, follow these steps:

Track usage for a period of time.
Determine the allocation by proportionally dividing the expenses based on the amount of business and personal use.
Maintain proper records to support the allocation.

When combining business and personal travel, careful allocation of expenses and adherence to specific rules is important. Expenses related to the personal nature of the trip cannot be deducted; only those incurred for business purposes can be.

If traveling abroad, you must spend a minimum of 25% of your time conducting business to qualify as a business trip and claim travel expense deductions. If you conduct business for less than 25% of the time while on a trip, you can still deduct travel costs. This deduction must be proportional to the amount of time spent on business.

Rules for international travel

International travel has additional rules to consider when claiming travel expense deductions. As mentioned, you must spend at least 25% of your time abroad conducting business to claim travel-expense deductions.

If you use 25% or less of your trip for business purposes, you can deduct related travel costs in proportion to the time spent on work. This can help to make international business trips more affordable. For example, if 40% of your time is spent on business activities, you can claim the entire cost of airfare as a business expense.

Self-employed individuals should be aware of special considerations when deducting travel expenses, such as home office deductions and computer rental fees. Understanding these unique aspects can help self-employed individuals maximize their tax savings and ensure compliance with tax laws, especially regarding their tax home.

Home office considerations

Home office deductions can be claimed if the office is the primary place of business and is regularly used for business purposes. The IRS has specific guidelines for the regular use of a home office for business purposes, such as the office being used exclusively and regularly for business purposes.

To claim a home office deduction, you can use the simplified method the IRS provides. Here's how it works:

Multiply the allowable square footage of your home office by the prescribed rate of $5 per square foot.
The maximum allowable square footage is 300 square feet, so the maximum deduction you can claim using this method is $1,500 annually.
The simplified option allows for a standard deduction without the need for detailed record-keeping.

Deducting computer rental fees

Computer rental fees can be deducted if the equipment is used for business during the trip. The full cost of the computer rental may be deducted as a business expense.

To claim a deduction for computer rental fees from business travel expenses, you must provide relevant documentation demonstrating the rental fees paid, such as receipts or invoices. Proper record-keeping is essential to support your deduction and ensure compliance with IRS regulations.

Leveraging technology

Technology, such as expense tracking apps and online bookkeeping services, can simplify record-keeping and documentation for travel expense deductions. These tools can help you track and categorize expenses, making it easier to identify and compute deductible expenses for tax purposes.

Expense tracking applications can:

Generate reports and summaries of travel expenses
Be beneficial for tax filing and auditing purposes
Save time and effort in tracking and documenting your travel expenses
Ensure accurate deductions and compliance with tax laws

Leveraging technology in expense tracking can be a valuable tool for managing your finances.

Sometimes, you might need more help. This guide provides basic questions about business travel deductions and expenses. Still, you are not alone if you have other questions about what might qualify as a tax-deductible business expense. There are experts at LegalZoom who can answer specific questions and better advise you about both business expenses and business travel-related expenses.

You might have questions about whether specific costs related to your business qualify as ordinary and necessary expenses or wonder if percentages of a certain expense or the entire cost can be completely deductible. Additionally, professionals in the know about things like a specific tax home can help you sort out concerns related to your business so that you can always claim the proper travel expenses. For any consultant looking to get back into the swing of travel, help and practical tips are just a click away.

Understanding and maximizing travel expense deductions can save you significant money on your tax return. By familiarizing yourself with the requirements, maintaining proper documentation, and leveraging the expertise of tax professionals and technology, you can ensure accurate deductions, compliance with tax laws, and, ultimately, keep more money in your pocket.

What kind of travel expenses are tax deductible?

Tax deductible travel expenses include airfare, train/bus fares, taxi rides between an airport or station and a hotel, or from the hotel to a work location.

What are the three requirements for a traveling expense deduction?

To qualify for a traveling expense deduction, you must have a “business trip," leave your tax home, have most of the trip business-related, and plan the trip in advance.

How do I prove travel expenses for taxes?

To prove business travel expenses for taxes, use credit card slips with notes on the business purpose made at the time of incurring the expense.

Are daily travel expenses tax deductible?

Daily travel expenses from your home to a regular place of business are not tax deductible. However, you can deduct transport expenses when traveling between your home and a temporary work location outside the metropolitan area where you live and normally work. Additionally, ordinary and necessary travel expenses incurred while away from your home and your main place of business can be deducted.

How do I allocate expenses between business and personal activities during a combined trip?

Allocate expenses proportionally based on the amount of business and personal use for a period of time, and maintain proper records to support deductions.

How to Deduct Business Travel Expenses (Even Some Vacation)

A woman working while riding in a rideshare

For the most part, business travel expenses are tax deductible, meaning that you could lower the amount of taxes you need to pay.

When it comes to tax-write offs for travel, the IRS provides specific guidelines around what you can claim. Mainly, your trip needs to be primarily for business purposes. However, there is some wiggle room to get a little vacation time in during a business trip that qualifies as a travel expense.

As a hard-working business owner, it’s good to carve out some time for meaningful rest and relaxation. We can almost guarantee that your business will be all the better for it.

Obviously, we’re not advocating for exploiting the tax code. As long as a trip is primarily for business, you could claim it as a business travel expense (within reason) and save some money on taxes. Here’s how to follow the rules while saving a bundle on your tax return.

What is considered a business trip?

We’ve already covered that the trip needs to be for your business, but what does that mean exactly? For a business trip to qualify for a tax deduction , it needs to meet these criteria. You must:

1. Travel away from home

The trip must be somewhere other than your “tax home.” In other words, you must leave the location where your business is based for longer than a normal workday. Specifically, you will be staying overnight somewhere else.

2. Spend the majority of the time on business

The IRS looks at what you do for each day of your trip. To qualify as business-related, you need to spend more days doing work-related activities, such as meeting with customers.

The days you spend traveling to and from the destination count as business days, so meeting this requirement is easier than it seems. For example, you could fly to Honolulu on Monday, attend a conference Tuesday through Thursday, hit the beach on Friday and Saturday, and fly home Sunday. That would be considered five workdays and two vacation days.

3. Plan in advance

Write out a detailed itinerary and what you’ll be doing each day. Get it time-stamped well in advance of your departure. For example, you could email it to a colleague.

4. Ordinary and necessary

The IRS states that business travel must be for “ordinary and necessary” activities. Ordinary means the expenses are usual for businesses in your industry. Necessary means you can’t run your business without the expense. Your expenses must meet both of these requirements to be deductible.

For example, it may be necessary to rent a car during your stay, but it’s not necessary to rent a luxury class one.

There’s a lot of room for interpretation here. But, carefully review the requirements, especially since the IRS penalties can be substantial.

5. Conventions

The cost of travel and attendance at conferences is considered tax-deductible as long as the event is related to your business. This includes training and meetings meant to improve skills related to your business. For example, if you own a design agency, a web design conference is tax deductible.

Expenses related to trade shows follow the same rules as other conventions.

Different Rules for International Trips

You may have even more opportunities for vacation deductions if you’re traveling internationally.

As before, your trip needs to be primarily for business purposes. This may limit you in terms of destination, but it also might give you a chance to see a part of the world you might not see otherwise.

The rules for these types of deductions are also a bit less stringent than the regulations for other trips.

International trips must meet the following criteria to qualify as a business travel expense.

Spend 25% of your days doing business
If you spend less than 25% of your time working, you can still take deductions, but only as a percentage of the total cost. For example, if you spend 1 day out of a 5-day trip to Italy on business, that’s 20% of your time away and you can deduct 20% of your airfare.

What is considered a business travel expense?

When you’re traveling, there is a long list of expenses that are deductible that you would not be able to write off when working from home. This list may include:

Transportation

Baggage fees

These are common expenses that you can write off. Keep in mind that some of them can be written off in their entirety, while others can only be written off partially.

In all cases, it’s best to save receipts and records, which you can do with a receipt scanner app . Not only will this shield you in the event of an audit, but it can make it easier for you to keep track of your expenses when filing your income taxes. In the event of an audit, the IRS will require you to provide documentation of expenses you have written off.

If you can book your lodging and transportation online, you’ll already have written documentation of some of these expenses, and restaurant receipts can easily account for the rest.

Numerous business travel expenses are deductible. You can deduct the cost of airfare including both the cost of the ticket and any associated fees, such as baggage fees.

Once you’ve landed, you can also deduct the cost of ground transportation, such as trains, buses, and taxis.

If you drive your car, you can deduct either the actual cost of gas and oil or the standard mileage rate. You or your accountant can decide which deduction is more beneficial to you. Also, you can deduct the cost of parking and tolls.

When traveling for business, many lodging expenses, including room service, can be tax deductions.

However, there are some restrictions. For example, if you are traveling for leisure as well as business, only a portion of your lodging expenses may be deducted.

Additionally, your deduction may be limited if your lodging costs exceed a certain amount since expenses must be considered reasonable and ordinary.

In general, any meal that is considered essential to the conduct of business can be deducted. This includes both business meetings and meals taken during extended business trips.

There are a few restrictions to keep in mind when deducting meal expenses. First, the meal must take place during business travel. Additionally, only 50% of the cost of the meal can be deducted in most years. Although for 2022, you are allowed to deduct 100% of meals eaten in restaurants.

Again, receipts or other documentation must be kept to substantiate the deduction.

Shipping or Baggage

Shipping and baggage costs are deductible during business trips. If you have to ship materials or equipment for your business, you can deduct the cost of shipping. This also includes the cost of packaging materials.

If you have to check bags when you travel, you can deduct the cost of the baggage fee. You can also deduct the cost of any other related fees, such as overweight baggage fees. Keep in mind that you can only deduct the portion of these costs that is related to business travel. So if you travel for both business and personal reasons, you can only deduct the portion of the costs that are attributable to the business portion of your trip.

Dry Cleaning and Laundry

When traveling for business, you may be able to deduct the cost of dry cleaning your clothes.

To be eligible for this deduction, you must maintain records of your expenses and submit them to your employer. Additionally, your employer must be able to verify that the expenses were incurred while you were on business travel.

If you are self-employed, you can deduct the cost of dry cleaning as a business expense on your taxes. Whether you are an employee or self-employed, the cost of dry cleaning can be deductible for business travel if you maintain accurate records and meet the required standards.

Wi-Fi and Cell Phone

You can also deduct the cost of Wi-Fi and cell phone services. This can be a significant deduction, especially if you frequently travel for business. For flights with paid Wi-Fi service, you can write off the charge if you are using the service for business purposes.

How much can you deduct for travel expenses?

We’ve listed the expenses that are deductible for business travel, but the IRS places limitations on some of the expenses.

For example, the standard mileage rate changes each year based on market conditions such as the price of repairs and gas. The past several years have seen changes in the deduction for entertainment expenses and meals eaten in restaurants.

When Your Trip Doesn’t Quite Qualify as Business

You may be spending the majority of your days on vacation, and just happen to meet with a client while you’re there. Or maybe you didn’t get the necessary documentation to support your claim that it was a business trip.

You can still write off 50% of for meals and entertainment you spent for business purposes.

However, you can’t deduct any travel or lodging costs.

Granted, this still may mean that the trip as a whole is more affordable since you’ll be deducting some of the expenses, but that doesn’t mean you’ll get the full benefit of a longer stay.

Several expenses are not deductible during a business trip. You cannot deduct any personal expenses you incur during the trip, including souvenirs, gifts for your family, or entertainment expenses unrelated to your business. If your friends or family travel along with you, none of their expenses are deductible.

When Family or Friends Come Along

For many entrepreneurs, traveling with family or friends simply makes sense. After all, if you could use some leisure time away, chances are your spouse is in the same boat. Tying this away time to your business trip can help the whole family save money, and if you have kids, this can be a great way to expose them to a new destination or a new cultural experience.

But before you book that trip to Walt Disney World, there are a few things you need to understand when it comes to friends and family joining you.

You can’t directly deduct any of their expenses. However, in many cases, they can ride on your coattails for less than the full cost.

The following rules apply to deductions when traveling with guests:

Car Rental: As long as it’s the same “ordinary and necessary” car you would have rented if you were alone, nothing says there can’t be other people in the car.
Lodging: You can deduct the portion of hotel costs that you would have paid for a single room. For example, if you would have spent on a $100 single room when traveling alone but you’re in a $150 double with your significant other, you can still write off $100.

Travel Expenses for Employees

When an employee is required to travel for business purposes, their employer will often reimburse them for some or all of their travel expenses.

The most common way to reimburse employees for travel expenses is through a per diem allowance, which reimburses the employee for each day of travel at a set rate. Even if you use a per diem allowance for meals, you still must track the business purpose.

Employers can choose to reimburse employees for their actual expenses. The employee would submit receipts for expenses incurred, including travel expenses. If the employee is driving, employers will often reimburse employees using the standard mileage rate (which changes each year) while using exact amounts for other expenses.

Regardless of the method used, it is important for employers to track and claim employee travel expenses to deduct them from their taxes. The IRS may ask for documentation for any employee travel expenses in the event of an audit.

Employers should be sure to provide clear guidelines to their employees regarding what expenses are eligible for reimbursement. By taking these steps, they can ensure that they are effectively reimbursing their employees for business travel while also reducing their tax liability.

How Xendoo can help you with taxes

Need more help with deducting your vacation or business travel expenses? Our online bookkeeping and accounting team is here to answer any questions you have and file your tax return correctly so that you get every write-off you can. You can also view our small business tax deductions checklist for more opportunities to save money on your taxes.

In the News

We understand business

Sales: +1 (877) 342-7763

Support: (954) 687-0971

Get in Touch: CONTACT US

Bookkeeping

CFO Services

Our Partners

Professional Services

We are actively seeking dedicated Accountants to join our team. The applicant must live locally, as this role is an in-office role.

The ideal candidate for this role should possess a foundational understanding of accounting principles and practices and familiarity with QBO or Xero accounting software. This individual pays attention to details, is proactive in understanding financial statements, and is willing to expand their knowledge further. A problem-solver at heart, the candidate quickly seeks assistance when needed and leverages technology to enhance efficiency and adaptability. The role engages directly with clients, offering them valuable insights into their financial health to bolster their business operations, coupled with a commitment to clear and preemptive communication to avoid potential issues.

Our organization operates within the financial technology sector with a team of compassionate, self-caring individuals who prioritize personal growth and collective success. We are life-long learners, passionate about teamwork and excellence in our respective roles, with a solution-oriented approach to challenges.

Role Responsibilities Overview

Maintain accurate and consistent books for assigned customers, including recording payments, expenses, and adjustments weekly and performing monthly bank, credit card, and Balance Sheet reconciliations. Maintain certification in both Quickbooks Online and Xero software.

Daily / Weekly Responsibilities

All assigned customers require weekly bookkeeping, which is completed through assigned Daily Tasks:

–Utilize Xendoo XP for all bookkeeping activities and tasks
–Record financial transactions for assigned bookkeeping customers based on type of accounting: Cash Basis vs Accrual
–Collect and track data needed to record transactions and create consistency in the general ledger accurately
–Maintain an appropriate Chart of Accounts based on customer needs and consistency
–Communicate with customers related to questions required to complete the bookkeeping and updates on progress
–Input notes for each account after customer calls, and based on meaningful information related to the customer-specific needs
–Collaborate with the Xendoo team for support and ask for assistance when needed
–Establish and record Opening Balances for New Accounts
–Respond to all Quality Control feedback professionally and in the required time
–Collaborate with Xendoo team members to solve problems

Monthly Responsibilities

All assigned customers require a thorough review and reconciliation process to ensure accuracy and consistency:

–Perform Account Reconciliations for all relevant Balance Sheet Accounts, including, but not limited to, Credit Cards, Bank Accounts, Loans, Clearing Accounts, Sales Tax, and more based on customer plan
–Review and analyze trends to ensure accuracy and consistency through comparative Income Statements and Balance Sheets
–Create a Monthly Checklist in XP
–Update Customer Notes related to month-end publishing/closing
–Communicate with customers about any issues with closing the books, and once reports are published
–Complete required Journal Entries based on customer-specific requirements and Xendoo Plan
–Establish monthly call schedules, as appropriate, to build strong customer relationships
–Upload all required documents into XP, including Statements and any customer-specific documents necessary to complete accurate books

Required Skills:

–Professional communication skills, both verbal and written
–Strong Accounting knowledge
–Ability to solve complex problems
–High attention to detail
–Analytical and critical thinking
–Follow-through and follow-up habits
–Confidential and professional demeanor
–Collaborative and willing to ask questions

Required Education:

–BS in Accounting or Finance, with a minimum of 1 year experience in a full-charge accounting role, or
–AA in Accounting with 5+ years’ experience in a full-charge accounting role
–Maintain 40-55 customers monthly, depending on Plan and complexity
–Utilize XP for all bookkeeping tasks and follow defined procedures
–Close and publish monthly reports within the established time frame based on the customer’s plan
–Communicate with customers via phone at least 1x/month
–Communicate via text/email for questions weekly, as needed
–Communicate monthly related to Closing / Publishing Reports
–Maintain up-to-date Notes for all customers
–Respond to Quality Control within the required time frame

We offer a supportive work environment with a Monday through Friday schedule, even during peak times, to ensure a balanced lifestyle. Benefits include health, dental, vision, life insurance, generous PTO and paid holidays, a 401(k) plan with employer matching, a casual dress code, complimentary weekly lunches, access to an on-site gym, and a dynamic, fun workplace. Our office is conveniently located on the North end of Fort Lauderdale near I-95.

We are actively seeking dedicated Senior Accountants to join our team. The applicant must live locally, as this role is an in-office role.

Role Responsibilities Overview:

Maintain accurate and consistent books for assigned customers, including recording payments, expenses, and adjustments weekly and performing monthly bank, credit card, and Balance Sheet reconciliations. Provide higher-level accounting guidance to the Xendoo Accounting team. Maintain certification in both Quickbooks Online and Xero.

–Ensure the accounting basis (Cash, Modified Accrual, Accrual) aligns with the requirements of the Plan chosen
–Set up monthly meetings with Customers to fully review month-end financials (Scale + Plans)
–Strong Accounting knowledge, including GAAP principles

Required Education/Experience:

–BS in Accounting or Finance, with a minimum of 5 years experience in a full-charge accounting role or
–MBA preferred
–1+ year as Senior Accountant or with Senior Accountant responsibilities, including team leadership and resolving escalated customer issues
–Maintain 30-40 Modified-Accrual and Accrual customers monthly, depending on Plan and complexity
–Maintain Quarterly Retention Rate of 97.5% or above

Search Knowledge Base by Keyword

Taxpayers Guide to LLCs and S Corps

Introduction.

About the Author
Progressive Updates
Introduction Disclaimer
Shameless Self-Promotion
Book Introduction
Quick Reference 2023
Quick Reference 2024

Chap 1 - Business Entities, LLCs

Basic Business Entities
Sole Proprietorship
Single Member Limited Liability Company
Multi-Member Limited Liability Company
Partnerships
C Corporations
Personal Service Corporation
Professional Corporations and LLCs
S Corporations
Section 199A Qualified Business Income Tax Deduction
S Corp Versus LLC
LLC Popularity (Hype)
Formation of an LLC or S Corp
Nevada Fallacy of an LLC (or Delaware or Wyoming!)

Chap 2 - Customized Entity Structures

Your Spouse as a Partner (Happy Happy Joy Joy)
Family Partners
Real Estate Holding Company and Operating Company
Parent-Child Arrangement (Income Flows "Up")
Parent-Child Arrangement (Income Flows "Down")
Multi-Member LLC That Issues Invoices
Things to Work Through with Multiple Entities
Recap of Benefits with Multiple Entities
State Apportionment with Multiple Entities
California Multi-Member LLC S Corp Twist
Holding Company versus Management Company
Economic versus Equity Interests
Structuring Deals with Angel Investors
ESOPs and S Corporations
Another Employee Ownership Situation
Medical C Corp
Fleischer Tax Court Case
Joint Ventures
Loans or Capital Injections
Using a Trust in Your Formation Considerations
Operating Agreements
Exit Plans, Business Succession
Liability Protection Fallacy of an LLC
Charging Orders
Using a Self-Directed IRA to Buy a Rental, Start A Business

Chap 3 - S Corporation Benefits

Avoiding or Reducing Self-Employment SE Taxes
Tax Savings with Health Insurance
S Corp Hard Money Facts, Net Savings
Ancillary Benefits with S Corporations
Officer Compensation with Solo 401k Plan Deferral
W-2 Converted to 1099
Net Investment Income, Medicare Surtax and S Corps
Being a Passive Business Owner
Three Types of Income

Chap 4 - The 185 Reasons to Not Have an S Corp or LLC

Chapter 4 Introduction
Additional Accounting Costs
Additional Payroll Taxes
SEP IRA Limitations
Trapped Assets
Distributing Profits, Multiple Owners
Other W-2 Income
State Business Taxes (Not Just Income Taxes)
Deducting Losses, Trapped Cash
Distributions in Excess of Shareholder Basis
Stock Classes
Vesting and Expanding Ownership
Bad Loans to the S Corp
Social Security Basis
Payroll Taxes on Children
C Corp to S Corp Problems
Going Concern
Recap of S Corp Downsides
Growing Business, Debt Service

Chap 5 - State Nexus Problems

Chapter 5 Introduction
Chapter 5 Disclaimer
Wayfair Case Part 1
Nexus Theory
Constitutional and Legislative Standards
Sales and Use Tax, Income Tax
Physical and Economic Presence, Nexus Attached
Wayfair Case Part 2
Services and Tangible Personal Property (TPP)
Costs of Performance, Market-Based Approach
Allocation and Throwback
FBA, Drop Shipments, Trailing Nexus Revisited
Recap of State Tax Issues
State Tax Issues and Nexus

Chap 6 - S Corporation Election

Formation (Election) of an S-Corp
Electing S-Corp Filing Status, Retroactive for 2023
Another Option, Dormant S Corp
Missing Payroll, Now What
Mid-Year Payroll
Nuts and Bolts of the S Corp Election
Ineffective S Corp Elections
S Corp Equity Section
Terminating S Corp Election
Distributed Assets
5 Year Rule
Life Cycle of an S Corporation

Chap 7 - Section 199A Deduction Analysis

Section 199A S Corp Considerations
Calculating the Qualified Business Income Deduction
Section 199A Defining Terms
Specified Service Trade or Business (SSTB) Definitions
Trade or Business of Performing Services as an Employee
Services or Property Provided to an SSTB
Section 199A Deduction Decision Tree
Section 199A Reasonable Compensation
Section 199A Pass-Thru Salary Optimization
Cost of Increasing Shareholder Salary
Section 199A Rental Property Deduction
Negative Qualified Business Income
Qualified Property Anti-Abuse
Aggregation of Multiple Businesses
Section 199A W-2 Safe Harbors
Additional Section 199A Reporting on K-1
Section 199A Frequently Asked Questions

Chap 8 - Section 199A Examples and Comparisons

S Corp Section 199A Deduction Examples
Section 199A Side by Side Comparisons
Section 199A Basic Comparisons
Section 199A Health Insurance Comparison
Section 199A 200k Comparison
Section 199A 250k Comparison
Section 199A Specified Service Business Comparison Part 1
Section 199A Specified Service Business Comparison Part 2
Section 199A Phaseout
Section 199A Recap
Section 199A Actual Tax Returns Comparison

Chap 9 - Reasonable Shareholder Salary

Chapter 9 Introduction
IRS S Corp Stats
Reasonable S Corp Salary Theory
IRS Revenue Rulings and Fact Sheet 2008-25
Tax Court Cases for Reasonable Salary
Risk Analysis to Reasonable Shareholder Salary
Reasonable Salary Labor Data
Assembled Workforce or Developed Process Effect
W-2 Converted to 1099 Reasonable Salary
S Corp Salary Starting Point
Multiple Shareholders Payroll Split
Additional S Corp Salary Considerations
Reasonable Salary Recap

Chap 10 - Operating Your S Corp

Chapter 10 Introduction
Costs of Operating an S Corp
New S Corp Puppy, What Do I Do Now
Accounting Method
1099-NEC Issued to Your SSN
Take Money Out of the S Corp
Processing S Corp Payroll
Taking Shareholder Distributions
Reclassify Shareholder Distributions
Accountable Plan Expense Reimbursements
Accountable Plan Requirements
Shareholder Distributions as Reimbursements
S Corp Tax Return Preparation
Distributions in Excess of Basis
Minimize Tax or Maximize Value (Economic Benefit)
Tracking Fringe Benefits
Other Tricks of the Trade with S Corps
Adding Your Spouse to Payroll
Chap 10 - Comingling of Money

Chap 11 - Tax Deductions, Fringe Benefits

Chapter 11 Introduction
Four Basics to Warm Up To
Section 199A Deductions – Pass Through Tax Breaks
185 Business Deductions You Cannot Take
Depreciation
Small Business Tax Deductions Themes
Value of a Business Tax Deduction
Deductions the IRS Cannot Stand
Automobiles and LLCs, S Corps
Business Owned Automobile
Section 179 and Bonus Depreciation
You Own the Automobile, Get Reimbursed By The Mile
You Own the Automobile, Take Mileage Deduction
You Own the Automobile, Lease Back to Your Company
Automobile Decision Tree
Home Office Deduction
Tax-Free Rental of Your Home
Business Travel Deduction
Deducting Business Meals
Sutter Rule
Capital Leases versus Operating Leases
Putting Your Kids on the Payroll
Educational Assistance with an S-Corp - Section 127
Summary of Small Business Tax Deductions
Business Tax Return Preparation
Comingling of Money
Reducing Taxes

Chap 12 - Retirement Planning

Retirement Planning Within Your Small Business
Self Employed Retirement Plan Basics
Retirement Questions to Ask
Tax Savings and Tax Deferrals
Using a 401k in Your Small Business Retirement Options
The Owners-Only 401k Plan
Having Staff with a Solo 401k Plan
Self-Directed 401k Plans
Company-Sponsored 401k Plan
401k Plan Safe Harbor Provision
Roth 401k Plans
Roth 401k Versus Traditional 401k Considerations
Two 401k Plans
Rolling Old 401k Plans or IRAs into Your Small Business 401k Plan
401k Loans and Life Insurance
401k Plans and Roth IRA Conversions
Turbo Charged 401k Plans
SIMPLE 401k
SEP IRA, Roth IRAs and the Roth Conversion
Controlled Groups
Owner Only 401k Plans in MMLLC Environment
Spousal Attribution and Controlled Groups
Non-Qualified Deferred Compensation Plan
Exotic Stuff
Expatriates or Expat Tax Deferral Planning
Small Business Retirement Planning Recap
WCG Fee Structure
More About WCG
Consultative Approach
Core Competencies
Expectations of Our Clients
Final Words

Chap xx - Health Care

Disclosure and Updates
Gaming the HSA System
Health Care Summary
Health Savings Accounts (HSAs)
Long-Term Care
Multiple Employees
One Person Show or Husband-Wife Team, S Corporation
Section 105 Health Reimbursement Arrangement (HRA)
Section 125 Cafeteria Plans and Flex Spending (FSA)
Sole Proprietors and Single Member LLCs

Chap yy - Business Valuations, Sale, Exit Planning

Business Valuation Techniques
Buy-Sell Agreements
Deal Structure
Debt Service
Exit Plans, Succession
Purchase Price Allocation

Chap zz - Other S Corp Thoughts

1099 Income as Other Income, No Self-Employment (SE) Taxes
Audit Rates and Risks with an S-Corp
Recap of S-Corps
Rental Losses with an S-Corp
Rentals Owned by an LLC Fallacy
W-2 or 1099-MISC That Is The Question

Expat and Expatriate KB

Are there any downsides to claiming the foreign earned income exclusion?
Are there exceptions to the bona fide residence or physical presence tests?
As an ExPat, do I need to file a State tax return?
Can I deduct mortgage interest paid on my foreign home?
Do I have to pass the same test each year?
Does voting through an absentee ballot mess up my bona fide foreign residency?
How do fluctuating currency values affect my taxes?
How do I handle my foreign rental property?
How do I qualify for the foreign earned income exclusion?
How do moving expenses affect my exclusion?
How do partial years work with the foreign earned income exclusion?
How do tax treaties affect my ExPat situation?
How does the foreign housing exclusion or deduction work?
If I am a self-employed ExPat, what taxes am I responsible for?
If I don't qualify for the housing deduction, can I still deduct expenses?
May I still make contributions to my IRA as an ExPat?
What amount can I deduct for foreign earned income exclusion?
What happens if my host country has a form of social security?
What is a tax home or abode, and how do they relate to each other?
What is considered foreign earned income?
What is foreign earned income exclusion?
What is the bona fide residence test?
What is the difference between foreign tax credit and deduction?
What is the physical presence test?

Rental Property KB

Rentals faqs.

Can I claim my residence as a rental, sell it for a loss and deduct the loss?
Can I deduct internet expenses?
Can I deduct my cell phone charges?
Can I deduct the taxes associated with public improvements?
Can I rent out half a duplex or a room in my house?
Do I need receipts for my rental expenses?
Do rental properties offer good tax sheltering?
How are repairs and improvements different?
How do passive loss limitations affect me?
I purchased a rental property last year. What closing costs can I deduct?
If I don't have any rental income can I still claim a loss?
If I move back into my rental, how does that work?
If my employer provides a cell phone, is that income?
Is depreciating my rental a good thing?
My rental sale was a huge loss. What can I do?
What are tax issues with an LLC owning a rental property?
What are the exceptions to rental activities?
What are the rules on a home office deduction?
What is active participation versus material participation?
What is considered rental income?
What rental property expenses can I deduct?

Real Estate Pros

Are rental activities always passive activities?
Are there downsides to the real estate professional designation?
Are there specific material participation tests for real estate professionals?
Do I need to group my rental activities together?
How do I record the hours spent as a real estate professional?
If I meet the 750-hour test, do I also meet the 500-hour material participation test?
What activities count and don't count?
What are some of the IRS tricks to deny my real estate professional designation?
What are some of the tax court cases for real estate professionals?
What are the general tests for material participation?
What is the definition of real estate professional?
Why designate myself as a real estate professional?

Other Tax Information KB

Can I ignore an IRS notice or claim I never received it?
How can I pay my taxes or my notice of deficiency?
How can I prepare for my face to face or interview field audit?
How do I appeal the collections of unpaid taxes?
How does a joint return get handled during an audit?
How does bankruptcy affect my unpaid taxes?
How much is interest and penalty on taxes owed?
How should I respond to an IRS notice or letter?
What are my chances of being audited?
What are some of the types of IRS notices and letters?
What can the IRS do if I don't pay my taxes- what is the collections process?
What causes or triggers an IRS audit?
What if I cannot pay my taxes?
What IRS publications deal with audits?
What is the appeals process?
What is the period of limitations for an audit?
What types of audits could I face?
Who can be with me at my IRS audit or conference?

Charitable Contributions

Are there ways to earmark money for an individual?
Do I need receipts for my donations?
Does deducting charitable contributions cause an audit?
How do I determine the value of my donation?
What are some of the donations I can deduct?
What are some other charitable deductions?
What are the limits of my donations?
Who qualifies as a charity?
Why give to charities?

Education, Tuition Deductions

Are Educational Savings Accounts Worth It
Are There Tax Breaks for Going to College
Are There Tax Savings When My Employer Pays for My Education
Can I deduct the cost of sports, games or hobbies while in college?
IRAs and Savings Bonds To Help With Higher Education Costs
What College Expenses Can I Deduct From My Income
What constitutes a full-time student for tax purposes?

Homes and Real Estate FAQs

Can I deduct the loss on my primary residence?
Can I exclude the gain on my home sale?
How does a Federal Disaster affect my casualty loss?
My home was destroyed- what deduction can I take? How do casualty losses work?
The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
What is Cancellation of Debt? Is it taxable income?

Medical, Health Insurance

What are qualified medical expenses?
Why can't I deduct health insurance premiums?

Mortgages, Bad Debts

Can I deduct a bad debt on my tax return?
Is cancellation of debt always taxable?

Recordkeeping

Are there specific records I need to keep?
Do I need receipts for my expenses?
How does proper recordkeeping affect my audit results?
How long do I have to keep records?
How should I maintain my tax records?
What are the requirements for mileage records?
Why should I keep tax records?

General Tax Questions

Tax Brackets Misconceptions- Should I earn more money?
What is the marriage penalty and how does it affect our tax returns?

Small Business KB

Small biz faqs.

Articles coming soon

Turn Your Vacation Into a Tax Write Off

By Jason Watson ( Google+ )

Can you deduct your vacation expenses? Yes, but there is one small catch; there must be a business connection. Specifically, the reason for the trip must be for business, but mixing business with pleasure is perfectly legal. It’s not unheard of for business travelers to incorporate some personal time into their business trips, so why not build an entire vacation around it?

Skeptical? Even the IRS rules state if your trip was primarily for business but you extended your stay for a vacation, made a pit stop, or had other non-business activities, your business related travel expenses are deductible. Cool! The IRS just gave you a hall pass.

Certainly, there are a few more conditions to maximize the business turned vacation deductions. For one, you must be self-employed or small business owner. This won’t work if your employer pays your travel when they send you on business trips. And, there are of course IRS rules that must be followed for this to work. The IRS can be demanding when it comes to rules. Here’s how to make it happen.

1. Establish a business purpose ahead of time. Your trip must have a prior set business purpose. A prior set business purpose means meetings and appointments are arranged before the business travel even begins. A business trip arranged for, or including, business seminars and conferences does count, but only if they are directly related to your trade or profession.

2. Travel far enough away for an overnight stay. The travel must be away from your regular place of business and must require substantial rest or have an overnight stay. The business days should exceed the personal days and travel days are considered “business days.” If you take into consideration that Monday thru Friday are counted as business days and weekends are not, building a weekend into your business trip is a good strategy to maximize the vacation deduction. If you do business on Friday and on the following Monday, travel related expenses in between are deductible.

3. Know what expenses you can deduct. When your primary reason for travel is for business, all of your transportation costs, whether by plane, train, or automobile, are fully deductible. If you drive to your destination, you can take the standard mileage rate of 56.5 cents per mile (2013 rate) plus any parking and toll expenses. All the lodging, tips, and car rentals for business travel are also fully deductible, with food and meals limited to 50%. The cost of laundry and dry cleaning typically count as well.

4. Make it a family vacation. Of course the family can come along, but you can only deduct the expenses you would ordinarily pay for yourself. If you travel by air, your family’s tickets are not deductible. But if you drive, your transportation is fully deductible no matter how many people tag along in your Fordosaurus. Lodging is still deductible, but any upgrades to fit the family are not. You can only deduct the business expenses you would pay as if you were traveling alone.

5. Keep it reasonable. The IRS likes to use words like “reasonable” and “ordinary” when referring to deductible expenses. Don’t travel like a rock star unless you actually are a rock star. All business related expenses should be “reasonable based on the facts and circumstances.”

6. Keep really good records! Use your log book to write down expenses or use widely available expense tracking apps on your smartphone. Even though strict substantiation for travel expenses, other than lodging, isn’t required for expenses under $75, including these in your record keeping lends a bit more credibility to your deduction. Other items such as schedules and itineraries are good to keep to support your deduction, especially to prove the trade related nature of conferences and seminars.

So, you could fly to Orlando on Wednesday and get there early enough to sunbathe on the beach. Tricked you- no beaches in Orlando. Rewind. You fly to South Beach on a Wednesday and hang out with King James. Thursday you have an early morning meeting with a client, then follow-up with a lunch meeting on Friday. Saturday and Sunday are spent snorkeling and sightseeing. Monday, you attend a trade related seminar and Tuesday night you fly home. Your deductible business expenses for the trip would be:

$800 for round trip ticket

$869 for 6 night hotel stay (Sat & Sun count only if between business days)

$275 for car rental

$140 for seminar

$150 for 50% of business meals

$2,234 Total

Yes, for everything else there’s Mastercard. That’s not a bad chunk of change! All you probably did differently was take an earlier flight there, take a later flight home, and planned your business meetings early. Adding a weekend in between is a bonus. Either way, the business travel expenses remain the same.

One last thing, these strategies are intended for travel within the United States. If you’re planning on watching the parade at the 2016 Summer Olympics in Rio De Janeiro and calling it business travel, don’t do it. If your main consideration for traveling outside of the U.S. was vacation oriented, no deduction can be taken. The IRS will expect a good reason for why your business couldn’t have been conducted within the United States. Even then, 75% of the trip must be for business as a good jumping off point. Anything less than that, starts looking like a vacation in disguise.

Information provided on this web site “Site” by WCG Inc. is intended for reference only. The information contained herein is designed solely to provide guidance to the user, and is not intended to be a substitute for the user seeking personalized professional advice based on specific factual situations. This Site may contain references to certain laws and regulations which may change over time and should be interpreted only in light of particular circumstances. As such, information on this Site does NOT constitute professional accounting, tax or legal advice and should not be interpreted as such.

Although WCG Inc. has made every reasonable effort to ensure that the information provided is accurate, WCG Inc., and its partners, managers and staff, make no warranties, expressed or implied, on the information provided on this Site, or about any other website which you may access through this Site. The user accepts the information as is and assumes all responsibility for the use of such information. WCG Inc. also does not warrant that this Site, various services provided through this Site, and any information, software or other material downloaded from this Site, will be uninterrupted, error-free, omission-free or free of viruses or other harmful components.

Individual and Corp tax deadline:

Customer login

Tax Pro login

Bookkeeping

Maximizing Tax Savings: How to Write Off Deduct Your Family Vacation Travel Expenses as a Business Trip Expenses

10 Minute Read

Copy Article URL

Antonio Del Cueto, CPA

April 8, 2024

Imagine you're a clever detective on a mission, where every clue you find is a piece of the puzzle to make your vacation a secret mission for work. As a business owner, you know that turning a trip into a business adventure can be like finding hidden treasure, turning your travel day and lodging into a tax deduction.

To do this, you plan each business day with care, filling it with business activities that are both ordinary and necessary to conduct business. It's like setting up a perfect disguise for your vacation, making sure every activity is business-related, so if an audit comes knocking, you're ready with your detective notebook filled with evidence. This secret mission requires smart planning to ensure your getaway can rightfully earn its place as a business-related trip.

Want an easier way to file your taxes? Download our FREE tax guide for individual filers.

Understanding Travel Expenses for Business Deductions

Let's learn about when you can use travel costs to lower your taxes. This is for when the travel helps your business. We will look at what costs are okay, how to know if a cost is for business or just for fun, and what proof you need to show it's for business.

What qualifies as a deductible business expense?

A cost is okay to lower your taxes if it's normal and needed for your work. Travel costs are okay if they help your business. This could be going to meetings or learning things important for your job. If your trip is mostly for work but you also have fun, you can still write off the work parts.

How to differentiate between personal and business expenses?

Knowing the difference between fun costs and work costs means you only use the work costs to lower your taxes. If your trip has both fun and work, only count the work parts. Use business cards for work costs to make this easy.

What documentation is required for business travel deductions?

You need to keep track of all your business travel costs. Keep all receipts, tickets, and other proofs. Also, write down why each trip was needed for work. This is important if the IRS asks about your tax deductions.

Maximizing Tax Savings on Business Travel

Now, let's talk about how to figure out which travel costs can lower your taxes the most. We will go over how to add up these costs and the rules to follow. This includes how to handle food costs on trips.

How to calculate deductible travel expenses?

To find out what you can deduct, add up all your business trip costs. This includes things like flights, hotels, and car rentals. Only include costs that were normal and needed for your work.

What are the IRS guidelines on deducting business travel expenses?

The IRS says your travel costs must be both normal and needed for your job. The trip should mainly be for work. You should also be away from your main work area for more than a day's work.

How to deduct food expenses during business trips?

You can use half of your food costs during trips to lower your taxes. Keep your meal receipts or use a set amount the IRS says is okay. Remember, very expensive meals might not count as much.

Can you deduct expenses for family on a business trip?

When traveling for work on a business-related trip around the country, you can deduct travel expenses for yourself, but not for your family. However, if your family members must spend time doing business at the place of business with you, their expenses may qualify as business related. To qualify for a tax home for longer period, such as five days meeting with clients, every expense you incur can be deduct 100. Make sure to only deduct transportation and accommodation expenses for the time doing business.

When filing your taxes, it's important to learn how to write off only expenses that are deemed “ordinary and necessary” for your business. If the trip is longer than a normal domestic travel and involves more paid and what you actually spent, you can deduct those expenses. However, expenses for family members who aren't directly involved in the business activities can’t write be deducted as a deduction you don’t qualify for.

What are the limitations for deducting family travel expenses?

Limitations for deducting family travel expenses on your tax return can be tricky. In order to deduct travel expenses, the trip must be entirely for business purposes. If you mix business and personal activities, you can only deduct 50 percent of your business-related expenses. You must also spend the majority of the days on your trip doing business activities in order for the entire trip to qualify as a business trip.

For a trip to qualify as business-related, you must leave your tax home and travel to a business destination where you will conduct business meetings or other activities related to business. If you extend your trip for vacation days or include entertainment expenses, those expenses may not be tax deductible . Be sure to track business miles and keep records of actual expenses in order to still deduct expenses related to business.

How to document family-related costs for business trips?

When documenting family-related costs for business trips, it is important to distinguish between expenses that are tax-deductible and those that are not. Small business owners who incur travel costs while traveling for business may be able to deduct their transportation expenses, such as their plane ticket and other travel-related costs. However, it is crucial to ensure that the primary purpose of the trip is business-related. If the majority of your trip is considered business days, you may still write off the expenses incurred during those days.

Before attempting to deduct travel expenses from your taxes, it is advisable to consult with a CPA to ensure that your expenses qualify as business-related. The IRS requires that the purpose of the trip be primarily for business in order to deduct the cost of the trip from your taxes. If you are traveling for business and have a few days meeting with clients, you may be eligible to deduct 50% of your expenses incurred during those days as tax write-offs.

How can Taxfyle help?

Finding an accountant to manage your bookkeeping and file taxes is a big decision. Luckily, you don't have to handle the search on your own.

At Taxfyle , we connect small businesses with licensed, experienced CPAs or EAs in the US. We handle the hard part of finding the right tax professional by matching you with a Pro who has the right experience to meet your unique needs and will manage your bookkeeping and file taxes for you.

Get started with Taxfyle today , and see how finances can be simplified.

Legal Disclaimer

Tickmark, Inc. and its affiliates do not provide legal, tax or accounting advice. The information provided on this website does not, and is not intended to, constitute legal, tax or accounting advice or recommendations. All information prepared on this site is for informational purposes only, and should not be relied on for legal, tax or accounting advice. You should consult your own legal, tax or accounting advisors before engaging in any transaction. The content on this website is provided “as is;” no representations are made that the content is error-free.

Was this post helpful?

Did you know business owners can spend over 100 hours filing taxes, it’s time to focus on what matters..

With Taxfyle, the work is done for you. You can connect with a licensed CPA or EA who can file your business tax returns. Get $30 off off today.

Want to put your taxes in an expert’s hands?

Taxes are best done by an expert. Here’s a $30 coupon to access to a licensed CPA or EA who can do all the work for you.

Is this article answering your questions?

Thanks for letting us know.

Whatever your questions are, Taxfyle’s got you covered. If you have any further questions, why not talk to a Pro? Get $30 off today.

Our apologies.

Taxes are incredibly complex, so we may not have been able to answer your question in the article. Fortunately, the Pros do have answers. Get $30 off a tax consultation with a licensed CPA or EA, and we’ll be sure to provide you with a robust, bespoke answer to whatever tax problems you may have.

Do you do your own bookkeeping?

There’s an easier way to do bookkeeping..

Taxfyle connects you to a licensed CPA or EA who can take time-consuming bookkeeping work off your hands. Get $30 off today.

Why not upgrade to a licensed, vetted Professional?

When you use Taxfyle, you’re guaranteed an affordable, licensed Professional. With a more secure, easy-to-use platform and an average Pro experience of 12 years, there’s no beating Taxfyle. Get $30 off today.

Are you filing your own taxes?

Do you know if you’re missing out on ways to reduce your tax liability.

Knowing the right forms and documents to claim each credit and deduction is daunting. Luckily, you can get $30 off your tax job.

Get $30 off your tax filing job today and access an affordable, licensed Tax Professional. With a more secure, easy-to-use platform and an average Pro experience of 12 years, there’s no beating Taxfyle.

How is your work-life balance?

Why not spend some of that free time with taxfyle.

When you’re a Pro, you’re able to pick up tax filing, consultation, and bookkeeping jobs on our platform while maintaining your flexibility.

Why not try something new?

Increase your desired income on your desired schedule by using Taxfyle’s platform to pick up tax filing, consultation, and bookkeeping jobs.

Is your firm falling behind during the busy season?

Need an extra hand.

With Taxfyle, your firm can access licensed CPAs and EAs who can prepare and review tax returns for your clients.

Perhaps it’s time to scale up.

We love to hear from firms that have made the busy season work for them–why not use this opportunity to scale up your business and take on more returns using Taxfyle’s network?

by this author

Share this article

Subscribe to taxfyle.

By clicking subscribe, I agree to Taxfyle's Terms of Service , Privacy Policy , and am opting in to receive marketing emails.

Get our FREE Tax Guide for Individuals

Looking for something else? Check out our other guides here .

By clicking download, I agree to Taxfyle's Terms of Service , Privacy Policy , and am opting in to receive marketing emails.

File simpler.

File smarter., file with taxfyle..

2899 Grand Avenue, Coconut Grove, FL 33133

How to Write Off a Vacation as a Business Expense

Is it possible to turn non-deductible personal travel expenses into tax deductible business travel expenses? Yes! You can deduct your vacation as a business expense. . . as long as you know the rules and follow them.

Personal travel expenses are never deductible. Even work related travel expenses are not deductible by the employee since the passgae of the Tax Cuts and Jobs Act of 2017. ( Here is how to deduct work expenses .)

Then how can you deduct personal travel expenses? Simple. Follow the rules for business travel.

The best way to clarify what qualifies as a tax deductible travel expense is with examples. Taxes are not a hard science. There are times there is more art than science in determining what can be deducted. Examples help clarify what is allowed.

Deducting a Road Trip Vacation as a Business Expense

Recently I took a road trip with my wife from the Green Bay area to Austin, TX. It was a zigzag down the backbone of America.

The road trip started as a personal family vacation. That would be non-deductible. However, I decided to meet several clients along the way with the final desination just south of Austin, Texas at a bookstore. The bookstore owner held promotional possibilities for this blog and my tax practice.

Every expense from this trip was deductible as a business travel expense for both my wife and me. The only expense not deductible was entertainment. Entertainment expenses were disallowed by the Tax Cuts and Jobs Act of 2017. Visits to the zoo in Memphis and museums were personal expenses and not deducted.

Phantom expenses were also allowed. These deductions exceeded actual cost so the deduction was larger than the out-of-pocket spending. (I will discuss mileage and the meal per diem below.)

Let’s not focus on what we can deduct at this point; let’s focus on why we can take the deduction.

As noted, this road trip included both me and my wife. Both our expenses were allowed! Why?

First, I own my own accounting practice and have the great fortune of serving clients around the United States. Many of these clients I have never meet in real life. This was a great opportunity to tour their business, allowing me to better serve their needs. This is good for them and me.

Next we need to ask why my wife’s expenses were allowed. The short answer is, she works in my business and gets a W-2 (and has for over 20 years). Her participation was valuable and necessary.

Family Members on a Business Trip

There is nothing wrong with taking family members on a business trip with you! However, there is a limit to what you can deduct.

If there are no additional hotel costs the entire lodging cost is deductible. If the kids come with you on your business trip and they have a seperate room at an additional cost, the additional cost is a personal expense and not deductible.

Getting to your destination is a deductible business travel expense for you. If you drive, there is no additional cost and the full amount is deductible. If you fly or use another mode of transportation where there is a fee for each person, only those on the trip for business purposes are deductible expenses.

As you can see, most expenses are still deductible if the family comes with you.

A few notes about a spouse on a business trip. All three rules below must be met:

• Your spouse must be employed by you or a business partner (partnership tax return).

• Spouse must have a bona fide business purpose for traveling with you.

• Spouse’s expenses are otherwise deductible. (No personal expenses qualify for a deduction.)

Deductible Personal Time

You are not required to work seven days a week when on a business trip. Non-workdays are still part of the business trip. Meals and lodging expenses are deductible.

On my road trip I often times visited clients on weekends. That did not mean I was not allowed two days off per week. Monday was better as a day off so I used Monday as a personal day. Entertainment expenses were not qualified expenses, but meals and lodging were.

Define What A Business Trip Is

Here is where taxes become more art than science. The rules are not always crystal clear. Facts and circumstances prevail.

My road trip is an example that is well into the deductible territory. I met several current clients; toured thier business; helped these clients with difficult business issues while there and later back at the home office. My wife was part of the process. When it comes to taxes, I’m the guy in my office; when it comes to organization and getting things done, my wife/employee is a bigger asset to the firm than I am.

More examples will clarify:

• Let’s use the bookstore owner in Texas. If he travels to see other bookstores he might have a deductible travel expense. Signing copies of his book, encouraging the bookstore to carry his titles and more move a personal vacation into the business travel column quickly. However, the number of days dedicated to business will limit meal and lodging expense.

• I have a physician client that has family in another state. He owns his own practice. He built a relationship with a doctor on a research project in the area where his family lives. Travel costs are all deductible, as well as, all expenses connected to work days with his research partner. Weekends are still qualified as business trip time so he can spend time with family.

• Don’t forget investment property owners. They also can enjoy a business trip. Note: Buying a rental property in all your favorite holiday destinations is not enough to qualify as a business trip. Just visiting your property is not a business trip. Conducting repairs and maintenance, screening tenants, filling vacancies, working with your property manager and searching for new properties are. Remember, if you own an income property and spend a month at the property remodeling, you can take the meal expense for the entire time and any hotel costs, if you don’t stay at the property.

• You do NOT have to be away from home for a full 24 hours to meet the overnight rule and get the ability to claim lodging and meal expenses (Revenue Ruling 75-170). Leaving late afternoon to visit a client, staying in a hotel overnight, and returning home in the morning still counts as business travel, assuming it is reasonable not to drive home that evening. Meals and lodging are qualified expenses.

• You don’t even have to be away from your tax home for travel expenses to qualify. I use this strategy for conferences. As I get older, driving an extra hour or two after a long day of classroom study is not safe. Driving back to the conference the next day isn’t any better, in the case of multi-day conferences. I miss any opportunity to work with peers if I head home as soon as class lets out. Now I get a hotel room and save on the driving time and take the social opportunities for business growth, plus a deduction. Here are the rules you need to follow:

• The lodging expense allows you to participate fully in the meeting, training, conference or other business fuction.

• The lodging is for 5 days or less and occurs no more than once per quarter.

• If you are the employee, your employer must require you to stay at the activity or function overnight.

• The lodging cannot be lavish and there is no significant element of personal pleasure, recreation or benefit. In other words, lodging at a waterpark might be a stretch unless the conference is at the waterpark.

It is relatively easy to build a business trip with all the accompanying deductions. Attending conferences is the perfect way to learn and have fun. The IRS actually has training classes for tax professionals in cities like Las Vegas and Orlando for a reason. Even they know the trick of getting a tax break and a vacation at the same time.

Another Loophole

You can extend a business trip an extra day to take advantage of a reduced airfare. The additional lodging and meal expenses are deductible because they are for a valid business purpose: to reduce travel costs. (Letter Ruling 9237014)

Lodging costs when I am at a 2-day conference an hour drive away falls in the same category. The mileage rate is reduced by as much or more than the lodging cost. So I take the low cost route and get adequate rest.

Conventions in North America

Travel expenses are deductible when attendence benefits your trade or business. Certain conventions are not deductible, for example: investment, political, social and other non-business related events.

However, investment conferences might still be deductible if you are in that line of business. Real estate agents, finacial planners, stock brokers, and even accountants and attorneys may qualify for certain conventions in this category. Real estate investors and real estate agents may have qualified expenses from conventions of an investment nature.

Conventions Outside North America

Travel outside North America is deductible only if:

• The meeting is directly related to your trade or business, and

• it is reasonable to hold the meeting outside North America.

Once again, there is more art than science involved. Reasonablness is based on the purpose of the meeting, activities taking place at the meeting, activities of the meeting sponsor, home of the sponsor and other relevant facts. The road seems wide enough for many trips to be classified as business in nature outside North America. Consulting a qualified tax professional is always a good idea, as expereince is needed to make a good decision on rules where facts and circumstances prevail.

Travel Outside the United States

For travel outside the U.S. to be deductible, the entire trip must be devoted to business activities. If the primary reason is personal (as you can do with travel in the U.S.), none of the expenses are deductible.

A trip primarily for business that includes personal activities must have travel expenses pro-rated between business and personal. You divide the total number of business days outside the U.S. by the total number of days outside the U.S.

Days traveling to and from your destination are considered business days.

Weekends and holidays are considered business days.

A business trip is considered entirely business, even if non-business activities took place, if:

• You do not have substantial control over arranging the trip. This generally applies to employees. Self-employed individuals generally have substantial control over trip planning.

• You were outside the U.S for a week or less. Do not count your departure day, but include your return day.

• Less than 25% of total time spent was on non-business activities. Count the day of departure and return for this purpose.

• You must establish a vacation was not a major consideration of the trip.

Cruise Ship Conventions

You can even deduct up to $2,000 per person per year for a business convention or seminar on a cruise ship. To qualify, the trip must:

• Be directly related to your trade or business.

• You travel on a U.S. flagship.

• All ports of call are within in the U.S. or its possessions.

In addition to the above requirements, you need to attach two statements to your tax return:

Statement #1 A signed statement listing the number of hours each days devoted to business activities, total days of the trip, and program of business activities.

Statement #2 Statement signed by an officer of the sponsoring organization with a detailed daily scheule of meetings and number of hours you attended.

Legal Fake Deductions

All expenses must be substantiated. The cost of hotels, airfare, conference and more require a detailed receipt of the expense.

However, meals, auto miles and expenses under $75 often do not need a traditional receipt. For meals you can use a per diem and the mileage rate for using your vehicle versus actual expense. Let’s look at the details so you get all the deductions you legally are allowed without a crazy amount of documentation.

Meals and Incedentials: Keeping track of meal expesnes can be a serious burden while traveling. A sale or client can be lost while you horse around getting a receipt.

A better way is to use the per diem. The government provides a handy website for calculating your deduction here . Rates usually change every year on October 1st.

Normally meal expenses, including the per diem, are 50% deductible. However, for 2021 and 2022, the per diem is 100% deductible (Notice 2021-63). Meals from restaurants and takeout from restaurants also get a 100% deduction for 2021 and 2022 when you use actual expense.

Also, you are not married to actual expense or the per diem for the entire tax year. You only need to be consistent on a per trip basis. That means if the deduction is higher with the per dium on one trip and actual expense gives you a bigger deduction the next trip, you can swith methods between trips.

As you can see, it is possible to deduct more than you spend, creating a legal fake deduction when it comes to meal expenses.

Miles: Driving your vehicle for business is deductible. You can use actual expenses or the mileage rate . If the cost of operating your vehcile is less than the mileage rate you have created another legal fake deduction.

You also have a tax strategy. If you use the mileage rate you can switch to actual expense at any time. You do need to adjust the basis of your vehicle for the depreciation component in the mileage rate. Once you use actual expense, however, that vehcile must always remain on actual expense. If a large repair bill occures switching could become adventageous.

Expenses Under $75: When traveling, expenses (other than lodging) under $75 generally do not need a reciept. You do need to keep a record showing the time, place, amount and business purpose of the expense. (Regulation 1.274-5(c)(iii))

When a receipt — tolls, for example — are unavailable a receipt is not needed. Just keep a record of the expense in your accounting records with the information listed in the paragraph above.

A Short List of Deductions

Here is a list of things you can deduct from a business trip. The list is not exhaustive. Generally, any expense necessary during a business trip is deductible.

• Transportation: Planes, trains and automobiles from your home to destination. If the ticket is covered by a frequent flyer or similar program the cost is zero and there is no deduction. Better to save those rewards for personal travel..

• Communting: Bus, taxi airport limo to and from the airport and hotel, the meeting place, client hotel or client business.

• Baggage and Shipping: Sending baggage, displays, samples, materials between temporary and regular workplace.

• Lodging and Meals: See rules above.

• Cleaning: Dry cleaning and laundry.

• Telephone: Business calls on a busines trip. Includes fax and other elctronic services. Courier, also.

• Tips: Tips for any expense on this chart.

• Miscellaneous: Any other similar, ordinary and necessary expenses related to business travel. Examples: remote internet access and computer rental fees.

This handy guide can help in the trip planning process. A side hustle or business can have serious tax advantages when you know the rules. Understand, a side hustle can be a business if it is engaged in with the intent to make a profit. Don’t play the side hustle fast and loose. That can cause a tax backfire.

Wednesday 14th of September 2022

Excellent article! We’ve definitely missed some of these things, especially on the maintenance of investment properties side of things. One of our businesses is a tour company. We take part in other tours when we travel specifically to vet and research new concepts and innovations, learn best practices, and gain firsthand knowledge on better ways to operate our tours and send out guest communications. And, the grey area is of course we do it to have fun too. Deductible?

Monday 19th of September 2022

@Jill C, Being owners of a tour company, that certainly could be deductible. I would suggest treating it seriously as being for the business, and being able to demonstrate that to the IRS if they ask. Take written notes on each tour, and keep memos from your business that demonstrate how you apply what you learn from these trips. As long as the overall "facts and circumstances" show that it's a reasonable business expense that is undertaken in order to improve your own business, it should be deductible.

An official website of the United States Government

Kreyòl ayisyen
Search Toggle search Search Include Historical Content - Any - No Include Historical Content - Any - No Search
Menu Toggle menu
INFORMATION FOR…
Individuals
Business & Self Employed
Charities and Nonprofits
International Taxpayers
Federal State and Local Governments
Indian Tribal Governments
Tax Exempt Bonds
FILING FOR INDIVIDUALS
How to File
When to File
Where to File
Update Your Information
Get Your Tax Record
Apply for an Employer ID Number (EIN)
Check Your Amended Return Status
Get an Identity Protection PIN (IP PIN)
File Your Taxes for Free
Bank Account (Direct Pay)
Payment Plan (Installment Agreement)
Electronic Federal Tax Payment System (EFTPS)
Your Online Account
Tax Withholding Estimator
Estimated Taxes
Where's My Refund
What to Expect
Direct Deposit
Reduced Refunds
Amend Return

Credits & Deductions

INFORMATION FOR...
Businesses & Self-Employed
Earned Income Credit (EITC)
Child Tax Credit
Clean Energy and Vehicle Credits
Standard Deduction
Retirement Plans

Forms & Instructions

POPULAR FORMS & INSTRUCTIONS
Form 1040 Instructions
Form 4506-T
POPULAR FOR TAX PROS
Form 1040-X
Circular 230

Here’s what taxpayers need to know about business related travel deductions

Here are some details about these valuable deductions that all business travelers should know.

Business travel deductions are available when employees must travel away from their tax home or main place of work for business reasons. The travel period must be substantially longer than an ordinary day's work and a need for sleep or rest to meet the demands the work while away.

Travel expenses must be ordinary and necessary. They can't be lavish, extravagant or for personal purposes.

Employers can deduct travel expenses paid or incurred during a temporary work assignment if the assignment length does not exceed one year.

Travel expenses for conventions are deductible if attendance benefits the business and there are special rules for conventions held outside North America .

Deductible travel expenses while away from home include the costs of:

Travel by airplane, train, bus or car between your home and your business destination.
Fares for taxis or other types of transportation between an airport or train station to a hotel, from a hotel to a work location.
Shipping of baggage and sample or display material between regular and temporary work locations.
Using a personally owned car for business which can include an increase in mileage rates .
Lodging and non-entertainment-related meals .
Dry cleaning and laundry.
Business calls and communication.
Tips paid for services related to any of these expenses.
Other similar ordinary and necessary expenses related to the business travel.

Self-employed or farmers with travel deductions

Those who are self-employed can deduct travel expenses on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) .
Farmers can use Schedule F (Form 1040), Profit or Loss From Farming .

Travel deductions for the National Guard or military reserves

National Guard or military reserve servicemembers can claim a deduction for unreimbursed travel expenses paid during the performance of their duty .

Recordkeeping

Well-organized records make it easier to prepare a tax return. Keep records, such as receipts, canceled checks, and other documents that support a deduction.

More information:

Publication 463, Travel, Gift, and Car Expenses
IRS updates per diem guidance for business travelers and their employers

Subscribe to IRS Tax Tips

Facebook
Twitter
Linkedin

May 6, 2014

Five Tax Tips For Writing Off Vacations for Your Business

It is pretty much not a headbanger to write off business-related travel for industry conferences and speaking engagements. But small business owners can also deduct their vacations legally, according to Anis BlÃ©mur, owner and manager at AB Consulting & Accounting Services , which specializes in accounting services, real estate services, consulting and tax savings strategies for businesses and individuals. Of course, it takes proper planning, but you can deduct most of your vacations if you combine them with business, explains Blemur. He offers the following strategies that help you mix business and pleasure.

1. Make all your business appointments before you leave for your trip. Most people believe that they can go on vacation and simply hand out their business cards in order to make the trip deductible. Wrong assumption. You must have at least one business appointment before you leave in order to establish the “prior set business purpose” required by the IRS. Keeping this in mind, before he left for his trip, Tim set up appointments with business colleagues in the various cities that he planned to visit.

Tip: It would be vital for Tim to document this business purpose by keeping a copy of all correspondence along with noting what appointments he will have in his diary.

2. Make Sure your Trip is All “Business Travel.” In order to deduct all of your on-the-road business expenses, you must be traveling on business. The IRS states that travel expenses are 100% deductible as long as your trip is business related and you are traveling away from your regular place of business longer than an ordinary day’s work and you need to sleep or rest to meet the demands of your work while away from home.

Tip: Remember that you don’t need to live far away to be on business travel. If you have a good reason for sleeping at your destination, you could live a couple of miles away and still be on travel status.

3. Make sure that you deduct all of your on-the-road -expenses for each day you’re away. For every day you are on business travel, you can deduct 100% of lodging, tips, car rentals, and 50% of your food. The IRS doesn’t require receipts for travel expense under $75 per expense–except for lodging.

Tip: Not only is your on-the-road expenses deductible from your trip, but also all laundry, shoe shines, manicures, and dry-cleaning costs for clothes worn on the trip. Thus, your first dry cleaning bill that you incur when you get home will be fully deductible. Make sure that you keep the dry cleaning receipt and have your clothing dry cleaned within a day or two of getting home.

4. Sandwich weekends between business days. If you have a business day on Friday and another one on Monday, you can deduct all on-the-road expenses during the weekend.

Tip: Expenses on the road can add up. That’s why a number of online expense tracking services are now available for the business traveler. Many of these services are used to implement company travel-reimbursement plans, generate client bill-back reports, or simply to track basic travel expenses. Moreover, there are mobile apps that now allow capturing of receipts with your phone. One such app is ProExpenser . Another is Expensify .

5. Make the majority of your trip serve as business days. The IRS says that you can deduct transportation expenses if business is the primary purpose of the trip. A majority of days in the trip must be for business activities if you want to write off transportation deductions.

Tip: You can deduct travel expenses only if you are traveling away from home in connection with the pursuit of an existing business. Travel expenses you incur in connection with acquiring or starting a new business are not deductible as a business expenses.

financial fitness
tax deductions
tax planning

Host Agencies
Accelerator Course
Travel Jobs
Travel Agent Chatter
Etiquette & Rules
Privacy Policy

A List of Business Travel Expenses You Can Write Off In 2023 [+Travel Expense Calculator & Tax Organizer]

Figuring out which business travel expenses you can write off probably registers on the fun-o-meter at the same level as root canals or bathing feral cats.

Travel agents are plagued with tricky questions when it comes to travel expense write-offs. If you have a few business meetings during a family vacation, how much of the trip can be a travel expense write-off? If you specialize in Europe does that mean any and all trips to Europe are tax write-offs?

Don’t worry. Stick with us and we’ll clear up what you can and can’t write off as a travel expense. I learned a thing or two when I chatted with Jay Elstad, a CPA (Certified Public Accountant) with Riley Martin Ltd , and Stephanie Cannon, a former accountant turned Founder of SC Travel Design . Our Friday 15 Episode with Stephanie Cannon in late 2022 is pretty much a movie trailer for this article!

It turns out that figuring out travel expenses is a lot less intimidating when you talk to professionals. So I’m here to share their wisdom with you. Starting with HAR's beauteous tax organizer! Download it now and keep it handy while you go through the article!

Here's how HAR's Tax Organizer looks in action:

To make it your very own, just click on the upper right-hand arrow on the document to download it for yourself! (If you have any issues or you don't have a Gmail account, we won't leave you out! Just drop us a line at [email protected] and we'll send it via email).

This article and the HAR tax organizer will ensure you’re tracking and logging expenses thoroughly and efficiently. Will it make tracking travel expenses fun? Um, no. Sorry. I’m not that good. But I will give you the tools to help you feel more confident when it comes to travel expenses.

⭐️ HAR ARTICLE HIGHLIGHTS: ⭐️

PDF: A list of travel expenses you can (and can't) write off
Business Travel Expenses You Can Write Off
Business Travel Expenses You Can't Write Off
Hobbyists (or Travel Dabblers)
Cruises & Travel Expenses
The Elephant in the Room: Is a Vacation a Travel Expense?
Travel Expense Scenarios for Travel Professionals
Tips on Tracking & Documenting Your Business Travel Expenses
Travel Expense Tracking Tools

A PDF Summary of Business Travel Expenses You Can (and Can't) Write Off

Our infographic details which business travel expenses you can (and can't) write off at a glance. If you're looking for crib notes, this PDF is it. But I highly recommend reading the rest of the article because business travel expense write-offs are all about nuance and the nitty-gritty.

A List Travel Expenses You Can Write Off

You can write off any travel expenses that are necessary, reasonable, and ordinary to your business operations. Below are examples of travel expenses you can (and cannot write off). Let's start with which write-offs are a green light.

1: Transportation

By airplane, train, bus, or car between your home and your business destination.
Fares for taxis or other types of transportation between the airport or train station and your hotel, or the hotel and the work location of your customers or clients, your business meeting place, or your temporary work location.
Personal car usage or car rental: You can deduct actual expenses or the standard mileage rate (¢65.5 for 2023 travel), as well as business-related tolls and parking fees. If you rent a car, you can deduct only the business-use portion for the expenses.

2. Baggage or Shipping

Checking in your luggage? You can deduct that. Shipping display materials for the trade show? Go ahead and write that off too (so long as it’s between your regular and temporary work location).

You can deduct any of your business-related lodgings as an expense so long as it’s reasonable and necessary to your business (e.g. hotel/resort stay during a travel conference).

If you bring your sweetie/friend/kid you can only deduct lodging expenses that are reasonable for one person, for the nights/days that you worked.

4. Dry cleaning and laundry

If you have laundry or dry cleaning bills during your business travel, keep those receipts for your travel expenses. (I'm told that traveling to your basement to do laundry does not fall under this category.)

5. Communication Expenses (Beyond your work cell phone)

(beyond your cell phone): Your cell phone will already be deducted in a different category. But if you have any peripheral communications like leasing a satellite phone in Antarctica (sweet!) for emergency business calls, you can deduct that.

Tips include any gratuity to pay for the services noted on this list (porter fees, room service/cleaning, cab rides, etc.).

Note on cash: If you take out cash for tips (or other incidentals) from an ATM, the ATM receipt is not enough documentation. You should write down on your ATM receipt the date, location/service, and amount, for which you tipped if you want to take it as a deduction.

This one is super vague, but here it is in IRS speak, "Other similar ordinary and necessary expenses related to your business travel." (e.g. use of a hotel business center, hiring an interpreter, transportation to and from hotel to business event, etc.)

I saved meals for last because it's a little complicated. But here's what you need to know about meals. The IRS recommends using a standard meal allowance rather than engaging in the administrative gymnastic of saving every receipt form every meal. Here's the lowdown.

You can (generally) deduct 50% of the unreimbursed meal cost. (Meals in 2022 can be deducted at 100% due to IRS' temporary rule, Notice 21-25 )
Meals must be non-entertainment-related. In 2018, the tax law changed, rendering entertainment expenses 100% nondeductible . So if you go to a dinner theater show with a client and the meal portion is not itemized on your theater ticket, you cannot deduct it.
There are two ways you can track/deduct meal expenses. You can either use a per diem or track your actual expenses. We’ll explore this soon , so stay tuned

A List of Travel Expenses You Can't Write Off

Now for the less fun part: Here are examples of travel expenses you CAN NOT deduct.

1. Entertainment

Entertainment is not an allowable expense. Going golfing at the resort with a potential client or a BDM (business development manager) while you’re at a business conference? Too bad . . . you’re going to have to do it on your own dime.

2. Family/friends/dependents traveling with you

If you’re traveling with a friend, family member, and/or dependent you cannot deduct any of their travel expenses.

If you feel like you fall under an exception to this rule—e.g. you compensate your family member/friend/dependent to fulfill necessary business activities during the trip and have the 1099 or W-2 to prove they work for you—talk to your CPA.

3. Lavish and extravagant

Lavish and extravagant expenses are not allowed by the IRS. However, they’re a little foggy on what defines lavish or extravagant saying only, “an expense isn’t considered lavish or extravagant if it’s reasonable based on facts or circumstances.”

If you think this may be a concern for you, talk to your CPA.

4. Travel that is compensated

This may seem obvious, but if your travel is comped, you cannot deduct it as an expense. For example, if you’re presenting at a conference and the event planner comps your entire hotel stay, you cannot deduct lodging.

The same also goes for using points on loyalty programs toward flight/lodging etc.

5. Personal vacations

You cannot deduct personal travel. When it comes to mixing business with leisure (I mean, do travel agents ever really stop working?), we get into a serious gray area. It’s such a doozie that it gets its own section. So read on.

Travel Expenses for Travel Advisor Hobbyists (or Travel Dabblers)

I’m not going to spend too much time talking about hobbyists. Just know that if you sell travel as a hobby, then none of your travel expenses are allowable in the eyes of the IRS.

How do you know if you’re a hobbyist? The IRS has a long list , including items like whether or not “you depend on the income for your livelihood” and other fun determining factors.

The IRS understands it can take a while to become profitable. Typically, you’re approaching hobbyist territory in the eyes of the IRS if you report a loss of three out of five years of business operations. (A loss means you’re claiming business expenses beyond your income.)

As with all things tax-related, there are exceptions as to what expenses are considered a loss, but that's above my pay grade. You’re a psychic now so you know what I’m about to say . . . talk to your accountant or CPA.

Cruises & Business Travel Expenses

You can only deduct up to $2,000 per year of expenses for things held on cruise ships

Cruises are special snowflakes and are subject to their own rules when it comes to travel expenses. According to the IRS , “You can deduct up to $2,000 per year of your expenses of attending conventions, seminars, or similar meetings held on cruise ships. All ships that sail are considered cruise ships.”

This may not be the happiest news to cruise buffs who spend thousands per year on Seminars at Seas. But remember, I’m just the messenger (not the IRS).

If you want to write off your 2k in cruises, there are all sorts of stringent requirements you need to meet. Below, I am copying and pasting what the IRS has to say on the matter, verbatim (why reinvent the wheel):

You can deduct these [cruise] expenses only if all of the following requirements are met.

The convention, seminar, or meeting is directly related to the active conduct of your trade or business.
The cruise ship is a vessel registered in the United States.
All of the cruise ship's ports of call are in the United States or in possession of the United States.
You attach to your return a written statement signed by you that includes information about:
The total days of the trip (not including the days of transportation to and from the cruise ship port),
The number of hours each day that you devoted to scheduled business activities, and
A program of the scheduled business activities of the meeting.
You attach to your return a written statement signed by an officer of the organization or group sponsoring the meeting that includes:
A schedule of the business activities of each day of the meeting, and
The number of hours you attended the scheduled business activities.

Again, if you think your cruise trip/business model is an exception, or you have a bone to pick with these rules, don’t call me. [Enter refrain] Talk to your CPA.

The Elephant in the Room: Is Your Vacation a Travel Expense?

I know that CPAs and accountants everywhere are probably going to duck and cover at the merest whisper of deducting trips that have even a whiff of personal travel.

But as a travel agent, it’s confusing since you need to travel to run a successful and profitable business.

Sure, it’s easy enough to justify travel expenses for a conference or an escorted FAM (familiarization trip). But when it comes to deducting travel expenses for any trip that’s in any way attached to personal travel, you’re entering some serious gray area (I like to call this Grayland).

The IRS isn’t super helpful when it comes to navigating Grayland. Their verdict is this, “If your trip was conducted primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. However, you can deduct any expenses you have while at your destination that are directly related to your business.”

Not exactly cut and dry. Sigh.

I can’t advise you on your taxes (trust me, everyone loses in this scenario). But here are a few guiding questions that help you determine if your trip is justifiable as a travel expense (and to what extent).

1. What is the primary purpose of your trip? You know in your heart of hearts whether your primary purpose is business or personal. If your primary purpose is to go to Mexico with your family, it’s going to be a tough sell to deduct your travel expenses. (Even if you do sell the resort or region you’re staying at.)

If the primary purpose of your trip is an Oaxaca FAM that’s sponsored by the Mexico tourism board, then that’s a different story. We’ll talk more about mixing business with pleasure later. But here’s the major takeaway: You can deduct only the expenses of your trip that are directly related to business. (Remember: reasonable, ordinary, necessary).

2. How much of your trip is spent on activities directly related to business activities? You can only write off the travel expenses directly related to business activity. So if you spend 10 days in Mexico with your family, but you spend 3 days ditching your family to go on-site inspections you scheduled weeks ago, you can reasonably write off a portion of your trip as a business expense.

Conversely, if you go on your family vacation and decide to pop into the nearest Sandals at the last minute for a self-administered “tour” in the name of business activity, that is a serious foul in the eyes of the IRS. (We’ll get into scenarios later).

3. Will your business derive income from the trip? You can have the most un-fun, jam-packed business trip in the world. But if you don’t make a good-faith effort to do any follow-up (ahem, earn moolah) with all your great meetings and research, then this could raise a red flag to the IRS.

4. Is the business activity necessary to your business/niche? If your niche is Italy, it’s going to be tough to write off a trip to Hawaii if you’ve never booked that destination (and don’t plan on doing it any time soon).

5. Is the trip necessary to the business operations you’re conducting? Working away from your tax home doesn’t automatically qualify as a travel expense. To deduct travel expenses, the business activity must necessitate the trip.

For example, if I go visit a friend in Paris and spend three full days working on this blog post about travel expenses, I may not deduct my trip as a business expense because I could easily conduct these business operations from home. Major bummer (because who isn't inspired to write about travel expenses when they see the Arc de Triomphe?)

The same goes for travel agents. If you’re on a family vacation but you’re still booking trips and supporting your clients from afar, your travel expenses are not deductible as travel expenses 1 because the trip wasn’t required for that particular business activity.

At the end of the day, you need to rely on your common sense (or, better yet, the common sense of your CPA or accountant). Remember the golden rule: travel expenses must be reasonable and necessary to your business.

How do you decide what’s reasonable? The following scenarios will help provide a little perspective.

Business Travel Expense Scenarios for Travel Agents

When it comes to deducting any business travel expenses that are (in any way) attached to personal travel, the CPA/accountants I chatted with agreed to proceed with caution.

If you’re mixing personal and business travel, be clear about what days you spend working and document your meetings and business activity during those days.

As an example, here are a few scenarios by way of example. Please remember that these scenarios are just crib notes. They’re intended to help give you a lay of the land, not to advise you in any way shape, or form:

Scenario 1 (The Conference)

You fly to the annual ASTA conference on Tues. and stay through Fri. The entire time is scheduled with conference activities except for breakfasts, which you purchase every morning at the resort cafe and charge to your room. On Thurs. night after the conference is over, you take an Uber to meet your long-distance college friend for dinner and drinks. You fly out early Friday morning.

Travel expenses are entirely deductible except for the Uber rides (to and from) and dinner and drinks with your friend.

Scenario 2 (The FAM)

You’re invited to an escorted FAM in Hawaii. The FAM is 3 days, but you decide to take your family with you and extend your trip, tacking on a 7-day family vacation after your FAM. You stay at the same resort with your family as you did during the FAM.

Since your business operations necessitated the trip to Hawaii, you can write off 100% of your flight and transportation to and from the airport (so long as it’s reasonable). Why? Because you’d have to fly to and from Hawaii and transfer to and from the airport to conduct your business anyway.

Additionally, you can also deduct other travel expenses incurred while you were working (such as meals and incidentals). If you rented a car, you can prorate your rental fees according to what percentage of the time you used it for work (e.g. 30% for 3 of ten days of total cost may be deductible).

Scenario 3 (working on vacation part I)

You’re on a family vacation to Disney World for 5 days. You take a last-minute lunch meeting to meet a new property manager at a resort you often book. The rest of the time, you enjoy with your family, posting about your time together on your travel agency's social media.

None of this trip is deductible except for your meal with the property manager. Sad face.

Scenario 4 (working on vacation part II)

A baseball fanatic, you decide to go to Japan for the Japan Series. While you’re there, you bring work with you and spend three hours per day booking trips and supporting your traveling clients. The rest of the time, you watch baseball and explore Japan.

None of your travel expenses are deductible because your trip to Japan wasn’t necessary for the business operations you were conducting while there.

These scenarios are merely examples. I know that real-life scenarios are much more complicated. If you’re mixing personal and business travel, be clear about what days you spend working and document your meetings and business activity during those days.

At the end of the day, it’s easiest to document your business activity and track expenses if you keep your personal and business travel separate. And let’s be honest, it’s best for your work-life balance too! Ultimately, you need to ensure you’re doing your due diligence to record and document your trips. Guess what?! We have a few tools to help you do just that.

Pro Tips on Tracking & Documenting Your Business Travel Expenses

Entering your expenses on beautiful sheets is just part of the administrative fun of tracking travel expenses.

Beyond that cursory bookkeeping, you need to have receipts, journals, and other documentation to back up your travel expenses. Why?

If the IRS comes calling with an audit letter, you may need to provide your documentation to prove that your travel expenses were (wait for it) reasonable and necessary. To make things more exciting, the IRS can hit you up for explanations about travel you took years ago.

Get all the info you need: When it comes to big-picture travel expenses, make sure that the receipts have all the details necessary to satisfy the IRS.

Here’s what the IRS considers enough detail:

Destination Area of Travel
Date(s) You left for and returned from your trip
Number of days spent on business
Amount of expense(s)

Here are a few tips to make this process as painless as possible:

1. Track Your Cash for incidentals: This tip is from Jay: If you take out cash for tips (or other incidentals) from an ATM, the ATM receipt is not enough documentation. You should write down on your ATM receipt the date, location/service, and amount, for which you tipped if you want to take it as a deduction.

2. On meal receipts, write down who attended and what business you discussed: This will help you jog your memory if you ever need to provide further documentation for your expense.

3. For transportation expenses beyond going between the airport and hotel, write down where you’re going: When you’re taking the rideshare to the ASTA gala, write down the destination/event on your receipt.

4. Keep detailed journals/documentation of business you conduct during travel: This is especially important for “Grayland” travel. It’s a benefit for yourself as much as it is for the IRS. But after your trip, write down your actionable items that relate to how you will derive income from your trip.

Are you going to create a new marketing initiative based on the site you toured? Great. Are you going to follow up with future potential clients? Fabulous. Are you growing your list of supplier contacts to expand your book of business? Write down how you plan to follow up on your trip to grow your business.

Tips for Documenting Your Travel Expenses

The truth is that as a good business person, you'll have all this information at your fingertips. Really, it’s just a matter of corralling all that info into one place.

Pro Tips on Developing a Documentation System for your Travel expenses

Stephanie Cannon weighed in on the importance of developing a system to document your expenses. See her tip below:

It's not only crucial to track the various trip expenses but to also develop a documentation system. In this digital age, I use folders on my computer, 1 for the year, and multiple for each trip during that year. Inside each trip folder, I include a summary sheet (Excel) that lists out all of the transaction details for each expense with a note of what it was for. I then upload all of the appropriate receipts for safekeeping (and store any paper copies in a large envelope).

~ Stephanie Cannon (2022)

Want to see this in action? Join Stephanie for her (free) "Travel Advisor's Know Your Numbers Challenge." Her challenge is the runway into a more in-depth Bookkeeping Bootcamp for travel advisors, covering how to set up and complete their bookkeeping process on a routine basis, no matter what “tool” you decide to use.

How Long Do I Keep all this Fun Documentation?

The IRS is allowed to dredge up the past. So you want to hang on to all your tax documents. If you’ve been in the biz for a while, you probably have enough receipts to wallpaper your entire house.

So when exactly can you throw all the stuff away? The rule of thumb is to keep documentation for:

3 years from the date you filed your return or
7 years if you claim a loss

If alarm bells went off when you read “rule of thumb” in regard to taxes, then you’re really getting the spirit of this article! Don’t take it from me. Read the lengthier recommendation on the IRS site or [enter refrain] talk to your CPA.

Travel Expense Calculator & Tracker

We whipped up a few goodies to help you along your voyage of figuring out your travel expenses. Now that you know which of your travel expenses you can deduct, we have a nifty resource you can use to approximate how much of your trip you can write off. It's also a resource to help you document the purpose of your trips as well (in case you need to refresh your memory).

How does it work?

Enter your total deductible expenses
Document the purpose of your business travel
upload receipts

This means that all your travel documentation will be at your fingertips for bookkeeping purposes so if the IRS calls you and asks the purpose of that travel conference and FAM at an all-inclusive in Puerto Vallarta, then you have everything you need at your fingertips.

Here's a quick look at how the travel expense calculator works:

You give the travel expense calculator a gander. But know that, if you decide you want to copy and download the template for yourself or your business, you'll need to create a free Airtable account (essentially it's a spreadsheet on steroids). This tool will help calculate and track your travel expenses and provide the kind of documentation the IRS (or your bookkeeper) wants to see!

HAR's Tax Organizer

2. har tax organizer.

We're so excited about HAR's tax organizer that we're going to put the download in our article a second time! (In case we didn't have you convinced at the beginning of the article.

Now you know your actual travel expenses, and you can enter your tally! Hurray! But where do you put all this delectable information? That’s right, in your HAR Tax Organizer !

Now, if I may say so myself, HAR’s tax organizer is a thing of beauty. It’s a form where you calculate all your business expenses. That’s right, we’re talking waaaay beyond travel expenses here!

So download your form and give it a test run by entering your travel expenses.

Other Travel Expense Tools!

1. tracking apps (har uses expensify ).

The more you travel, the more impossible it will be to remember the Wheres? Whys? and What Fors? of your travel expenses. If you are overwhelmed at the thought of tracking all your expenses, stop everything and download an expense-tracking app.

I’m sure there are a ton of expense apps out there, and we’re not going to dig into different options here. HAR uses Expensify. It’s user-friendly and helps create reports very quickly.

What do you use? Tell us in the comments!

2. Per Diem Rate Calculator:

Per diem rates vary depending on where you're going (and what year it is). This is a nifty way of determining legitimate, standard per diem rates according to your destination. Remember, if you’re self-employed, you can only use the meal and incidental expenses (M&IE) per diem and you must still document all the expenses.

3. Accounting/ Bookkeeping Software

Below is a list of accounting software.

Quickbooks , Freshbooks , and Xero are great for smaller agencies or if you’re starting out. If you want a free option, you can use a Google Spreadsheet or Excel document. (HAR uses Quickbooks.)
TRAMS and Globalware are for large travel agencies and are travel-specific (unlike the above programs). For the average agency, these programs are not cost-effective.

If you're a die-hard DIY-er You can also use free resources such as Google spreadsheets or Excel sheets.

Thank Yous!

I can’t emphasize enough how little I knew about taxes before chatting with these amazing people: Stephanie Cannon, thank you for sharing your very rare travel-accounting hybrid knowledge with me, and for reviewing this article to help insure it provides the latest juicy gossip on tax regulations!

Jay Elstad has a ton of experience working with travel professionals. I called Jay during his BUSIEST season (mea culpa)! And you know what, he didn’t even get mad at me. In fact, he really went the extra mile to answer my questions and review this article.

Editor's Note: This article was first published on March 2nd, 2020. We update and republish it annually to include the latest information on travel expense deductions. The most current publish date is listed at the top of the article.

It’s important to note we’re talking about travel expenses only. You can still write off necessary office expenses you need to conduct business, such as phone calls, wifi, a portion of lodging used for your office, etc. ↩

About the Author

Mary Stein has been working as a writer and editor for Host Agency Reviews since 2016. She loves supporting travel advisors on their entrepreneurial journey and is inspired by their passion, tenacity, and creativity. Mary is also a mom, dog lover, fiction writer, hiker, and a Great British Bake Off superfan.

Agent Tools
Business Tips
Experienced Agents
Legal & Regulatory
Travel Agent Basics

IMAGES

Travel expense tax deduction guide: How to maximize write-offs
EXCEL of Travel Expenses Report.xls
How to Calculate Travel Expenses for Businesses
Travel expense tax deduction guide: How to maximize write-offs
How to Write Off Business Expenses
8 Business Travel Expenses You Can and Cannot Write Off

VIDEO

Deducting Business Travel Expenses: A Guide for Business Owners
Smart Travel Savings: Avoid These Silly Vacation Spending Habits!
What Expenses Can You Write Off In Your Business?

COMMENTS

Understanding business travel deductions
Business travel deductions are available when employees must travel away from their tax home or main place of work for business reasons. A taxpayer is traveling away from home if they are away for longer than an ordinary day's work and they need to sleep to meet the demands of their work while away. Travel expenses must be ordinary and ...
How to deduct business expenses while on vacation
Business trips that are 100% for business. For trips that are all business, make sure your clients establish the rule of having a prior set business purpose by scheduling your appointments and business purpose prior to leaving for your trip. When your trip is 100% business, the IRS states travel expenses incurred for yourself are 100% deductible.
How to Deduct Business Travel Expenses: Do's, Don'ts, Examples
To be able to claim all the possible travel deductions, your trip should require you to sleep somewhere that isn't your home. 2. You should be working regular hours. In general, that means eight hours a day of work-related activity. It's fine to take personal time in the evenings, and you can still take weekends off.
How to write off travel expenses
For self-employed travel expenses, you will list travel write-offs on Schedule C Form 1040. Businesses must claim travel expenses on Form 2106 and report them on Form 1040 or Form 1040-SR as an adjustment to their total income. While there's no annual travel deduction limit, the IRS scrutinizes higher write-offs.
How to Deduct Travel Expenses (with Examples)
You can also potentially deduct the cost of lodging on the days when you're not conducting business, but it depends on how you schedule your trip. The trick is to wedge "vacation days" in between work days. Here's a sample itinerary to explain how this works: Thursday: Fly to Durham, NC. Friday: Meet with clients.
Can You Deduct Business Travel While On Vacation?
General Rules. Business travel expenses are potentially deductible if the travel is within the United States and the expenses are "ordinary and necessary" and directly related to the business. (Foreign travel expenses may also be deductible, but stricter rules apply than are discussed here.) Currently, business owners and the self-employed ...
7 Rules You Should Know About Deducting Business Travel Expenses
The IRS has a specific definition for business travel when it comes to determining whether these expenses are tax deductible. The agency says business travel is travel that takes you away from your tax home and is "substantially longer than an ordinary day's work." It requires that you sleep or rest while you're away from home, and that you do so.
Is Your Working Vacation Tax Deductible?
With Working Vacations, The Proof is Always in the Pudding. It's very important that you substantiate the business justification for deducting any expense on your taxes. However, travel and entertainment deductions are often abused and closely scrutinized by the IRS. You should retain any and all documentation that provides insight into the ...
Can You Deduct Your Vacation From Your Taxes? Experts Weigh In
Note that for 2024, the IRS mileage reimbursement rate is 67 cents for employees or a self-employed individual traveling for work, up from 65.5 cents in 2023. Know, too, that you must be away from home overnight—the IRS requires an overnight stay for the trip to qualify as business travel, Wheelwright says.
How to find deductions for travel expenses
If traveling abroad, you must spend a minimum of 25% of your time conducting business to qualify as a business trip and claim travel expense deductions. If you conduct business for less than 25% of the time while on a trip, you can still deduct travel costs. This deduction must be proportional to the amount of time spent on business.
How to Deduct Business Travel Expenses (Even Some Vacation)
Spend 25% of your days doing business. If you spend less than 25% of your time working, you can still take deductions, but only as a percentage of the total cost. For example, if you spend 1 day out of a 5-day trip to Italy on business, that's 20% of your time away and you can deduct 20% of your airfare.
How to Deduct Business Travel Expenses (Even Some Vacation)
Spend 25% of your days doing business. If you spend less than 25% of your time working, you can still take deductions, but only as a percentage of the total cost. For example, if you spend one day ...
Turn Your Vacation Into a Tax Write Off
5. Keep it reasonable. The IRS likes to use words like "reasonable" and "ordinary" when referring to deductible expenses. Don't travel like a rock star unless you actually are a rock star. All business related expenses should be "reasonable based on the facts and circumstances.". 6.
How to Write Off Your Vacation as a Business Expense
Being able to write off your vacation as a business expense takes planning. You'll want to: Make all your business appointments before you leave for your trip. Make sure your trip is all "business travel". Deduct all on-the-road expenses for each day you're away. Sandwich weekends between business days.
Maximizing Tax Savings: How to Write Off Deduct Your Family Vacation
Efficiently write off travel costs for business purposes. Individual and Corp tax deadline: 00. Days. 00. Hours. 00. ... How to Write Off Deduct Your Family Vacation Travel Expenses as a Business Trip Expenses. 10 Minute Read. ... Small business owners who incur travel costs while traveling for business may be able to deduct their ...
Understanding Business Travel Deductions
Here are some common travel-related write-offs you can take advantage of. All transportation costs are a travel tax deduction. This includes traveling by airplane, train, bus or car between your home and your business destination. Fares for taxis, Uber rides or other types of transportation to and from your destination are also tax deductible.
How to Write Off a Vacation as a Business Expense
Yes! You can deduct your vacation as a business expense. . . as long as you know the rules and follow them. Personal travel expenses are never deductible. Even work related travel expenses are not deductible by the employee since the passgae of the Tax Cuts and Jobs Act of 2017. ( Here is how to deduct work expenses .)
Here's what taxpayers need to know about business related travel
Business travel deductions are available when employees must travel away from their tax home or main place of work for business reasons. The travel period must be substantially longer than an ordinary day's work and a need for sleep or rest to meet the demands the work while away. Travel expenses must be ordinary and necessary. They can't be ...
Five Tax Tips For Writing Off Vacations for Your Business
Another is Expensify. 5. Make the majority of your trip serve as business days. The IRS says that you can deduct transportation expenses if business is the primary purpose of the trip. A majority ...
What Travel Expenses You Can (and Can't) Write Off
Cruises are special snowflakes and are subject to their own rules when it comes to travel expenses. According to the IRS, "You can deduct up to $2,000 per year of your expenses of attending conventions, seminars, or similar meetings held on cruise ships. All ships that sail are considered cruise ships.".
How to Write Off Travel and Entertainment Expenses
For entertainment expenses, document: the amount of each separate expense; the date of the entertainment; the name, address, and type of entertainment; the business reason for the entertainment ...