7 Useful Tips for Deducting Business Travel Expenses

Business Travel
Business Travel. Helde Benser/Corbis/Getty Images

In this article, some tips on deducting business travel expenses. But first, 

What is "business travel," as defined by the IRS?

The IRS has a specific definition for business travel, for the purpose of determining the deductibility of expenses. The IRS says business travel is travel away from your tax home that is "substantially longer than an ordinary day's work" and that requires you to sleep or rest while away from home.

You must also sleep away from home to be able to deduct these costs. The travel must also be "temporary" (lasting less than a year).

Read more about the definition of a tax home. If the qualifications for business travel are met, then many business expenses while traveling may be deductible.

1. You may be able to deduct business travel costs on a combined business/personal trip. 

You can deduct business travel costs incurred during a personal trip. For example, if you are visiting family in another city and you make an appointment to see a client, your costs for that appointment are deductible business expenses.

You cannot deduct any other travel costs since the trip was primarily personal. The IRS considers these business activities as "incidental" to the main purpose of the trip, which is personal travel, stating,

"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."

2. You can use per diems to calculate business travel costs. 

The term "per diem" means per day. Per diems are amounts that are considered reasonable for daily expenses while traveling, for meals and miscellaneous expenses. Per diem rates are set for U.S. and overseas travel, and rates differ depending on the area.

For example, per diem rates in larger U.S. cities are higher than for sections of the country outside larger metropolitan areas. Companies can set their own per diem rates, but most businesses use the per diem rates set by the U.S. government.

If your employees receive more per diem than the maximum rate set by the General Services Administration, the excess is taxable to the employee.

Read more about per diem rates and the current IRS allowable per diem rates.

3. You can deduct the cost of air travel if you used frequent flyer mile credits 

No, if you used frequent flyer miles for air travel for a business trip, you can't deduct the cost as a business travel expense.

4. Not all charges on a hotel bill are deductible travel expenses. 

The room charge and taxes are deductible, as are laundry expenses, but additional personal charges such as gym or fitness center fees, and fees for movies or games are not deductible.

You can deduct hotel charges for phone calls or use of a fax machine.

5. You may be able to deduct the cost of bringing a spouse on a business trip

The cost of bringing a spouse, child, or other person along on a business trip is considered a personal expense and is not deductible.

If you can prove that the other person is employed by the business and is performing substantial business-related tasks while on the trip (taking minutes at meetings or meeting with business clients) you may be able to deduct the cost of this person's travel.

6. You can deduct 50% of meal costs on a business trip. 

Although it would seem reasonable that meal costs on a business trip should be fully deductible, they are not. Meal costs are deductible at 50%, like entertainment expenses.

Read more about meals and entertainment expenses as part of business travel.

7. You may be able to deduct the cost of a cruise for a business trip, with certain limits. 

The cost of a cruise may be deductible, up to the current specified limit determined by the IRS (currently $2,000). You must also be able to show that the cruise was directly related to a business event, like a business meeting or board of directors meeting.

The IRS imposes specific additional strict requirements for deducting cruise travel as a business expense, for obvious reasons. See more details under "Cruise Ships" in IRS Publication 463.

Read more about deducting business travel expenses

For more information, see these IRS publications:

Disclaimer: This article and all articles on this site are offered for general information purposes, and are not intended to be tax or legal advice. Every business situation is unique, and taxes, laws, and regulations change frequently. Consult your tax and legal professionals before taking actions that could affect your business.