An important point to make about business travel expenses is that not all travel qualifies. Before you can declare it, it has to actually be travel outside your city. If you could reasonably travel back to your home after the business meeting, it doesn’t count. You can’t just stay in a motel on the other end of town and try to declare it. So, before you try deducting any of these, make sure you’re actually traveling.
Travel Expense You Can Deduct
All forms of transportation qualify, whether it’s planes, trains, or automobiles. This can also include car rental fees, parking fees, taxi charges, and road tolls. Keep track of your mileage as you travel, because you can currently deduct 54.5 cents from every mile you drive. What the IRS wants with half a penny, I don’t know. Make sure you get receipts for everything.
The IRS will let you deduct meals from your business travel as long as they are not “lavish or extravagant,” and are provided to you, or an employee, one of which must be present at the meal. You can’t declare food from places that provide prepackaged food (like grocery stores or gas stations), but any restaurant will do. Normally, you could only deduct 50% of the meal, but a change was made for 2021 and 2022 letting you deduct 100% to help restaurants get back on their feet.
Keep in mind, this includes sales tax and tips.
You can write off some accommodations at hotels or motels for overnight stays. The cost of rooms, room service (can potentially qualify for the 100% meal deduction), and similar expenses can all count. Visiting a hotel minibar or renting a movie won’t, however. Basically, if it’s needed for travel, it counts, but if it’s purely entertainment, it usually won’t. Get an itemized bill before you leave so you can accurately write off your expenses.
4. Conference and Equipment Fees
If you run a conference, renting the conference hall and equipment can be deducted. This also counts for the costs of cleaning up afterward. Dry cleaning and laundry costs for conference or business clothes also qualify under this as well.
What You Can’t Declare
While traveling for business lets you declare a lot of things, keep in mind that not everything is declarable. For examples:
1. Travel Expenses for Family
Yes, you’re allowed to bring your family along on a business trip. When I was a kid, that’s how my parents were able to afford taking us to Disneyland our first time. Don’t try to declare the expenses for your family though. Your plane ticket might count, but the tickets for the rest of the family are off the table. Any expenses they personally incur are also not declarable, including their meal expenses. Lots of people try this trick, so the IRS catches it quickly.
2. Unreasonable Expenses
What qualifies as lavish or extravagant? There is no clear definition of these terms, so you’ll have to use your own judgement. Just make sure you don’t push it, as you don’t want an IRS audit. If the restaurant is charging $100 a plate, it probably won’t count. This also applies to all expenses for your business trip. If the expenses aren’t necessary for your actual business travel, don’t try to declare them. Try not to get carried away with the expenses that do qualify. The IRS gets the final decision on what you can and can’t declare and they aren’t required to explain themselves before auditing you, so don’t take chances.
Keep All Your Receipts
Make sure you keep the receipts and bills given for everything you declare. The IRS can be meticulous when making sure your tax deductions are all accurate. If you don’t provide all your receipts and they decide to audit you, that’ll cost you even if you can prove it. If you don’t have proper documentation for it, then you’ll face even more fines and charges for tax fraud. The IRS is not a group you want to toy with, so take no chances.
Having An Accountant Helps
The tax codes are always changing. Exactly what you can declare and how much you can declare may not be the same this year as it was last year and may be different next year, too. If you can’t keep up with it all yourself, it helps to hire an accountant. Accountants make it their entire job to know what you can and can’t declare on taxes. They might know ways to declare expenses you weren’t even aware of. The time and trouble you can save with an accountant makes the expense well worth it.
With Covid restrictions slowly being eased or lifted, business travel is back on the table as an option. While online meetings may remain a better option for some matters, sometimes travel is just a necessity. Don’t be afraid to travel when you need to, and make sure you document everything. The tax write-offs, where possible, are always helpful.