Travel Tax Deductions: What Can You Claim?

Whether you can claim tax deductions for travel expenses depends on the purpose of your trip. If you're travelling for business, you can usually deduct the costs of transportation, meals, and accommodation from your taxes. However, if your trip is primarily for pleasure, you generally cannot claim any tax deductions for travel expenses.

Transportation costs

Deductible Transportation Expenses

• Air, rail, bus, taxi, or car travel expenses: Costs of travelling between your home and your business destination are deductible. This includes plane, train, bus, or car travel expenses, as well as taxi, shuttle, or other transportation fares.
• Baggage fees: Costs of shipping baggage or display materials between work locations are deductible.
• Car rental and mileage expenses: If you rent a car for business purposes, you can deduct the business-use portion of the rental expenses. If you use your own vehicle, you can deduct actual expenses or use the standard mileage rate, along with business-related tolls and parking fees.
• Lodging expenses: Costs of lodging during business trips are deductible.

Conditions for Deduction

For transportation expenses to be deductible, the trip must meet certain criteria:

• Business purpose: The primary purpose of the trip must be for business. Vacation days can be included, but the majority of the trip must consist of business activities.
• Temporary work location: Transportation expenses to a temporary work location away from your main place of business are deductible. A temporary assignment is generally considered to be one year or less.
• Ordinary and necessary: Expenses must be "ordinary and necessary" for your business or industry. This means they are common and accepted in your industry and helpful and appropriate for your business activities.
• Advance planning: The business trip must be planned in advance, with a clear business purpose and itinerary.
• Record-keeping: Good records must be maintained, including receipts and evidence of expenses.

Lodging

When it comes to lodging, the IRS allows business travellers to deduct business-related hotel, Airbnb, and motel costs, as long as they are reasonable and not lavish or extravagant. The cost of lodging is tax-deductible, even if you are not conducting business during your stay. For example, if you are travelling for business and decide to stay over the weekend for leisure, the total cost of your lodging is tax-deductible.

If you are travelling with family, you can only deduct lodging costs equivalent to what you would pay for yourself. For example, if a hotel room for one person costs $100, and a room that accommodates your family costs $150, you can deduct $100 of the cost as a business expense.

If you are a digital nomad, you must be able to claim a particular foreign city as your tax home to write off any travel expenses.

Meals

In 2021 and 2022, business meals in restaurants were 100% deductible. This was a temporary rule to help restaurants recover from the COVID-19 pandemic. For 2023 onwards, the rules revert to those defined in the Tax Cuts and Jobs Act, which means purchases at restaurants are no longer 100% deductible.

In 2024, meals you eat while travelling for business are 50% deductible, as long as they are not "lavish or extravagant". This means you can deduct the cost of meals for yourself, and meals with business associates, as long as you or an employee is present at the meal. Meals do not have to be strictly "business-related", and you do not have to be discussing business with a client.

There are two ways to calculate your meal expense deduction: the actual cost method, or the standard meal allowance. The actual cost method requires you to keep records of what you spend on meals, including tips and tax, and then deduct half of the total. The standard meal allowance is a set amount for each day of your business trip, based on what federal workers are allowed to charge for meals. This amount varies depending on location and date, and the deduction is generally limited to 50% of the standard meal allowance.

There are some things to remember when it comes to deducting meal expenses. You cannot deduct the cost of meals for your spouse or dependents while travelling, unless they are employees travelling with you for a business purpose. You also cannot deduct the cost of meals if you are alone, even if you are on a work call or meeting.

Entertainment expenses

• Expenses treated as compensation on your originally filed tax returns (and treated as wages to your employees)
• Recreational expenses for employees such as a holiday party or a summer picnic
• Expenses related to attending business meetings or conventions of certain exempt organizations such as business leagues, chambers of commerce, professional associations, etc.
• Entertainment sold to customers. For example, if you run a nightclub, your expenses for the entertainment you furnish to your customers, such as a floor show, aren’t subject to the nondeductible rules.

If you provide meals to the general public as a means of advertising or promoting goodwill in the community, you can deduct 50% of the cost. For example, neither the expense of sponsoring a television or radio show nor the expense of distributing free food and beverages to the general public is subject to the 50% limit.

You can also deduct 50% of the cost of business meals if you (or an employee) are present and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant, or similar business contact.

Travel for temporary work

When it comes to travel for temporary work, there are a few things to keep in mind, especially regarding tax deductions and visas.

Tax Deductions for Temporary Work Travel

If you're travelling for work, you can deduct certain expenses from your taxes. The trip needs to qualify as a "business trip", meaning:

• You need to leave your "tax home", which is the locale where your main place of business is located.
• Your trip must consist "mostly" of business. For example, if you go away for a week, you need to spend the majority of your time (at least 4 days) on business-related activities.
• The trip needs to be an "ordinary and necessary" expense. This means that the expense is common and accepted in your industry and helpful and appropriate for your business.
• You need to plan the trip in advance and be able to provide documentation that proves there was a professional intent behind your trip.

If your trip meets these criteria, you can deduct expenses such as transportation, baggage fees, car rentals, lodging, meals, and tips. It's important to keep records and receipts for these expenses, as you may need to provide them during a tax audit.

Visas for Temporary Work

If you're a citizen of a foreign country and wish to work temporarily in a country like the United States, you will typically need to obtain a temporary work visa. The specific type of visa will depend on the nature of your work and your country of origin. For example, the H-1B visa is for specialty occupations, while the H-2B visa is for temporary or seasonal non-agricultural work. The process usually involves having an approved petition filed by your prospective employer and reviewed by the country's immigration services.

Frequently asked questions