Business Travel Expenses
The travel expenses tax deduction allows business owners to deduct expenses for business-related travel.
Commonly referred to as travel expenses tax deduction, business travel tax deduction and tax deduction for travel expenses.
Do I Qualify for the Business Travel Expenses?
Business owners may deduct reasonable expenses for business travel. The types of travel that usually qualify for the business travel tax deduction fall into three categories: travel for new business, travel for business events and travel for board meetings.
2022 Business Travel Expenses Details
Business owners may deduct reasonable expenses for business travel. The types of travel that usually qualify for the business travel tax deduction fall into three categories:
Traveling for new business: This includes the costs of traveling to scout new locations, explore potential mergers and acquisitions opportunities or acquire new investment property.
Traveling for business events: This includes the cost of traveling to attend conferences and seminars, and vacations can often be tacked onto these trips. Travel to and from the location for the participants is deductible, as is lodging for the nights of the conference or seminar. Non-business and non-conference days are not deductible.
Traveling for board meetings: The cost of traveling to board meetings — even those held at resorts — can qualify for the travel expenses deduction as long as the taxpayer can demonstrate a clear business purpose and a reason for why the meeting can’t be held at the primary business location (for example, to entice board members to attend the meeting).
Traveling With Spouses & Children
Travel costs for spouses and children who accompany someone on a business trip typically do not qualify for the travel expenses tax deduction. However, if they are involved in the business and have a business purpose for attending, the travel expenses may be deductible. For example, if the business owner’s child functions as a company videographer and travels for that purpose, the expenses would be deductible.
Deductibility of Travel-Related Meals
The recent passage of the Consolidated Appropriations Act, 2021, on December 27, 2020, created an exception to the 50% deductibility limit on meal expenses. For calendar years 2021 and 2022, meal expenses paid or incurred as part of business operations are 100% deductible for meals provided by a restaurant, including those consumed while traveling for business. The meal does not have to be eaten at the restaurant; takeout and delivery meals are fully deductible if they meet the requirements.
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Benefits
• Lower taxable income
• Lower self-employment taxes
Considerations
• Potentially onerous documentation requirements
• Conflicting strategy: Accountable Plan
Assumptions When Taking the Business Travel Expenses
• Travel expenses cannot be lavish or unreasonable. (“Lavish” is not defined by the IRS and taxpayers should use their best judgment.)
• This information applies only for domestic travel. Additional rules apply for deducting foreign travel expenses.
• The expenses are deducted by the entity that paid them. If a business owner is reimbursed by the business for the travel expenses, the business would claim the related deductions.
• Only travel expenses that are business-related can be deducted.
Conflicting Strategies
• Accountable Plan
Requirements to Claim the Business Travel Expenses
• Travel expenses must be documented with receipts. Deductions for family members’ travel expenses should be supported by evidence of their activities within the business and their participation in the business purpose of the travel.
Business Entities That Can Claim the Business Travel Expenses
• Schedule C
• Schedule E
• Schedule F
• Farm Rental
• S Corporation
• C Corporation
• Partnership
The material discussed on this page is meant for general illustration and/or informational purposes only and is not to be construed as investment, tax, or legal advice. You must exercise your own independent professional judgment, recognizing that advice should not be based on unreasonable factual or legal assumptions or unreasonably rely upon representations of the client or others. Further, any advice you provide in connection with tax return preparation must comply in full with the requirements of IRS Circular 230.