Travel expenses are essential for some companies who need to send their team to meet with clients and business partners from far away. You can find different areas to reduce tax costs if you’re wanting to cut back on your cash outflow due to business travel.

What Can Be Considered As Tax Deductible

The good news is that the majority of the costs of business travel can be tax deductible. However, the Internal Revenue Service (IRS) requires a few essentials before you can write things off as a business travel expense deduction.

Determining What is Business Travel

Only some trips your employees take can be counted as business travel expenses deductible. Consider the following before classifying a trip as a corporate need:

• Employees must travel away from their tax home.

• The trip must be a necessary but ordinary expense.

• Employees need to travel mostly for business.

Professionals Need to Leave Their Tax Home

According to the IRS, your tax home is the city or general area where you conduct business. It’s also where your office or place of business is located. When your employees travel out of your tax home, the cost can be counted as a business travel expense deduction. Further, the IRS considers the size of your tax home and business address to determine whether employee travel can be regarded as a business travel expense deductible.

Let’s say your office or production facility is located in Milwaukee, but your employees live in Chicago. They travel to Milwaukee, stay in hotels and eat in restaurants there. After working for a week, they return to Chicago, coming home to their families.

Since your place of business is in Milwaukee, this is your tax home. Your employees incur business expenses within the tax home, which means they’re not deductible even if they have to travel from Chicago each week.

However, if your team travels from Milwaukee to Florida for a few days to meet with business partners, the costs of this trip can be considered a business travel expense deduction.

Size of the Tax Home

The size of the tax home also matters to the IRS. Any area within a city or territory where you conduct business counts as part of the overall size of your tax home. If your business is located in a city, the entire city becomes your tax home. If your employee travels to a city suburb, which is quite a distance away but does business there regularly, then that area is still covered within your tax home.

To be considered a deductible, a business trip should be made outside the usual areas considered within your tax home, such as a neighboring city, for instance. Your trip should also be an activity you don’t usually do in a regular work week.

Ordinary and Necessary Expenses

You don’t need your employees to go on first-class trips or stay in lavish hotels. The IRS rules state that trips should be ordinary and make sense in your industry. The trip should mainly be carried out for business activities. This means employees can be given some time to relax and unwind during the journey.

So, for instance, your team needs to attend two conferences: one in an adjacent city and the other in France. The local trip to another city can be counted as part of a business travel expenses deductible, while the one in France will not be considered.

IRS Rules for Business Travel

Here are a few more rules you need to bear in mind before writing off business trips:

• The destination of the business trip should be at least 100 miles from your tax home. This trip can be anything by plane or at least a two-hour drive. In addition, these trips should require your employees to sleep in any available accommodations at or near the destination.

• The trip should require your employees to work during regular business hours. They should be performing their duties, which means they work entire shifts during the trip. Professionals will still take their time off after office hours and have weekends off.

• The IRS will also consider the trip duration away from your tax home. If employees need to stay at the destination for over 12 months, it doesn’t count as a deductible, regardless of whether you’re working there. Remember that a prolonged stay over a year will mean travel expenses will become non-deductible.

Business Travel Expenses You Can Write Off

After going over the requirements from the IRS, here are some items you can write off as deductible business travel expenses. Remember that all costs your team incurred related to that business trip can be considered. However, non-business and entertainment expenses such as going out for drinks, visiting theme parks, or playing in casinos will not be deductible.

Air, Rail, and Bus Transportation

All transportation related to the business trip can be considered a tax deduction. This includes Uber rides and baggage fees at the airport. However, there are times when they can’t be deducted, such as booking flights using frequent flyer miles or if the airfare was comped.

Taxi Fares or Other Transportation Costs

Taxi fares, car rentals, bus rides, trains, and other forms of transportation are also deductible. You can use a standard mileage deduction or the actual costs incurred.

Hotel Accommodations

Lodgings, hotel stays, motel charges, and Airbnb costs are also deductible. If you have a friend at the destination and stay in his place for a fee, that cost is also deductible.

Meals and Incidentals

Important meals during the conduct of your business can also be deducted. The IRS allows you to write off 50 percent of these expenses.

Dry Cleaning and Laundry Expenses

Professionals need to look their best for meetings and conferences. This is why cleaning and laundry expenses are also deductible.

Business-Related Phone Calls, Faxes, and Internet Access

Business communication costs such as internet access, phone calls, and other communication related to your business activities can be deductible. 

Shipping

The shipping fees are deductible if your team needs to ship materials for a presentation, some clothing, or other essentials.

Plan Your Business Trips and Reduce Costs

With careful planning, you can reduce the costs of business trips. At CI Azumano, we combine market-leading technology and industry expertise to help you plan employee travel and save money. Fill out this contact form, and our specialists will be happy to assist you in your planning, thus maximizing the benefits of these trips for your enterprise.