How to write off travel expenses: A complete guide on business travel expenses

Many small business owners have to travel a few times a year or even as often as every week. Unfortunately, the cost of transport, lodgings, and meals adds up. However, you can cut down these costs by writing these fees off as business expenses by learning about IRS deductible travel expenses.

Learning how to write off travel expenses can save your business thousands of dollars each year. They also empower owners to network, visit clients, and attend valuable workshops. Finally, knowing which deductions are eligible for a write-off can save you a lot of stress at tax time. This travel expenses tax deduction guide overviews which expenses are deductible, how to deduct them, and how to calculate them.

What qualifies as a business trip for tax deductions?

The IRS allows tax deductions on certain travel expenses when the trip's main purpose directly relates to your business. Since the line between business and nonbusiness travel is hard to draw, you can take a few steps to ensure your trips' overhead costs qualify.

For a trip to qualify as business travel tax deductions, you must:

• Leave the area for longer than a day. The place where you normally conduct business is called a tax home. Travel expenses aren’t deductible unless you spend two or more days doing business outside your tax home.
• Spend the majority of your trip on business. The IRS measures trip length in days. So, if you spend four days of a weeklong trip on work and three days on rest, it still qualifies as a business trip. 
• Limit yourself to “ordinary and necessary” expenses. Businesses can write off expenses if they’re required or typical in their field. Taking a client to dinner is considered ordinary, but renting a yacht won’t count because it isn’t necessary or usual. 
• Document trip plans in advance. The IRS is more likely to provide deductions if you schedule expenses in advance. Before you leave, document and time-stamp hotel reservations, plane tickets, and conference fees.

Taking these steps to ensure your travel qualifies for a tax deduction will ensure you get the correct deductions. 

Which travel expenses are tax deductible?

Understanding business tax deductions is easier with a list of example write-offs. While most expenses outside your tax home qualify for deductions, here are the most common travel expenses that are tax deductible: 

• Transportation
• Lodging
• Meals
• Event registration
• Equipment rentals
• Miscellaneous business expenses

However, there are some travel expenses you can’t deduct, such as family travel and lodging costs, entertainment, and unnecessary or unreasonable expenses. 

For example, you may deduct your plane tickets from your home to the destination, a lunch meeting with a client, and a rented computer while traveling. However, you can’t deduct the hotel stay for your family members or if you take your client to a concert. 

How to write off travel expenses on your taxes

Even if you go on a trip for business purposes, incorrectly filing your tax deductions could stand in the way of a write-off. To ensure the IRS covers every expense, plan your write-offs before leaving and hold onto your receipts once you get home. The main steps to follow include: 

1. Confirm your eligibility

Before you can bank on a write-off, you must ensure a trip is eligible for business deductions. The IRS uses rigid criteria to weigh business expenses, so make sure your write-offs meet all the standards. 

The eligibility criteria for a business trip tax deduction include: 

• Booking at least one business-related appointment before you leave. You need to establish a "prior set business purpose" and keep copies of your correspondence and scheduled appointments.
• Primarily using it for business purposes. The IRS won’t deduct 100% of your transportation costs unless the trip is primarily for business and lasts longer than an ordinary day’s work. 
• Being longer than an ordinary day’s work. You can’t write off expenses from a day trip. If your trip involves an overnight stay, then the travel qualifies for a deduction. This applies even if you intersperse your trip with personal days.
• Excluding companions from expenses. You can only deduct expenses typically incurred on a solo business trip. You can only deduct the cost of your plane ticket if you travel by air, and your family will have to purchase their own. However, if you drive with friends, you can write off all the transport fees.
• Traveling within the United States. The above rules only apply to travel within the United States. If you plan to travel to another country, the IRS has stricter standards when allowing for deductions. 

Additionally, you can write off lodging, taxis, car rentals, and 50% of your food costs on business days. You can also deduct laundry, dry cleaning, personal grooming, and other “ordinary and reasonable” expenses for the trip. 

Likewise, only 50% of your food costs are deductible, along with your portion of the lodging. So, if you usually rent a single hotel room but need a double and another room for the family, you can only deduct the cost of a single room. If you make a layover in another city for personal reasons, you cannot deduct those related travel expenses.

2. Make sure expenses are ordinary and necessary

Business owners who try to deduct unnecessary or unreasonable expenses from their taxes may run into trouble. While you can deduct the cost of taking a client to dinner, that doesn’t mean you should spring for a thousand-dollar bottle of wine. Avoiding extravagant fees makes the IRS more likely to accept your deduction.

Note: The IRS offers a temporary 100% deduction on business meals ordered from a restaurant between Dec 31, 2020, and Jan 1, 2023. In all other cases, the write-off is 50%.

3. Save all receipts from a trip

Track all expenses by holding onto every receipt from your trip. While not every expense will earn a write-off, it’s worth checking in with a tax professional before throwing any away. Over time, small write-offs and unexpected deductions lead to huge savings. 

The IRS doesn’t require that you keep receipts for payments less than $75, but you do need to keep a log of the time and date of the expenses. To streamline the process, you can use QuickBooks expense tracking software.

4. Itemize your expenses

Once you narrow down the receipts eligible for a deduction, organize them into different categories. Group food, transport, and lodging fees into their own folder and write notes explaining when and how you made each expenditure. You'll be in good shape during tax season if you do this while the information is fresh.

Earning a travel deduction means keeping accurate records of your spending. On a business trip, you should tally up your fees on an expense sheet. 

Use this free travel expenses write-off calculation sheet to find the estimated amount you can write off for travel expenses. Make a copy of the spreadsheet and input your expenses by category to use the total as a reference. 

Please note this is an estimation tool and should not be taken as financial or tax advice. Always refer to IRS guidelines for the latest updates. 

5. File your write-off correctly

Once tax season rolls around, you need to make sure that you properly file your travel expenses. For self-employed travel expenses, you will list travel write-offs on Schedule C Form 1040. Businesses must claim travel expenses on Form 2106 and report them on Form 1040 or Form 1040-SR as an adjustment to their total income.

While there’s no annual travel deduction limit, the IRS scrutinizes higher write-offs. Be sure to calculate your business expenses with a tax attorney before submitting a large filing. 

How to calculate business travel expenses 

To calculate the estimated travel deductions, you can use one of the following formulas. When tallying write-offs, be careful about what you consider a business expense. While baggage fees, laundry costs, and admission to a workshop all count, you shouldn’t include personal expenses like souvenirs. Additionally, you can only write off entertainment costs when treating a client, vendor, or business acquaintance. 

Business trip with no personal days

This formula applies to business trips that involve no personal days. The entire trip consists of travel and business purposes. 

Travel deduction = Transportation + lodging + business expenses + (meals / 2) 

Business trip with personal days in the middle

This formula applies to business trips with vacation time sandwiched between business days. As long as you spend more time on business than leisure, you can include transport and lodging costs in your deductions.

Travel deduction = Transportation on business days + lodging + business expenses + (meals on business days / 2)

Other trips involving business

This formula applies to trips that are mostly for business with vacation days at the beginning or end or personal vacations with at least one business day. You cannot deduct any fees from personal days, so you will end up spending much more on lodgings and transport. 

Travel deduction = Transportation on business days + lodging on business days + business expenses + (meals on business days / 2) 

Example business vacations you could write off

If your business requires you to travel, you could be missing deductions that can shrink your taxable income and grow your bottom line. While travel expenses must be business-related to be 100% deductible, taking a little vacation time during a trip isn’t unusual. 

With that in mind, here are some ideas that you might be able to coordinate with or plan “in and around” your holiday travel to maximize your tax deductions.

• Attending your company’s annual meeting: The IRS offers deductions for attending a corporation or LLC's annual meeting. These meetings allow you to discuss company goals, learn more about your field, and network with other professionals. 
•  Visiting clients: Strengthening relationships with your customers boosts sales, attracts new customers, and provides tax deductions for businesses with clients all over the country. Try to meet as many important clients as you can when visiting their area.
• Visiting vendors: Many vendors, subcontractors, suppliers, and corporate affiliates set up shop all over the country. Take an opportunity to network, renegotiate prices, or tour the facilities. 
• Attending conferences or workshops: Look into local conferences and workshops when traveling. Seminars on business, management, taxes, marketing, SEO, website building, customer service, and technical training are the most common. Workshops relevant to your profession are tax deductible. 

While these ideas might begin as a tax write-off, they can grow into a relationship with clients, business partners, and vendors. 

Things to consider when writing off travel expenses for holiday travel

Some businesses keep working through the holiday season, so you may find some overlap between family and business. However, IRS auditors invest time and resources into ensuring these expenses relate to business and not a holiday trip.

Here are the main points to consider when deducting write-offs during holiday travel:

• Holiday vacations are usually not deductible: If you travel without doing any business, the IRS won’t offer any deductions on your vacation. Even if your trip was primarily a vacation with a little work tacked on, only the costs incurred for business on business days are deductible. 
• Business expenses on vacation are deductible: You can qualify for a small deduction if you go somewhere for vacation and incidentally work while traveling. In addition, any costs related to business expenses—and not relaxing or vacationing—are eligible for a write-off.
• Holiday write-offs only apply to you and work associates: If you travel to see a client over the holidays and bring your family, you cannot write off any costs they incur. You are responsible for funding their meals, lodging, and other expenses. That said, you can deduct rental car payments even if your family rides with you.

Remember to follow IRS guidelines. Passing vacation expenses off as a business write-off will trigger an IRS audit. The IRS may level a fine and revoke other business write-offs. So, to keep earning future tax deductions, stay within IRS guidelines and pay for your own vacation expenses. 

Find peace of mind come tax time

Going on a business trip is a worthwhile opportunity to expand your business, meet potential investors, and boost professional development. Whatever the reason for your next business trip, learning how to write off travel expenses can help you save money to invest in other areas of your business. 

Whether you're a solopreneur going on your first business trip or you have regular meetings across your state’s borders, keeping records of your expenses is crucial to claim tax deductions. An accounting software like QuickBooks Self-Employed can help you track your expenses on the go so you never lose a receipt.