Entrepreneurs often need to travel away from home to meet with clients, negotiate with vendors, pitch to investors, attend trade shows and conduct business development. If you travel for for business purposes, whether it be to a neighboring city, a different state, or even outside of the country, as long as the primary purpose of your trip was for business your travel expenses will generally be deductible.
Jasper is an Uber driver who received a ride request at 5pm from a rider who needed to travel from Washington D.C. to JFK airport in New York to catch an international flight. Because of traffic Jasper didn't arrive at JFK until 11pm, so he decided to spend the night at a hotel in proximity to the airport before returning home the next day. When Jasper is files his tax return he will be eligible to deduct the cost of his hotel on line 24a of his Schedule C.
Kimberly is a speaker who recently took a business trip to Portland, Oregon. Since her husband had never visited the northwest he decided to tag along. In addition to sightseeing, he also attended the event she spoke at. Despite her husbands best efforts to support his wife in her business endeavors, since his visit was not for a bona fide business purpose Kimberly would not be able to deduct any of his travel expenses (flight, hotel costs in excess of a single room, his meals and entertainment, etc.) on her Schedule C, she can however deduct all of her related business travel costs, subject to IRS limits.
Jeffrey is a sole proprietor MD from Baltimore, Maryland whose specialty is cardiology. Last year Jeff contracted with a client 45 minutes across town who needed him to be available within 30 minutes, for 24 hours per day, for three days following an invasive procedure. Jeff booked a room at a hotel 5 minutes from his clients chosen care facility. Even though Jeff didn't leave town, his lodging served a legitimate business purpose so he will be able to deduct all of his lodging, transportation, meals (50%) and other business expenses associated with his three day on-call engagement.
Carrie is a freelance web designer who recently secured a new contract in Atlanta, Georgia that requires her to leave her home and regular workplace in New York for 7 months so she can lead the planning phase of a major project. While traveling for this engagement, she incurred $43,000 of hotel, rental car and airfare costs, all of which she billed to her client. When she prepares her Schedule C at the end of the year Carrie would recognize $43,000 of reimbursed expenses as part of her gross income and deduct 100% of her qualifying travel expenses. Note that if Carrie did not bill her client for travel and the client instead paid directly for all of her travel costs, she would not be allowed to deduct any of the $43,000.
Erik is a Director at a software company in Atlanta, Georgia who operates an AirBnB business with his three vacation homes in Park City, Utah. Every 3 months he travels to Park City to check on his properties and tend to regular maintenance issues. Last year he spent $5,000 on airfare, $3,000 on uber to get around in Utah and $500 on airport parking in Atlanta. He stays in one of his vacation homes while on his property visits. When Erik files his taxes he would be able to deduct the full $8,500 of travel expenses on line 6 of his Schedule E since his trips were strictly for business purposes.
According to the IRS, deductible travel expenses are the “ordinary and necessary expenses of traveling away from home for your business, profession, or job.” In other words, if your job takes you away from where you typically work, e.g. for a conference, and requires you to stay in a hotel or Airbnb or other temporary lodging, then that would qualify as business travel, and many expenses associated with that trip would be considered “business travel expenses.”
The IRS says that you are permitted to deduct many travel expenses incurred while on temporary work assignments that take you away from your “tax home” (The IRS defines your tax home as “the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home.”).
Warning: you are NOT allowed to deduct travel expenses that you accrue while working on an indefinite work assignment, which the IRS considers to be any work that takes you away from home for longer than one year. Other restrictions apply, of course, so make sure you chat with your trusted accountant or financial advisor about what is considered permitted business travel.
So what are some examples of business travel expenses? Here are some common business expenses that you can deduct on your taxes:
In order to deduct the above costs, you will need to make sure you save every receipt for every expense you incur while on your business trip. You should have proper documentation that includes the date, exact amount and reason for the expense. When tax time rolls around, if you are a sole proprietor or single member LLC, you will need to document these expenses in the "Expenses" section on your Schedule C.
Hurdlr is your simple solution to tracking and managing all of your business’s expenses— and determining which tax deductions you’re eligible for. Not a fan of saving all those paper receipts? The Hurdlr app can save them digitally for you. Download the app today and make your business travel smooth and stress free.
