TRAVEL

Business Travel Tax Deduction

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.

UBER DRIVER / RIDESHARE

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.

AUTHOR / SPEAKER

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.

ENTREPRENEUR

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.

DESIGNER

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.

AIRBNB HOST

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.

MORE INFORMATION ON DEDUCTING BUSINESS TRAVEL

  • Your travel expenses are generally deductible when you are away from your home longer than a typical work day and it would not be reasonable for you to return home without sleep or rest (naps and pit stops don't count).
  • It doesn't matter if you take a taxi, bus, airplane, ferry, train or drive your own car (mileage or actual expenses), any mode of transportation you take while traveling for business could be deductible.
  • If you regularly conduct business in more than one location, your tax home (where you cannot deduct travel expenses) would be determined based on the amount of time you ordinarily spend at each of your business locations, how much business activity occurs at each of those locations and how much income you earn in each location.
  • Expenses that you incur while you are on your business trip such as dry cleaning and laundry, wifi, meals (50%), lodging, etc. are generally considered deductible business expenses.
  • If you are working for a client who pays for your travel expenses directly (i.e. your hotel is charged to their corporate account) you are not allowed to deduct the travel costs that are paid by your client. If you pay for your own business travel costs out of pocket your travel costs will be deductible regardless of whether your client reimburses you for these costs.
  • If you travel with your spouse, relative or friend on a business trip you may not deduct any portion of their travel costs unless they are your employee, partner, professional advisor, customer, or other party who joined you for a legitimate business purpose.
  • The travel examples and bullet points outlined above highlight items primarily relevant to sole proprietors and business owners. A number of travel rules specific to employees have been excluded from this page.