If you own a business or are self-employed and travel for business purposes, you need to know how much of your travel expenses are deductible. Often people either deduct more than allowed or they don’t deduct enough, assuming the expenses are not deductible. Travel expenses are only deductible if you own your own business or are self-employed. They are not deductible for employees with unreimbursed expenses since employees have no longer been able to deduct any unreimbursed business-related expenses since 2017.

The rules are different depending on if you are traveling within the US or outside of the US and if you have a spouse accompanying you. These rules apply when the business conducted away from home reasonably necessitates an overnight stay.

Here are some key rules for deducting away-from-home business travel expenses:

• Travel Costs: Actual travel expenses such as airfare, car, taxi fares, bus, airport limousine, and baggage are deductible. You can also deduct the cost of meals and lodging. Meals are deductible even if they are not directly related to a business meeting or function, though only 50% of the meal cost is deductible (80% for long-haul truckers and certain other transportation workers). Be aware that expenses deemed “lavish or extravagant” are not deductible.
• Personal Costs: Expenses for personal entertainment during the trip are not deductible. However, business-related expenses such as dry cleaning, phone calls, and computer rentals are deductible.
• Mixed Business and Personal Trips: If your trip includes both business and personal elements (e.g., traveling for business and extending your stay for a vacation), you can only deduct expenses related to the business portion of the trip. This includes meals and lodging incurred during the business days. If the primary purpose of the trip is business, you can deduct the full travel cost (e.g., airfare) without needing to allocate between business and personal portions. Conversely, if the trip is mainly personal, none of the travel costs are deductible. The primary purpose is usually determined by the time spent on business versus personal activities, though this is not the only consideration.
• Convention or Seminar Travel: If your trip is solely for attending a convention, seminar, or similar event, the IRS will scrutinize the nature of these meetings to ensure they are not merely vacations in disguise. Be sure to keep all documentation that supports the business or professional nature of your trip.
• Personal Expenses: Costs incurred at home due to the trip, such as pet boarding, are not deductible.
• Spousal travel: The rules for deducting your spouse’s travel expenses are quite stringent.
  • To qualify for a deduction, your spouse must be an employee of your business. This means you cannot deduct travel costs for your spouse unless they are a legitimate employee of your company, even if their presence has a genuine business purpose. This requirement often limits the ability to deduct such costs.
  • If your spouse is indeed your employee, you can deduct their travel expenses if their presence on the trip serves a legitimate business purpose. Simply having your spouse perform minor business-related tasks, like typing meeting notes, is generally not sufficient to establish a business purpose. Their presence must be deemed “necessary” for the business, not just “helpful.” For example, participation in social functions or hosting duties to build goodwill is usually not considered enough.
  • Additionally, if the trip includes a vacation component, such as sightseeing by your spouse, it becomes more challenging to justify their business purpose. If your spouse’s travel meets these criteria, you can claim the usual business travel deductions, including transportation, meals, lodging, and incidental expenses like dry cleaning and phone calls. Even if your spouse’s travel does not meet these criteria, you might still be able to deduct a significant portion of the trip’s expenses.
  • You do not need to allocate 50% of the travel costs to your spouse. Instead, you only need to account for any additional expenses incurred because of their presence. For example, if the cost difference between a single and a double hotel room is minimal, such as $50 per night, only that additional cost is non-deductible. Similarly, if you use your own or a rented car, the cost is fully deductible regardless of whether your spouse is with you. However, any separate costs for public transportation or meals incurred solely for your spouse would not be deductible.
• Traveling outside of the US:
  • If your trip is solely or 100% for business, you can deduct all travel expenses, as well as 50% of meal costs, lodging, and some incidental expenses like laundry and dry cleaning.
  • If the trip is mainly personal or < 50% business, you cannot deduct the travel costs to and from the destination, even if you spend some time on business activities. Deductions for lodging, meals, and similar expenses are only permitted for the business portion of the trip.
  • The rules become more intricate if the trip is > 50% for business, but not 100% for business. In such cases, costs related to the personal (vacation) portion of the trip are generally not deductible unless specific exceptions apply. For example, if you take a 10-day trip with 4 days for personal activities and 6 days for business, you can only deduct expenses for the business days. Additionally, you can deduct only 60% of the travel costs (e.g., airfare) to reflect the proportion of business days in the trip. Here are the exceptions:
    • If the primary purpose of the trip is business and it lasts no longer than a week, you don’t need to allocate part of the travel costs to the non-deductible portion. For this purpose, a week is defined as seven consecutive days, excluding the day of departure but including the day of return.
    • If the trip exceeds a week, you don’t need to allocate costs if personal days account for less than 25% of the total trip duration. For this calculation, the trip includes both the departure and return days. Even if business activities occur for only part of a day, that day counts as a business day. Business days also include travel days to and from a business destination, as well as weekends and holidays between business days.
    • For example, if A travels to Paris on a Monday primarily for business, takes a vacation on Tuesday and Wednesday, and resumes business from Thursday through the following Thursday before returning home on Friday, the trip spans 12 days. With only 2 of those days being personal, less than 25% of the trip is considered personal. Therefore, all travel costs, except for meals and lodging on the vacation days, are deductible, and there’s no need to allocate travel expenses between personal and business use due to the 25% rule.
    • If you don’t meet the one-week or 25% criteria, you might still deduct all travel costs if you can demonstrate that vacationing was not a major factor in the trip. However, the more significant the vacation aspect, the harder it may be to justify.

Disclaimer: The information provided here is for general informational purposes only and should not be construed as legal or financial advice. Always consult with a qualified tax professional or advisor to discuss your specific situation and obtain advice tailored to your individual needs. The accuracy, completeness, and timeliness of the information cannot be guaranteed, and you should rely on professional guidance when making tax-related decisions.