what does work related travel expenses mean

An official website of the United States Government

Kreyòl ayisyen
Search Toggle search Search Include Historical Content - Any - No Include Historical Content - Any - No Search
Menu Toggle menu
INFORMATION FOR…
Individuals
Business & Self Employed
Charities and Nonprofits
International Taxpayers
Federal State and Local Governments
Indian Tribal Governments
Tax Exempt Bonds
FILING FOR INDIVIDUALS
How to File
When to File
Where to File
Update Your Information
Get Your Tax Record
Apply for an Employer ID Number (EIN)
Check Your Amended Return Status
Get an Identity Protection PIN (IP PIN)
File Your Taxes for Free
Bank Account (Direct Pay)
Payment Plan (Installment Agreement)
Electronic Federal Tax Payment System (EFTPS)
Your Online Account
Tax Withholding Estimator
Estimated Taxes
Where's My Refund
Direct Deposit
Reduced Refunds
Amend Return

Credits & Deductions

INFORMATION FOR...
Businesses & Self-Employed
Earned Income Credit (EITC)
Child Tax Credit
Clean Energy and Vehicle Credits
Standard Deduction
Retirement Plans

Forms & Instructions

POPULAR FORMS & INSTRUCTIONS
Form 1040 Instructions
Form 4506-T
POPULAR FOR TAX PROS
Form 1040-X
Circular 230

Understanding business travel deductions

Here are some tax details all business travelers should know

Business travel deductions are available when employees must travel away from their tax home or main place of work for business reasons. A taxpayer is traveling away from home if they are away for longer than an ordinary day's work and they need to sleep to meet the demands of their work while away.

Travel expenses must be ordinary and necessary. They can't be lavish, extravagant or for personal purposes.

Employers can deduct travel expenses paid or incurred during a temporary work assignment if the assignment length does not exceed one year.

Travel expenses for conventions are deductible if attendance benefits the business. There are special rules for conventions held outside North America .

Deductible travel expenses include:

Travel by airplane, train, bus or car between your home and your business destination.
Fares for taxis or other types of transportation between an airport or train station and a hotel, or from a hotel to a work location.
Shipping of baggage and sample or display material between regular and temporary work locations.
Using a personally owned car for business.
Lodging and meals .
Dry cleaning and laundry.
Business calls and communication.
Tips paid for services related to any of these expenses.
Other similar ordinary and necessary expenses related to the business travel.

Self-employed individuals or farmers with travel deductions

Those who are self-employed can deduct travel expenses on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) .
Farmers can use Schedule F (Form 1040), Profit or Loss From Farming .

Travel deductions for the National Guard or military reserves

National Guard or military reserve servicemembers can claim a deduction for unreimbursed travel expenses paid during the performance of their duty .

Recordkeeping

Well-organized records make it easier to prepare a tax return. Keep records such as receipts, canceled checks and other documents that support a deduction.

Subscribe to IRS Tax Tips

Business Taxes / Business Travel / Personal Taxes

What is the Definition of Business Travel? (It’ll Surprise You)

by Team Falcon · Published · Updated

Table of Contents

Not sure what qualifies as business travel? Read to learn what is considered business travel and business travel expenses.

What's the definition of business travel?

Please continue to the bottom of this article for instructions about how to deduct business travel expenses.

Introduction

The simplest business travel definition is travel that is undertaken for business purposes. Business travel does not include daily commutes. However, that does not really get to the gist of the question we’re really trying to answer.

More specifically, according to the IRS, the definition of business travel is travel the taxpayer does, ‘away from their home’ for business purposes.

In this post, we go over the definition of business travel. We also provide a business travel definition for the purpose of expenses. This includes what qualifies as business travel expenses for tax deduction purposes and how to deduct business travel expenses. This post includes the information needed for both personal and business tax returns.

For companies, business travel is a significant expense. For most companies, business travel is the largest expense. Therefore, it is important to understand the definition of business travel for expenses and accounting purposes. This way, both companies, and individual maximize their cost savings.

What is the definition of business travel?

According to the IRS , travel is considered ‘business travel’ and qualifies for tax-deductible business travel expenses when the travel is ‘away from home’ for a duration longer than an ordinary day’s worth of work. The IRS defines ‘away from home’ as outside the entire city or general area outside the location of your main place of business. Also, a duration longer than a day’s worth of work typically means the business traveler stays overnight.

What business travel expenses are tax deductible?

The IRS defines business travel expenses as tax deductible if they are ‘ordinary and necessary’ expenses incurred while traveling away from home for work. These expenses include transportation, lodging, meals, entertainment, and incidentals (such as tips). Business travel expenses are divided and grouped into different categories (as listed below). Each category often has different rules and limits about how to deduct and how much is tax deductible, which we explain in later sections towards the bottom of this article.

Meals and entertainmtnt such as lunches, dinners, shows, sporting events, etc.
Travel, such as by personal car, plane, train, bus, etc.
Transportation, such as fare for taxis or other types of transportation to and from the airport, train station or hotel (including transportation between the hotel and work location.
Lodging, such as hotels and Airbnb rentals.
Incidental, such as tips; for example, baggage claim tips.
Dry cleaning and laundry.
Business calls while on a business trip. This includes business communications by fax machines or other business communication devices.
Other ordinary and necessary expenses related to business travel.

Track your tax deductible business travel expenses with ease using Falcon Expenses award-winning expense tracker and expense report generator. Download on the app store, here .

How to Deduct Each Type of Business Travel Expense

Meal and entertainment expenses.

Meal and entertainment expenses involve taking clients, colleagues, prospects, partners, etc. out for meals and entertainment. From a tax deduction perspective, the IRS allows for 50% of these expenses to be deducted.

How to Deduct as a Business

Businesses typically reimburse employees and contractors the full amount of meals and entertainment expenses. The business then subsequently deducts 50% of these expenses from their business tax return. Businesses cannot deduct any amount of meals and entertainment expenses that were not reimbursed to employees or contractors.

How to Deduct as a Taxpayer

Taxpayers reimbursed in full for meals and entertainment expenses do not have anything to deduct from their personal tax return. Typically these taxpayers are employees of companies or contractors working under employment contracts that include full reimbursement of business travel expenses.

However, taxpayers that work as employees can deduct 50% of unreimbursed meals and entertainment expenses from their tax return. Also, only 50% of meals and entertainment expenses are deductible from the tax return of self-employed taxpayers who pay these expenses out-of-pocket and are not reimbursed for them.

Travel and Transportation

Travel expenses by plane, train, bus, or personal car to the business travel destination are tax deductible. Transportation expenses such as fares for taxis and other types of transportation are also tax deductible. However, some important notes need to be mentioned about the topic of travel when the travel is done using the taxpayer’s personal car.

Notes about travel and transportation by personal car.

The cost of travel if you drive a personal car between your home and your business travel destination is tax deductible. Also, the cost of travel while using a personal car at a business destination is tax deductible. For example, the commute between your hotel and office or client in the city the traveled to for business.

With that said, the IRS provides two ways to calculate this tax deduction amount. The Actual Car Expense Method and the Standard Mileage Rate method. The easiest method is the Standard Mileage Rate method. Check out this article for more information and a comparison of these two methods, How to Maximize Business Use Car Tax Deductions . Also, check out this page for an up-to-date list of per mile reimbursement rates for each year, IRS Standard Mileage Rate Tax Deductions . These rates are used for the Standard Mileage Rate method. For 2019 the standard mileage rate is $0.58 per business mile, $0.20 per moving mile, $0.14 per charitable mile. The IRS establishes these amounts by taking into consideration fuel costs, wear and tear on the car, and vehicle depreciation.

Business travel expenses are tax deductible by the business if reward points were not used to buy train, plane or bus tickets. The business can deduct the full amount of the expenses if the business reimburses employees and contractors the full amount of the expenses. The business cannot deduct the amount of travel and transportation expenses that were not reimbursed. In this case, it is the responsibility of the employee or contractor to take the deductions on their personal income tax return.

Personal Car Use

Typically businesses reimburse employees that drive their personal car for business trips. The standard mileage rate is typically used to calculate the reimbursement amount. Sometimes businesses will reimburse their employees or contractors more. However, whatever the employee or contractor is reimbursed, the business is only allowed to deduct the per mile amount for business travel specified by the IRS. Each year these amounts change.

Review the following post if you drive an employer-provided car and want to know about employer-provided vehicle tax deductions: Employer-Provided Car and Truck Expense Tax Deductions .

Travel expenses are tax deductible if the taxpayer paid for their plane, train or bus ticket out of pocket and they were not reimbursed. However, travel expenses are not deductible if reward points were used to buy by train, plane or bus tickets.

Personal Car Use and Consideration for Changes to the Tax Law as of 2018

In regards to travel by personal car, there are special details that need to be taken into consideration. For years prior to 2018 taxpayers employed by a company, on a payroll (i.e. not a contractor) and not reimbursed for business travel transportation with their personal car qualify to deduct this cost from their personal income tax return. However, for years 2018 to 2023 taxpayers who are employees can no longer take this deduction.

Lodging includes the cost of room and board while the business traveler is away on an overnight business trip.

Businesses can deduct the full amount of lodging expenses that are reimbursed to employees and contractors.

Employees that are not reimbursed by their employers can deduct the full amount of lodging expenses incurred during business travel from their tax returns. For those that are self-employed, they can also deduct the full amount of lodging expenses that were paid out-of-pocket while traveling for business.

Incidental expenses are the tiny expenses incurred while traveling for business. This includes things like tips, such as baggage handler tips or meal tips. Personal expenses are not incidental expenses.

Employees and contractors are typically reimbursed up to $5 per day for incidental expenses incurred when traveling for work. The company then subsequently deducts $5 per day per business traveler from the company’s tax return.

Employees reimbursed by their employers for incidental expenses cannot deduct incidental expenses from their tax return. However, self-employed, who pay incidental expenses out of pocket, can deduct up to $5 per day they were away for business travel from their tax return.

Other Business Travel Expenses

Other ordinary and necessary expenses related to business travel are tax deductible. These include things like the cost of dry cleaning and laundry. Business calls, including the use of fax machines. Stenographer fees, computer rental fees, etc.

Expenses reimbursed to the employee or contractor are fully deductible by the business. However, please consult a certified tax professional as needed.

Any expenses not reimbursed to the employee by their employer are tax deductible on the employee’s personal tax return. For the self-employed, any of these expenses paid out-of-pocket are tax deductible. However, please consult a certified tax professional as needed.

About Falcon Expenses

Falcon Expenses is an iOS solution for expense tracking and management. Scan receipts, we type merchant, date and amount, auto-track mileage expenses via GPS, and log billable hours with an integrated timer. Quickly organize expenses by time period, project, or client and easily prepare reports for email to anyone in PDF or spreadsheet formats, all from your phone. Use for reimbursements, taxes, record keeping or invoicing. Falcon Expenses is great for professionals, freelancers, realtors, business travelers, truckers, and more.

Please check out the following articles to learn more about Falcon Expenses products and services:

How to Scan and Manage Receipts with Falcon Expenses
How to Track Mileage Expenses with Falcon Expenses
Falcon Expenses Expense Report Template & What Expense Reports Look Like
What is Included in Falcon Expenses Mileage Expense Log

Was this article helpful?

Falcon Expenses, Expense Tracker & Mileage Tracker App

We are a team of writers and contributors with a passion for creating valuable content for small business owners, self-employed, entrepreneurs, and more.

Feel free to reach out to use as [email protected]

Tags: Business Travel Business Travel Expenses Business Travel Tax Deductions IRS Self Employed Business Travel Tax Deductions

What Business Mileage is Tax Deductible?

by Team Falcon · Published

How to track mileage with a GPS mileage tracker app

by Brooke Sugarman · Published

What are the IRS Mileage Rate Amounts (Updated for 2023)

Business Travel Expenses: A Guide to Management, Calculation, Tax Deductions & More

what does work related travel expenses mean

For both employees and employers, streamlining business travel expense management and reimbursements becomes a top priority. This guide will equip you with all the necessary information: what qualifies as a travel expense, what you can claim as tax deductions, and, most importantly, how to manage it efficiently.

Let’s take the stress out of travel expenses and get you back to focusing on what matters most–a successful business trip.

What Is A Travel Expense?

For tax purposes, a travel expense is any cost you incur while traveling for work. This can include transportation, lodging, meals, and incidental costs directly related to your business trip.

When does travel qualify as a business trip?

The IRS considers a trip a business trip if it takes you away from your tax home or main place of work for business reasons and requires you to sleep over for work purposes.

Quick definitions

Tax home: Your tax home isn't where you live with your family but rather the general area where you report to work every day. This applies to your whole city or the surrounding region where your job is located.

Main place of work:

To identify your main work location if you have multiple workplaces, consider these factors:

The amount of time you typically spend at each location. The place where you log the most hours might be the frontrunner.
The intensity of your work activities at each location. Where do you take on the most crucial tasks and responsibilities?
The relative importance of your income from each location. Does one location bring in significantly more income than the others?

For more information, refer to IRS Publication 463 (2023), Travel, Gift, and Car Expenses .

A List Of Deductible Travel Expenses

Businesses can claim tax deductions when employees travel outside their main place of work. These expenses must be ordinary and necessary to travel away from home for business purposes. You cannot deduct expenses that are lavish, personal, or unrelated to work. Employers can also deduct costs associated with temporary work assignments lasting less than a year.

Here’s a list of deductible business travel expenses while you’re away from home:

Transportation ✈️: Flights, trains, buses, or your own car to get to your business destination (including free frequent flyer tickets at face value).
Local travel 🚕: Taxis, shuttles, or rideshares between airports/stations, hotels, and work locations (clients, meetings, temporary assignments).
Shipping 🛄: Baggage, samples, and display materials between your regular and temporary workplaces.
Car expenses 🚗: Using your car (actual expenses or mileage rate), tolls, parking (business use only for rentals).
Accommodation 🏨: Lodging for your business stay.
Instead of tracking every meal expense, you can use a standard meal allowance that changes based on your travel destination. However, remember that only 50% of the cost (even using the standard allowance) is typically deductible for business meals.
Laundry and dry cleaning 🧺: Keeping your clothes presentable during the trip.
Business communication📱: Calls, faxes, or other work-related messages.
Tips💰: Associated with any of the deductible expenses.
Other miscellaneous costs 💸: As long as they're reasonable and necessary for your business trip, like travel to/from business meals, stenographer fees, computer rentals, or maintaining a work trailer.

And What You Can't Deduct As Travel Expenses

You can only claim expenses that are ordinary and necessary for your business trip. This means no personal expenses like buying gifts, extravagant meals, fines incurred, or even expenses made for companions like a friend or family member who might have accompanied you on the trip.

Can You Bring Friends And Family On A Business Trip?

Do you feel like taking your friends or your spouse on a business trip? While you can’t deduct the expenses of bringing your family on the trip, some costs can be offset indirectly.

Carpooling on a business trip

Need a ride? No problem! If you're traveling for business and renting a car is a legitimate expense, you can still deduct your mileage or car rental costs even if you offer rides to others.
But be careful! You can't deduct extra expenses caused by carpooling, like the need for a bigger car to fit your family. The key is that the expense must be "ordinary and necessary" for your business trip.

Sharing a hotel room

Similar to carpooling, you can only deduct the cost of lodging you would typically use for a solo business trip.
However, there's some wiggle room! If you pay for a bigger room to accommodate your family, you can still deduct the portion a single room would cost.

So, What If I Extend My Trip For a Vacation?

Great idea! But remember, you can only deduct business travel expenses. This covers getting you to and from your work location, plus any work-related costs while you're there. Personal detours or leisure activities won't count.

Example: Imagine you take a business trip to Seattle from your usual grounds in Chicago. The round-trip mileage for that work travel clocks in at 2,200. But on the way back, you take a quick detour to catch up with your family in Portland. Over your 10-day trip (including the detour), your travel, meals (excluding entertainment), lodging, and other expenses add up to $3,400.

Now, if you'd skipped Portland and flown straight back, the trip would've been 8 days and cost $2,800. The good news? You can still deduct the full $2,800 for your business trip, including the round-trip flights to and from Seattle.

Some Methods of Reimbursing Travel Expenses

Per-diems simplify expense reimbursements by providing a fixed daily rate for meals and incidental expenses during travel. The rate varies depending on location and reflects typical costs.

Employees don’t need to submit receipts for these covered expenses; they just need to document their travel dates and locations. This saves time but requires setting appropriate per diem rates and ensuring employees understand what’s included.

What is Per Diem? What are Per Diem Rates?

Corporate Credit Card

Companies issue corporate credit cards specifically for business travel. Employees use these cards for approved expenses, eliminating the need for upfront personal costs. The company handles the bill directly, and employees submit expense reports for record-keeping. This offers convenience but requires clear spending policies and monitoring.

Post-trip Expense Reimbursements

Sometimes, accurately predicting all business travel expenses upfront can be tricky. Unexpected expenses like laundry, repairs, or tolls can throw off the estimate.

To address this, you can reimburse employees for documented expenses after their trip. Traditionally, this involves manually entering expenses on a spreadsheet and submitting receipts for verification.

But did you know there’s a faster and much easier way to do this?

Travel expense management software like Fyle use Conversational AI , which enables employees to submit receipts via text messages for out-of-pocket and credit card expenses. Expense reports are automatically created by extracting all relevant information from receipts, and card expenses are automatically reconciled with the correct card transaction when the data flows in.

This makes the reimbursement process faster, more efficient, and ultimately more convenient for employees.

How To Manage Travel Expenses?

Automate with a travel expense management software.

This is one of the easiest ways to manage business travel expenses. Invest in a travel expense management software that automates receipt collection, approval workflows, and your expense reimbursement process.

It enables employees to submit receipts on the go and leaves little room for manual errors. Additionally, with real-time compliance, your approvers will know if expenses do not align with company policies and can take necessary action. This saves time and reduces errors for both employees and approvers alike.

Establish Clear Travel Policies

Having clear and well-communicated travel policies helps employees understand what expenses are reimbursable and set spending limits. This can include guidelines for meals, accommodation, and incidentals. Specifying preferred vendors or booking platforms can also help control costs.

Issue Virtual Cards to Your Employees

Do you use an Amex Business Credit Card? With travel expense management software like Fyle, you can create American Express virtual cards on the spot, perfect for one-time or regular costs like meals, travel, or office supplies.

This eliminates the need for physical cards and simplifies expense tracking for traveling employees. Plus, you can monitor spending in real time, giving you greater control over your budget.

How To Calculate Travel Expenses?

Calculating business travel expenses involves two main steps: estimating the costs before the trip and then reconciling the actual expenses after the trip. Here’s a breakdown:

Before the trip

1. research average costs.

Use online travel booking tools and resources to understand your destination's average flight fares, hotel rates, and meal prices.
Consider factors like travel seasonality and location when researching.

2. Consider additional expenses

Factor in potential costs like local transportation (taxis, buses), laundry, internet access, and business calls made during the trip.

3. Utilize corporate travel tools

Companies often have negotiated discounted rates with hotels, airlines, and car rentals. You could leverage folks in your network for the best deals.

4. Set realistic budgets

Based on your research and additional expenses, set a realistic budget for each category (transportation, accommodation, meals).
This will ensure you stay on track during the trip.

After the trip

1. collect and categorize receipts.

Keep all receipts for flights, hotels, meals, and other business-related expenses incurred during the trip.
Categorize expenses as per your expense policy (e.g., transportation, accommodation, meals)

2. Reconcile expenses with estimates

Compare your actual spending against the pre-trip estimates you made.
Identify areas where you might have overspent or underspent.

3. Use a travel expense management software

Consider using a travel expense management system to automate receipt management , expense categorization, expense reporting, and reimbursements.
This can save you a significant amount of time and effort in the reconciliation process.

Additional tips

Get pre-approval for high-cost items : If you anticipate any large expenses (e.g., expensive client dinners), seek pre-approval from your manager to avoid any issues with reimbursements.
Use travel rewards programs : Take advantage of travel rewards programs offered by airlines, hotels, and credit card companies to earn points or miles that can be redeemed for future travel.

How Can Businesses Reduce Travel Expenses?

Leverage technology.

Video conferencing: Whenever possible, use video conferencing platforms like Zoom or Google Meet for meetings. This eliminates travel costs and saves employees time.
Travel booking tools: Implement online booking tools that offer negotiated corporate rates for flights, hotels, and car rentals.

Implement a Clear Travel Policy

Define trip approval criteria: Establish clear guidelines for what qualifies as a business trip and who can approve travel requests.
Set expense limits: Based on the destination and travel duration, set reasonable spending limits for different expense categories (e.g., meals and accommodation).
Promote alternative travel options: Encourage employees to consider cost-effective travel options like economy-class flights or budget-friendly hotels when appropriate.

Negotiation and Cost Optimization

Negotiate bulk rates: For frequent business travelers, negotiate discounted rates with airlines, hotels, and car rental companies.
Utilize travel management companies (TMCs): Partner with a TMC specializing in sourcing cost-effective business travel solutions.
Encourage early booking: Promote early booking of flights and hotels to take advantage of lower fares and rates.

Analyze and Optimize Travel Data

Track travel spending: Track and analyze business travel expenses to identify areas for cost reduction. Look at trends and identify destinations with higher-than-average costs.
Review travel policies regularly: Review your travel policies regularly and adjust them based on updated data and changing business needs.
Benchmark against industry standards: Compare your business travel spending with industry benchmarks to identify areas for improvement.

What Penalties Will I Face For Breaking IRS Rules?

The IRS takes tax compliance seriously, and there can be penalties for claiming non-deductible expenses on your business travel report. Here’s a breakdown of what you might face:

Owed-back taxes

If the IRS discovers you claimed non-deductible expenses, you’ll be responsible for paying back the taxes you avoided plus interest. This interest accrues from the date the tax was originally due.

Tax-penalities

The penalties you face will depend on whether the mistake was intentional or unintentional.

Negligence: If the mistake was unintentional due to negligence (not properly understanding the rules), you may face a penalty of 20% of the additional tax owed.
Fraud: If the IRS determines the mistake was intentional fraud, you could face a steeper penalty of 75% of the additional tax owed, plus potential criminal charges.

For more information, please refer to the IRS documentation on penalties .

Additional filing requirements

In some cases, the IRS may require you to file additional forms, such as Form 8275, to disclose the error and potentially avoid penalties.

How Form 8275 Can Help You Avoid Tax Penalties

The Form 8275 lets you explain any deductions you claimed that might not be perfectly clear on your tax return. As long as you had a good reason for claiming the deduction (which wasn't something the IRS specifically disallows), filing Form 8275 can help you avoid owing extra taxes or facing penalties. However, it's important to note that this form won't work if you intentionally tried to mislead the IRS.

For more information, please refer to Instructions for Form 8275 (01/2021)

How Fyle Can Help Manage Business Travel Expenses

Fyle streamlines expense reporting from start to finish. Thanks to Conversational AI, you can submit receipts with a simple text message , and Fyle's integrations with Visa , Mastercard , and American Express give you real-time notifications on all card spending while also automatically reconciling credit card transactions.

Fyle goes beyond automation, offering features like business mileage tracking and the ability to issue Amex virtual cards specifically for travel expenses. Plus, real-time compliance checks keep your spending on track. This comprehensive approach helps you identify cost-saving opportunities and ensures your business stays within budget.