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What are the Rules for Deducting Business Travel Expenses?

February 12, 2024

Getting ready for a business trip in 2024? Here’s how taxes factor in.

What qualifies as a business trip for tax deduction purposes?

The IRS considers a trip a business trip for tax deduction purposes when the following reasons are met:

  1. You need to travel away from your tax home (where your business is located) for longer than a normal work day.
  2. Your trip is primarily business related. The majority of your time away must be spent doing business.
  3. Your expenses are “ordinary and necessary” meaning the expenses are common and accepted in your industry and helpful and appropriate for your trade or business.

The most important limitation on deducting business trip expenses is that your attendance at the meeting will advance your business. The IRS requires you to show an income-producing purpose for your attendance.

What are eligible expenses?

Travel expenses must be “ordinary and necessary” and cannot be lavish, extravagant or for personal purposes. Eligible expenses include:

  • Travel- airplane, train, bus or car
  • Taxi and other local transport;
  • Baggage
  • Lodging
  • Dry cleaning and laundry
  • Business calls
  • Tips
  • Fifty-percent of the cost of meals (100% for food and beverage expenses provided by a restaurant paid or incurred in 2021 and 2022).

Important note about meals:

As a general rule, your company can deduct 50 percent of the cost of meals as a business expense if the following requirements are met:

  • the expense must be ordinary and necessary and paid in carrying on a trade or business;
  • the expense may not be lavish or extravagant;
  • the taxpayer or an employee must be present when the food or beverages are furnished;
  • food and beverages must be provided to the taxpayer or a business associate; and
  • if the food and beverages are provided during or at an entertainment activity, separate invoicing is required.

Meals provided to employees after 2025. Certain employer-provided meal expenses paid or incurred after December 31, 2025, are prohibited. Beginning in 2026, no deduction is allowed for amounts that an employer pays or incurs for:

  • meals that are excludable from an employee’s income because they are provided on the employer’s business premises for the convenience of the employer; or
  • food, beverage, and eating facility expenses for facilities located at an employer’s business that provide meals that are considered a de minimis fringe benefit.

Deductible travel expenses include those incurred attending a convention related to the taxpayer's business. Expenses for a convention or meeting in connection with investments, financial planning, or other income-producing property are not deductible.

Remember to keep detailed records!

Don’t forget about recordkeeping. Remember to keep well-organized records including receipts, canceled checks and other documents that support a deduction—this will make it much easier come filing season.

What about a spouse’s expenses? Are those deductible?

Travel expenses incurred on behalf of your spouse or dependent are deductible if your spouse or dependent is your employee and he or she has a legitimate business purpose for traveling with you.

Your business associates are treated slightly differently. Expenses incurred by your business associates, such as your customers, clients, suppliers, agents, partners, or professional advisors, are deductible if they too have a legitimate business purpose for traveling with you.

Questions? Contact us.

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