Building a successful business is exciting, but it also stretches you. But like a savvy business owner, you realize the importance of ongoing education, and you’re committed to learning everything you can in order to grow. As part of your growth strategy, you might decide to attend an out of town business conference that’s relevant to your niche. How fun! But those travel expenses can add up quickly. You keep hearing that these travel expenses are tax-deductible, but what exactly does that mean? In this post, I’ll cover the basics of business travel expenses so you can deduct your expenses with confidence.
Disclaimer: This post is for information purposes only and does not constitute tax or legal advice. This post contains affiliate links, see my Disclosures here.
Travel Expenses Explained
The IRS defines travel expenses as the ordinary and necessary expense of traveling away from home for your business profession or job. This is travel away from your tax home, which is defined by the IRS as your principal place of business. As a business owner, traveling to conferences related to your business, certainly qualifies as a deductible travel expense based upon the IRS guidelines.
Let’s mention a few examples to get started. If you’re a blogger, you may decide to attend a blogging conference where you can network and learn from industry leaders. Similarly, a podcaster may go to Flynncon in order to meet other podcasters and stay up to date on best practices. Etsy shop owners or handmade craft sellers may travel to an out-of-state craft show so they can expand their product reach.
Once you’ve concluded that your travel is ordinary and necessary for your business, let’s dig into the details of your travel and the portion that is deductible. For our conference example, the cost of the conference ticket is tax-deductible. In addition, if you travel by air or train, you can deduct the cost of the plane or train ticket. If you rent a car, you can deduct that cost. If you drive your own car you can use the standard mileage rate (this post provides details about the business mileage deduction).
In addition to deducting the actual conference expense and transportation to the conference, you can deduct the cost of the hotel room if you need to stay overnight. However, it is important to note that if you use rewards points for your hotel or airfare (and didn’t actually spend money), you cannot deduct those as a business expense. Other ordinary and necessary expenses of travel such as taxis, tips, and parking are also tax-deductible. Be sure to keep excellent records so you have all the information you need when you file your return.
While the other items we discussed above are fully deductible, meals while traveling are an exception. Meals are subject to a 50% limit. If you’re traveling away from your tax home and purchase a meal while you are traveling, only 50% of the cost is allowed as a tax deduction. This holds true for non-traveling business meals as well. If you and your partners have a business meeting at a restaurant, only 50% of the cost is deductible as a business expense.
In summary, if you are legitimately traveling for business, you can deduct all of your expenses, but remember that meals are the only exception with the 50% limit. Be sure to keep your receipts and maintain careful records when you travel (and always!). If you love reading legal speak and want to dive into this topic further, the IRS outlines these guidelines in Publication 463.