Good recordkeeping is crucial
When traveling from home overnight for business, it’s wise to keep track of all expenses you incur, because they may be deductible.
Deductible travel expenses generally include, but are not limited to the costs of:
- Travel by airplane, train, bus or car between your home and your business destination.
- Fares for taxis or other types of transportation between the airport or train station and your hotel, the hotel and the work location and from one customer to another, or from one place of business to another.
- Shipping of baggage and tradeshow material between your regular and temporary work locations.
- Meals and lodging.
- Using your car while at your business destination. You can deduct either actual expenses or the standard mileage rate, but you must make this choice during the first year of using your car for business; after that, there are restrictions on choosing a method. You can also deduct business-related tolls and parking fees. If you rent a car, you can deduct only the business-use portion for the expenses.
- Dry cleaning and laundry.
- Business calls while on your business trip.
- Tips you pay for services related to any of these expenses.
- Other similar ordinary and necessary expenses related to your business travel.
Instead of keeping records of your meal expenses and deducting the actual cost, you can generally use a standard meal allowance, which varies depending on where you travel. The deduction for business meals is generally limited to 50% of the unreimbursed cost.
For all employees, allowable travel expenses will be figured on Form 2106 or Form 2106-EZ. The allowable expenses are then carried to Form 1040, Schedule A. In order to successfully deduct business travel expenses, the deductions must exceed 2% of your adjusted gross income.