Travel expenses are tax deductible when you’re away on business.
As long as the trip is primarily business in nature, a tax planning element is available. You can spend some of your time for pleasure or personal purposes and still deduct most of your travel expenses.
The main types of travel expenses are travel fares, meals, lodging and expenses incident to travel. Some examples of expenses incident to travel include telephone charges, tips and dry cleaning bills.
As with all business expenses, travel expenses must be ordinary, necessary and reasonable in amount to be deductible.
When taxpayers travel for both business and personal purposes, they must allocate the expenses. If the trip is primarily for business, travel fare is deductible in total, and other various expenses must be allocated between business and personal.
For example, if you take a trip for both business and personal purposes and spend three days on business and two days for pleasure, you would allocate the expenses as follows:
- You would be able to deduct 100 percent of the travel fare because the travel is primarily for business.
- Your hotel, rental car, and meals and entertainment would be deductible for the amounts spent during the three days of business but not for the two days of pleasure.
- The deductible business portion of the meals and entertainment would still be subject to the 50 percent limitation.
However, if your trip is mainly for personal purposes, you will not be able to deduct any of the travel fare, for example, an airline ticket. The hotel, rental car, meals and entertainment are deductible for the business portion of the trip but not for the personal portion.
When your spouse or children accompany you on a business trip, expenses attributable to them are not deductible unless there is a bona fide business purpose. The performance of some minor tasks by your spouse and/or children does not cause these expenses to become deductible business travel expenses. They are still considered personal.