What expenses can I deduct while traveling for business away from home?
A wide range of expenses can be deducted while traveling away from home.
Here are the main ones:
- Transportation fares, or actual costs (or a standard per mile rate) of using your own vehicle. Also, transportation costs of getting around in the work area-to and from hotels, restaurants, offices, terminals, etc.
- Lodging and meals (subject to the 50% limit on meals)
- Phone, fax, laundry, baggage handling
- Tips related to the above
What cannot be deducted as travel expenses?
The following travel expenses cannot be deducted:
- Costs of commuting between your residence and a work site, but it’s a deductible business trip if your residence is your business headquarters.
- Travel as education
- Job hunting in a new field or looking for a new business site
What can I deduct for business entertainment?
There are various conditions and limits for deductions for business and entertainment.
- Generally, there should be a business discussion before, during, and after the entertainment.
- Generally, deduction for entertainment and meals is limited to 50% of the cost.
- There are further limitations for club dues, entertainment facilities and skyboxes.
- Spouses of business associates, and your own spouse, can be included in the entertainment in settings where spouse attendance is customary.
How do I prove my travel and entertainment expenses?
If you’re an employee who is reimbursed for expenses you’ll need to file and expense report for your employer, which is a written accounting of your expense while on travel. If you received a cash advance, you’ll also need to return to the employer any amounts in excess of your expenses.
Some per diem arrangements and mileage allowances-called “accountable plans”-take the place of detailed accounting to the employer, if time, place and business purpose are established.
Where expenses aren’t fully reimbursed by your employer, or excess reimbursements aren’t returned, detailed substantiation to IRS is required and, if you’re an employee, your deductions are subject to the 2% floor on miscellaneous itemized deductions.
In addition, your expense records should be “contemporaneous,” that is, recorded close to the time expenses are incurred.