How does traveling for business work on your financials? What expenses can you deduct for business travel? Knowing what you can and cannot deduct for travel on your business taxes is important in keeping tax records accurate and in line with IRS regulations. There are many misconceptions about how business travel deductions work and what is actually considered travel for business.
What is business travel?
When trying to determine whether travel expenses are indeed related to business travel, the first thing to consider is your “tax home,” a term the IRS uses to help qualify how business travel is defined.
Per the IRS, your tax home is the entire city or general area where your main place of business is located. Where you live does not affect what your tax home is when qualifying business expenses.
If you work in more than one place, it will be the main location where your business is located. While there are multiple factors the IRS considers when determining a tax home, the most important is the length of time spent at a location for business purposes.
If you are traveling away from your tax home for a period of time that is longer than a standard workday and you need sleep or rest in order to complete your work tasks, the expenses incurred during that travel may be deductible.
Deduction rates are related to the expense type. Meals, for example, generally have a 50% deduction rate. Entertainment, on the other hand, gets no deduction.
When considering expenses for business travel, keep in mind that the purposes of the travel and the expenses must be related to business, and the individual claiming the deductions must be able to show that a real business purpose exists for the expense.
Need help keeping your travel expenses documented properly? Silver Star Bookkeeping would love to dig in and help answer any questions you may have when traveling for business.