Travel expenses can be deducted if the primary reason for the trip is for business purposes away from your main place of business. This can include attending conferences, meetings, or other business-related activities. It’s important to keep receipts and documentation to support these expenses.
What qualifies as business travel?
- The primary purpose of the trip is business-related.
- Traveling away from your tax home.
Deductible Travel Expenses
For tax purposes, travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your business. Types of business travel expenses can include:
- Transportation: travel by airplane, train, bus, or car between your home and your business destination.
- Lodging and meals: your lodging, hotel, or other accommodation costs and non-entertainment-related meals if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. Meals include amounts spent for food, beverages, taxes, and related tips. You can generally deduct only 50% of the cost of your meals.
- Car: operating and maintaining your car when traveling away from home on business. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking. If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses.
- Other: baggage fees, taxi or rideshare fares to your destination, business-related phone calls or internet usage, tolls and parking fees, dry cleaning, and laundry.
To be considered business expenses in Heard, these costs must be directly related to a 100% business event, such as traveling for a work conference or training. Any business expenses incurred on the trip can be paid from your business account, so they are captured in your practice books.
What about personal travel expenses?
If your trip includes some personal travel time, you can only deduct the business related portion of the expenses. For example, if you have a 5-day trip with three business days and two personal days, you could deduct 60% of your transportation and lodging costs. However, meals remain only 50% deductible for business travel days only.
Expenses incurred on personal days, for example, sightseeing or extended stays, are not deductible. You can create a travel log to document the purpose of each expense, especially for mixed-use (business and personal) costs, to help clarify.
S Corporation
Luckily, there aren’t many other considerations for S-Corps, as business travel operates under the same rules as a Sole Proprietorship. If you paid for the business travel through the business, everything acts as normal.
If you paid for travel personally using your own card or cash, the correct method for an S-Corp owner is to reimburse yourself through an Accountable Plan. This ensures expenses are properly documented, supported by receipts, and reimbursed by the business in accordance with its policies. Using an Accountable Plan is required for S-Corp owners when personal funds are used for business expenses (like business travel), and it allows the deduction to remain on the business return rather than being treated as a personal cost.