Traveling for Business This Summer? Here’s What You Can Deduct

• Learn about changes to business deductions through the Tax Cuts and Jobs Act.
• Discover rules regarding expenses and deductions when traveling for business.
• Learn the rules around mixing business with pleasure trips.
• Find out if you can deduct expenses incurred by taking a spouse on a business trip.

Are you and your employees traveling for business this summer? Then there are several considerations to keep in mind. Under tax law, to claim deductions, you must meet certain requirements when traveling for out-of-town business within the United States. The rules apply if the business conducted reasonably requires an overnight stay.

Note: Under the Tax Cuts and Jobs Act, employees can’t deduct their unreimbursed travel expenses on their tax returns through 2025. That’s because unreimbursed employee business expenses are “miscellaneous itemized deductions” that aren’t deductible through 2025.

However, self-employed individuals can continue to deduct business expenses, including away-from-home travel expenses.

Rules that come into play when traveling for business

The actual costs of traveling for business (for example, plane fare and cabs to the airport) are deductible for out-of-town trips. You may also deduct the cost of meals and lodging. You may deduct your meals even if not connected to a business conversation or other business function. Remember 2021’s and 2022’s temporary 100% deduction for business food and beverages provided by a restaurant? Sadly, that deduction did not extend to 2023. Therefore, there’s once again a 50% limit on deducting eligible business meals this year.

Keep in mind that you may not deduct meal or lodging expenses considered “lavish or extravagant,” a term interpreted to mean “unreasonable.”

Personal entertainment costs on the trip aren’t deductible. However, business-related costs such as those for dry cleaning, phone calls, and computer rentals can be written off.

Mixing business with pleasure

Some allocations may be required if you combine traveling for business with pleasure, for example, if you fly to a location for four days of business meetings and stay on for an additional three days of vacation. You may only deduct the costs of meals, lodging, etc., incurred for the business days — not those for the personal vacation days.

On the other hand, concerning the cost of the travel itself (plane fare, etc.), if you travel primarily for business, you can deduct the travel cost in its entirety and no allocation is required. Conversely, if the trip is mostly personal, none of the travel costs are deductible. An important factor in determining the primary function of a trip is the amount of time spent on each (although this isn’t the sole factor).

If the trip doesn’t involve the actual conduct of business but is to attend a convention, seminar, etc., the IRS may check the nature of the meetings carefully to make sure it isn’t a vacation in disguise. Retain all material helpful in establishing the business or professional nature of this travel.

Other expenses

The rules for deducting the costs of a spouse accompanying you on a business trip are very restrictive. You may not deduct any expenses unless the spouse is an employee of you or your company. The spouse’s travel must also be for business purposes.

Finally, note that personal expenses you incur at home as a result of taking the trip aren’t deductible. For example, let’s say you have to board a pet while you’re away. The cost isn’t deductible.

Have questions about your small business deductions? Call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations to discuss your situation.

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