How Much Can I Deduct for Business Travel?

By Michael Ferguson

Business travel expenses can be used to reduce taxable income, resulting in lower taxes owed. The Internal Revenue Service (IRS) allows taxpayers to deduct certain business expenses, including costs associated with traveling for work. The amount that can be deducted depends on the type of travel and the purpose of the trip.

Travel Expenses That Can Be Deducted
The IRS allows taxpayers to deduct a variety of expenses related to business travel. These include costs for lodging, meals, transportation and other miscellaneous items. If the trip was taken outside of the continental United States, additional expenses such as passport fees, foreign visas and inoculations may also be deductible.

Limitations on Deductions
The IRS places limitations on the amount that can be deducted for certain types of business travel. For instance, only 50 percent of meal costs can be deducted from taxable income while traveling away from home on business.

Additionally, lodging deductions are limited to a fixed amount per night in certain locations; this amount is adjusted periodically by the IRS. Businesses must also maintain proper documentation in order to take advantage of these deductions; receipts must be retained as proof of expenses incurred while traveling for work-related purposes.

Per Diem Rates
The IRS also has established per diem rates which allow taxpayers to deduct specified amounts when they are away from home on business trips lasting less than one year. These rates are determined by location and reflect an allowance for meals and incidental expenses incurred during work-related travel within certain geographic regions in the United States and its territories. Taxpayers who choose to use these per diem rates instead of actual expense amounts must also maintain proper documentation supporting their travels as well as any other related activities during their trip for tax audit purposes.

Reimbursed Expenses
If an employer has reimbursed a taxpayer for business travel expenses, those amounts cannot be deducted from taxable income since they have already been excluded through reimbursement or salary reduction plans such as a 401(k). However, if an employee has paid out-of-pocket for travel expenses not covered by their employer’s plan or has received partial reimbursement, they may still qualify for deductions under certain circumstances; again proper documentation must be maintained in order to take advantage of these deductions if available.

Conclusion

The amount that taxpayers can deduct for business travel depends on numerous factors including the type of trip taken, its duration and other related activities incurred while away from home or abroad on company-related business trips. It is important that businesses maintain proper documentation in order to take advantage of deductions available under IRS guidelines; failure to do so could result in disallowed deductions or even penalties depending upon individual circumstances.