Deducting travel expenses
Travel expenses can be deductible if they're incurred while conducting business related work. Typical travel expenses include car, airfare, lodging, meals, and entertainment. For these expenses to be deductible, they must be ordinary and necessary.
Vehicle expenses can be calculated by tracking either:
- All your vehicle costs (gas, repairs, maintenance, depreciation, etc.), or
- Your business miles x the IRS mileage rate ($0.54 for 2016). For this option you have keep a log of all your business trips.
You can add tolls and parking fees to both methods of calculating vehicle expenses.
Business meals are deductible but only at 50% of the actual cost. This applies whether you have a business meal while traveling away from home overnight or while in your tax home.
The method used to deduct expenses depends on whether you are self-employed or are employed by someone else. Self-employed individuals generally take their travel expenses as a deduction against self-employment income, while those who are employed by others take their unreimbursed employee expenses as an itemized deduction on Schedule A, limited to amounts above 2% of their adjusted gross income (AGI).