Deducting travel expenses
This article is valid for tax year 2017. As a result of tax reform legislation, the travel expenses deduction will be suspended starting in tax year 2018. See the complete list of affected deductions at Which federal tax deductions have been suspended by tax reform?
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 ($0.535 for 2017). For this option you have to 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. Meal expenses are deductible if your business trip is overnight or long enough that you need to stop for substantial sleep or rest to properly perform your duties. Meal expenses are also deductible if the meal is business-related entertainment, regardless of where the meal takes place.
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).