Deducting Travel Expenses
Travel expenses can be deductible if they are incurred while conducting business related work. Typical travel expenses include automobile, airfare, lodging, and meals and entertainment. For these expenses to be deductible, they must be ordinary and necessary.
Auto expenses can be calculated by tracking either:
- All costs of using the vehicle (gas, repairs, maintenance, depreciation, etc.), or
- The number of business miles (you must keep a log of business trips driven each day) and multiplying the miles times the IRS mileage rate for the year:
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 your Adjusted Gross Income (AGI).
IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses, provides other details about deducting your expenses.