The IRS and Business Travel

When you or you boss travel on business, it's important to be aware of what the IRS will allow as "the ordinary and necessary expenses of traveling away from home for your business, profession, or job" in order to claim these expenses for tax purposes. That is if your company doesn't reimburse you.

Generally, when employees travel on business for their company, they will be reimbursed by submitting a reimbursement form at the end of their business trip. What is considered reimbursable is usually outlined in the company travel policy. Make sure you and your boss get a copy and read it before that first trip.

In the meantime, what you're most likely to find covered by your organization include these company business expenses:

Transportation:

Most employers are willing to reimburse any reasonable cost related to getting to and from your business destination, whether that means going by airplane, bus, train, private car or taxi. The IRS allows these deductions, so if your employer doesn't reimburse you, you can claim them on your taxes. Just keep in mind that luxury water travel is not included. That means no Caribbean cruises for business.

Meals:

You're likely to find in your employer's travel policy that they cover meals either based on a daily total stipend - say, $75 - or an amount established per meal. Extras, such as snacks or alcohol are generally not included. The IRS allows a deduction of 50 percent for the daily meal stipend or actual meal cost. Your employer may want you to hold onto your receipts; the IRS only requires this for the actual cost method.

Lodging:

If you're away on business and need to stay overnight in a hotel, you're employer will likely reimburse the cost and, in fact, may have a deal worked out with certain hotels. Just be sure to check your travel policy as to an acceptable nightly rate. If for some reason you do not receive reimbursement from your employer, the IRS sees this as a reasonable deduction.

Incidentals:

You may find the need for things such as tipping, telephone calls, and dry cleaning while you are traveling. If so, hold onto your receipts. These incidentals may be covered by your employer, and if not, you may be able to write them off on your income taxes.

Of course, these are only the typical expenses that most employers reimburse. You might find your company will cover some additional costs. And if your employer doesn't reimburse all of these, it makes sense to see if the IRS will pick up the tab.

Even if you are not traveling out of town on business, there may be travel expenses associated with your job. If you have an office in your home that you use as your principal place of business for your employer, you may be able to deduct the cost of traveling between your home office and any work locations associated with your employment. In addition, business entertainment and business gift expenses, while subject to certain limitations, may be tax deductible. Just remember to keep records of everything.

Last but not least is the issue of business travel versus personal travel expenses. The IRS is typically looking for anyone who tries to classify a nondeductible personal trip as a business trip. So if you travel and engage in both business and personal activities, just make sure your purpose is primarily for business; otherwise, you cannot deduct any of your expenses.

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