Travel expenses may include airplane, taxi, limousine, bagging and shipping, meals and lodging, telephone, tips, and any other costs that are “reasonable and necessary” in conducting your business.1
Part personal. If your trip is part business and part personal, expenses attributable to your personal activities are not deductible, but you can deduct the costs of getting to and from your destination if business was your primary purpose for the trip. An important factor in determining primary purpose is how much time you spend on business versus how much time you spend on personal activities.3
Family members. If you take your spouse or other family members with you, you can't deduct their travel costs unless you can show that their presence had a bona fide business purpose.4
Substantiation requirements. In addition to the standard requirements, the tax code imposes strict substantiation requirements for deducting travel expenses. Under these requirements, you must prove the following elements:5
Amount. The amount of each separate expense, although certain items can be aggregated.
Time. Dates of departure and return and the number of days spent away from home on business.
Place. Destinations or locality of travel, i.e., names of the cities, towns, etc. where you traveled.
Business purpose. Business reason for the travel or the nature of the benefit you expected. E.g., client meeting, contract signing, business education, business association meeting, sales presentation, etc.
Furthermore, you must record (write down) each element “at or near the time” it occurs.6
Tip. The substantiation rules effectively require you to keep a tax diary.
Finally, you must keep supporting documents, such as receipts, paid bills, or similar documents for:
Every lodging expense, and
Any other expenditure exceeding $75, except for transportation charges when documentary evidence is “not readily available.”
Documentation tip. Keep all your receipts, regardless of amount.
1 Reg. Section 1.162-2(a). See IRS Publication 463, “Travel, Entertainment, Gift, and Car Expenses.”
2 IRC Section 274(n)(1).
3 Reg. Section 1.162-2(b).
4 Reg. Section 1.162-2(c).
5 Reg. Section 1.274-5T(b)(2).
6 Reg. Section 1.274-5T(c)(2).