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Updated for 2011

Small Business Deductions: Travel Expenses

What Are Travel Expenses?

Travel expenses are defined as the...

Ordinary and necessary expenses...
related to your business, profession, or job...
while traveling away from home.

Who May Deduct Travel Expenses?

Travel expenses may be deducted by:

Self-Employed Persons
Employees
Unemployed Persons
Transportation industry workers (get special treatment)

Self-Employed Persons

Deduct business-related travel expenses while away from home as a business expense.
Claim the deduction on line 24 of Schedule C (2011).

Employees

Employees

Unemployed Persons

An unemployed person may deduct travel costs to find a new job, including meals and lodging.
The deduction is taken on Schedule A under the miscellaneous deductions section if he/she itemizes deductions.
Only 50% of meal costs are deductible.
Lodging costs are100% deductible.
The deduction must exceed 2% of adjusted gross income to get any tax benefit.

Caution! First-time job seekers may not deduct expenses to find their first job.

Transportation Industry Workers

Employees or self-employed persons in the transportation industry may elect to claim a special M&IE (meals and incidental expenses) rate.
- The blended M&IE rates set by the IRS that will apply during the federal government's 2011 fiscal year from October 1, 2010 to September 30, 2011 are as follows:
  - $59 per day for any CONUS location (locations within the continental united states) and
  - $65 per day for any OCONUS location (outside the continental united states).
- Check with the IRS for updates.

Items Included in Travel Expenses

Transportation Costs:

Transportation costs of getting from home to the business location and back home are 100% deductible.

Once you arrive at the business location, you may deduct 100% of the cost of:

Transportation between the airport (or train/bus station) and the hotel.
Transportation between the hotel and all business locations.

Lodging:

Lodging costs are 100% deductible. Make sure you have receipts for lodging. There is no IRS standard lodging allowance like there is for meals.

Tips:

Tips to service personnel are 100% deductible. For example, taxis, baggage handlers, and maid service.
Tips to waiters/waitresses for meals are only 50% deductible.

Services:

Dry cleaning and laundry expenses are 100% deductible.
Business-related telephone and internet charges are 100% deductible.

Meal Allowance for 2011 (Food and Beverages):

You can claim actual meal costs, if you maintain records, or use the IRS standard meal allowance.
If you use the IRS standard meal allowance, the allowance for 2011 for travel within the continental U.S. (referred to as CONUS locations) is usually $46 per day, higher rates apply in certain high-cost areas such as resort areas and metropolitan cities.
Keep a record of the time, place, and business purpose of the trips. Failing to keep records could cost you the deduction.

Entertaining Business Associates on Business Trips:

You may deduct:

Food and beverage costs, including taxes and tips.
- Only 50% of these costs are deductible.
Tickets to entertainment events.
- Only 50% of the face value of a ticket is deductible even if you actually pay more.
Transportation costs to and from a restaurant and/or entertainment facility are 100% deductible.
- See the deduction rules for...
  - your employees who travel with you, and
  - a non-employee spouse, dependent, or other individual who travels with you.

Travel Expenses: Tax Terms You Need to Know-Ordinary and Necessary Expenses

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