When it comes to deducting business travel expenses, business owners and employers face a maze of rules that can be both complicated and prone to change. However, understanding these regulations can significantly help businesses maximize their tax write-offs and lower their annual tax bills.

Following are some guidelines and tips to ensure compliance with IRS standards.

When are Business Travel Expenses Deductible?

Whether it’s for an overnight stay for a tradeshow or a flight to meet a client across the country, the IRS generally allows businesses to deduct travel expenses if they meet the following criteria:

  1. Expenses must be considered "ordinary and necessary," not "lavish and extravagant." Meaning, the expenses should be common within industry standards and beneficial for the business’s operations.
  2. Expenses can be deducted when a person is traveling away from their tax home, which is the city where their primary business operates and may differ from the location of their family home.
  3. The primary objective of the trip should be business-related, as opposed to personal.

A clear business purpose is essential for deducting travel expenses. When travel is directly related to increasing revenue, profit, or building the business, most expenses are fully deductible.

What Types of Travel Expenses are Deductible?

Costs related to attending workshops, meeting with vendors, and checking in on a rental property, among others, are generally considered 100 percent write-offs on your tax return. Meals, however, are subject to a 50 percent limitation. Any personal expenses, such as personal entertainment, gifts for family or friends, or parking tickets, etc. are excluded from deductible expenses.

Following are some commonly deductible travel costs for businesses:

  • Transportation: flight and baggage expenses, car rentals and taxi fees, train and bus fares, parking and tolls, and any operating costs for personal vehicles (standard mileage rate or actual cost of gas etc.)
  • Lodging: hotel or house rental
  • Meals: 50 percent of food expenses
  • Miscellaneous expenses: tips, necessary rental fees, laundry services, etc.

It’s important to note that most entertainment expenses are no longer allowed and should be clearly delineated from meals for proper tax reporting. Even if the entertainment involves a business engagement with a client, vendor, prospect, or employee, such expenses, like a concert or sporting event, are generally not deductible unless they meet specific conditions.

What are the Per Diem and Mileage Rates for Business Travel?

To simplify the process for employees who frequently travel for business purposes, employers may consider using the government per diem rates, a set daily reimbursement amount that fluctuates depending on the location and time of year. For 2025 the reimbursement amounts for meals and incidental expenses range from $68 to $92 and for lodging from $110 to $342. The federal government’s General Services Administration has a search tool to determine per diem rates in effect for each location. Note that documentation must be provided even if reimbursing using per diem rates. Per diem payments in excess of the actual expense are taxable to the employee.

While per diem rates offer a convenient way for employers to substantiate business travel expenses, it’s important to note that using per diem rates is not required. Employers can choose to deduct the actual cost of lodging and meals, as long as they provide proper documentation. In some cases, deducting actual expenses may help recoup more of the cost than what the standard per diem would allow. However, self-employed individuals are limited in that they cannot use the lodging per diem amounts and can only deduct the actual lodging expenses paid. The use of per diem rates for meal expenses is allowed for self-employed individuals. The meals deduction is still limited to 50 percent of the total expense regardless of which method is used.

What Should You Know About Combining Business and Personal Travel?

It’s common to blend some business and personal travel, especially when it is to a highly-sought-after destination. However, the IRS keeps a close eye on mixed-purpose travel to ensure that personal expenses aren’t being deducted as business costs, making the allocation of time between business and personal activities a key factor in determining eligible deductions.

In cases where travel is primarily for personal reasons, the travel costs, such as airfare and lodging, are generally not deductible. The cost of bringing a family on a business trip is also not deductible. However, any business-related expenses incurred during the trip, like attending a meeting or conference, may still be eligible for deduction.

When business travel includes personal time—such as extending your stay to visit attractions—you can only deduct the portion of expenses directly tied to business activities, such as transportation and lodging during the business-related part of the trip. A reasonable allocation method, like dividing the total expenses based on the ratio of business to personal days, helps determine what can be deducted.

What Records and Receipts are Essential for Tax Purposes?

As a general rule of thumb, businesses are required to have records for travel expenses. The receipt and documentation should include the details of the expense, amount, date, place of purchase, and the business purpose. In addition to retaining receipts, it also helps to keep a log of expenses and trip details or to use an expense tracking app to alleviate cumbersome manual entry.

Steps to Take Before Year-End

Ideally before year-end, business owners and employers should make sure their records and documentation are in place. This head start will not only streamline your tax preparation but also provide greater financial transparency and facilitate better business decisions moving into the new year.

If you’re looking for accounting support, our Client Accounting Services team can serve as an extension of your business and handle the back-office functions so you can focus on operations, client relations, and business development.

Contact an R&A advisor to learn more about services that can help you and your business.

About this Author

Adam specializes in international tax planning and analysis. Since 2012 he has coordinated offshore compliance submissions, international tax training relating to foreign pension plans, foreign investment in US property, and general foreign compliance. In addition, in conjunction with legal counsel, he assists international families regarding planning, entity structure, and transaction analysis.

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