One of the most important parts of a business trip is tracking your expenses. Of course, business travel costs money up front, but if you accomplish the goals of your trip, it can lead to more revenue for your company down the road. This is why sticking to budgets is so important, and tracking expenses in real time helps with that.
Another benefit of tracking business travel expenses diligently is that some expenses will be tax deductible. Understanding which expenses qualify for tax deductions and maintaining accurate records can be complex. This guide is designed to provide clear, practical guidance to support compliant, and efficient expense tracking.
Which business travel expenses to track
Let's start with the basics—which expenses you need to track while you're on the road. In short, all of them. Whether it's strictly business-related or a combination of business and personal, it's a good idea to keep track of all your expenses during a business trip—meals, hotels, taxis, rental cars, laundry, entertainment, parking fees, and anything else that may come up.
There is a clear distinction between tax-deductible and non-deductible expenses, and accurately tracking deductible costs is important for reporting and compliance. The following sections provide a more detailed explanation.
Are business travel expenses tax deductible?
Yes, some business travel expenses are tax deductible. According to the IRS, deductible expenses include, but are not limited to, the following:
- Travel by plane, train, rental car, or another method of transportation between your home and the location of your business trip
- Accommodation during your business trip
- Taxi fares during your business trip
- 50% of the cost of meals while you're on the road
- Laundry and dry cleaning
- Tips for any of the above services
- Mileage when using a personal car for business
Other necessary expenses, like parking fees, gas for a rental car, and the like are also tax deductible. According to the IRS, deductible expenses must be "ordinary and necessary" and must not be "lavish or extravagant."
In addition, there are limitations placed on some expenses. For example, for meals, the deduction limit is 50% on unreimbursed costs. If you don't claim any deductions for meals, though—if your company fully reimburses you, for example—you can also deduct $5 per day for incidental fees like tips at a hotel or restaurant.
Keep in mind that if your company is fully reimbursing you for all costs you picked up for your business trip, you may not be able to deduct these expenses from your personal taxes.
Non-deductible business travel expenses
There are also costs associated with business travel that are not tax deductible. Any entertainment or leisure expenses during your trip that don't serve your work, for example, are not tax deductible. Examples of these may look like the following:
- Movie theater tickets
- Lavish meals that aren't business meetings
- Costs of accompanying family members
- Gym fees
- Souvenirs
Most of these are self-explanatory, but bleisure travel can get a little more complicated expense-wise. Bleisure travel is a rising business travel trend that combines business travel with leisure travel—for example, being sent somewhere on a business trip and deciding to extend your trip for a few days after you're finished working. During a trip like this, the necessary daily expenses during the business portion of your trip are tax deductible, but as soon as the business portion ends, they're non-deductible.
Disallowed business expenses
Every so often, a mistake can happen and you (or your company) may claim tax deductions that you don't actually qualify for. In more serious cases, claiming excessive business travel expenses can result in a substantial understatement of income tax, which the IRS defines as an understatement exceeding 10% of the tax required to be shown on the return or $5000, whichever is greater.
These are called disallowed expenses by the IRS, and you should try to avoid them at all costs. Claiming disallowed expenses can result in frequent audits and even fines. The fine is typically 20% of the difference between what you paid in taxes and what you actually paid, meaning you end up paying 120% of what you should have paid in the first place.
This is why it's important to avoid disallowed expenses at all costs. To do this, we recommend the following:
- Diligent recordkeeping using a business travel app.
- Saving money on business travel whenever possible. One way to do this is to take advantage of SIXT business rental cars—corporate clients get up to 15% off rental cars.
- Consulting a tax advisor to help you understand your personal situation better.
Tips for how to expense business travel
When it comes to how to expense business travel, recordkeeping is everything. We have a few tips to make it easier on you when the time comes to report your expenses and get reimbursed:
- Keep everything: receipts, invoices, bills, any proof of expense. You may even want to take photos of them and upload them to a business travel management platform so you have a backup.
- Use a business credit card to pay for work-related things during your trip if your company gives you one. This will help keep business and personal expenses separate, making your records cleaner.
- Document everything. Keep detailed records of the purpose of the trip and the purpose of each expense. Detail where you were, why you were there, when you were there, the payment method you used, and how it specifically relates to business in case any questions come up later.
When the trip is over (or, if you're using an expense tracking app, you can do this in real time), you'll report your expenses to your company and get reimbursed for the approved amount. Whatever business expenses you don't get reimbursed for can be written off on your taxes.
Writing off business travel as an expense
As explained, business travel expenses that have not been reimbursed by your company may be deductible, subject to the limitations discussed earlier. Once eligibility is confirmed and receipts are in order, the tax reporting process can begin. You will need to keep your detailed log with the date, time, amount spent, place, and purpose of each expense handy for this process. Here are your next steps:
- 1. Categorize your expenses using an app, a spreadsheet, or physical files. Organize them into categories like meals, accommodation, transportation, etc. You may have already done this step during your trip, but if not, do it now.
- 2. Go over the reimbursements that were issued to you from your company. Remember you can't claim deductions for things you were reimbursed for, so you'll only be working with what's left after the reimbursements. If you were reimbursed for everything, you will not be eligible for tax deductions, as your employer will write these off on the business tax return.
- 3. Fill out your tax forms correctly either on your own or with the help of a tax professional. If you weren't reimbursed for everything, you may be able to claim deductions using Form 2106.
The bottom line: How to expense business travel
Expensing business travel can be complicated, but this guide should make it easier. Stay within your company's budget, keep a detailed log of your expenses during the trip, and report everything correctly when you get back. And then, whatever you're not reimbursed for, claim as tax deductions later.
To make things even easier, choose a reliable mode of transportation like a rental car from SIXT business. Not only can this be written off as a business expense, but you'll also enjoy corporate customer perks like:
- Up to 15% discount for corporate clients
- Skip the line at the counter with online check-in
- Flexible rental periods for any business trip duration
- Wide vehicle selection including EVs and hybrids
How to expense business travel: FAQs
Save money on business travel by taking advantage of loyalty points, using expense tracking apps, and taking advantage of deals like those with SIXT business, where you can get up to 15% off rental cars. Employers may also give employees a per diem rate to closely control expenses.
You can typically deduct all the same business travel expenses as an employee of a company does, but you'll use Form 1040. If you're self-employed with employees, you can also deduct any reimbursements you issued to your employees for business travel. For a broader overview of deductible costs, see our guide to small business tax deductions.
There is no annual tax deduction limit for business travel, but the IRS will closely scrutinize higher deduction amounts. This is where your supporting documentation comes in—make sure you can prove that each expense you claimed is accurate and work-related.
Around Business Travel
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- What is Business Travel
- Business Travel Management
- Save Money on Business Travel
- Sustainable Business Travel
- Bleisure
- Duty of Care
- Travel Expenses
- Business Travel Trends
- Tips on Business Travel
- Best Cities for Business Travelers
- Best Car Rental for Business Travel
- Best apps for business travel
- How to calculate business mileage
- Small Business Tax Deduction