Similar to other costs of doing business, you can claim income tax deductions for any travel expenses you personally incur in order to service your customers. However, it’s important to plan your trips so that you can maximize your deduction.
You can only deduct your travel expenses if they are ordinary in nature and necessary for servicing the customer. Costs one could consider extravagant or lavish do not qualify for the deduction. While not guaranteed, the following types of travel expenses are usually deductible:
- Transportation costs incurred while travelling from your personal home to the client site
- Fuel and other automotive costs you pay while working at the client’s location
- Meals and hotel costs
- Dry cleaning and laundry expenses occurred during business travel
Transportation costs incurred while travelling from your personal home to the client site. Fuel and other automotive costs you pay while working at the client’s location. Meals and hotel costs. Dry cleaning and laundry expenses occurred during business travel.
Additionally, you cannot incur your travel expenses for personal reasons, but instead must incur them in the process of providing your services to clients. There is no concrete rule on when a travel expense is business-related. However, as a result of this rule, you cannot claim a deduction for the cost of your daily commute between your personal residence and the office. Instead, this is considered a personal expense.
You have to travel a substantial distance to deduct your travel expenses. During your trip, you must leave your “tax home,” i.e. your main place of business. And, you have to travel more than just a short distance from your office building to meet with a client. This usually means that you have to leave the city in which your business is located or, for smaller towns, its general surrounding area.
You must also travel for such a length of time that you are away from your tax home for longer than an ordinary work day. Generally, this means that you have travelled for such a long period of time that you must rest or even sleep overnight.
However, you cannot stay away from your tax home for too long, or else you risk losing the deduction. You can deduct travel expenses incurred while temporarily working away from your tax home. However, if you provide your services at a client location for an indefinite amount of time, you cannot claim the deduction. This usually means that you can stay at a client site and claim travel expense deductions for up to a year. When you realistically expect to work there for over a year, however, you may no longer claim a deduction for any future expenses of travelling to that location.
Finally, successfully claiming the travel expense deduction requires recordkeeping. To support your deduction, you should keep all related receipts. It is also helpful to use a log, notebook, or other type of written record to track your expenses.