Whether you are in business for yourself or you are an employee, you are entitled to take credit for your qualified travel expenses in the form of tax deductions. It is important to understand the Internal Revenue Service (IRS) rules regarding travel expense deductions and use them to your advantage at tax time. To substantiate your deductions, keep careful records of your allowable travel costs throughout the tax year.
Use federal tax Form 1040, Schedule A and Form 2106 to claim travel expenses if you are an employee. When your employer requires you to travel away from your tax home to conduct business, you may claim meal, lodging and business-related entertainment expenses. You may generally deduct 50 per cent of the cost of business meals while travelling for business.
Take credit for your actual vehicle expenses while travelling or use the optional standard mileage deduction offered by the IRS. After June of 2008, you may claim $.58 per business mile on Form 2106. Taking the standard mileage deduction simplifies record-keeping because you do not have to account for vehicle depreciation and individual auto expenses--you must only log your business mileage.
Add your travel expenses to your total employee business costs and carry that figure from Form 2106 to line 21 on Schedule A. Include business expenses, such as laundry expenses, faxes, equipment rental and administrative help. Take credit only for expenses not reimbursed by your employer. If your business-related expenses total at least 2 per cent of your adjusted gross income, you will qualify for a deduction.
Calculate your travel expenses on Form 1040 and Schedule C if you are a business owner or independent contractor. Include the cost of airline tickets, hotels, train fare, taxis, tolls and tips. Account for your travel expenses on lines 24a and 24b. Carry your net business profit or loss from Schedule C to Form 1040, line 12.
Recognise that you may only deduct travel expenses for a spouse or dependent who accompanies you on a business trip if they are specifically engaged in business-related activities. For example, if your spouse is employed by you and travels with you to conduct business, you may deduct her travel expenses.