How to Get Credit for Traveling Expenses

Reduce the travel expenses burden on your business budget with tax credits.

Travel expenses are one of the three largest controllable expenses of a business, together with wages and health care. Deducting your travel expenses accurately is a smart way of reducing your travel expenses without any loss of benefits. Whether you're self-employed or an employee, it's important to understand the Internal Revenue Service guidelines on travel expenses and learn how to apply them correctly.

Things You'll Need

• Odometer
• Receipts

Instructions

1. Compare your travel expenses to the Internal Revenue Service's definition of travel expenses. For instance, any travel expenses away from your home on a temporary assignment should qualify. However, if you're traveling back home from a temporary work assignment, you can't deduct expenses incurred while you're at home.

2. Determine if your work assignment is indefinite or temporary. Any work assignment you expect to last for more than a year is indefinite. You can't claim a tax credit for travel expenses on indefinite assignments.

3. Keep records of invoices for all deductible travel expenses. Deductible expenses include airplane, train and bus tickets; car rental fees; taxi and airport limousine fares; business telephone calls; lodging; dry cleaning; laundry; and meals.

4. Deduct any limitations to deductible travel expenses according to Internal Revenue Service guidelines. For instance, when you declare meal expenses, you may only declare 50 percent of the cost of a meal or the current standard meal allowance. The IRS standard meal allowance for 2010 was $46.

5. Calculate your total traveling expenses in Schedule C to your Form 1040. Write your total travel expenses on lines 24a and 24b to deduct travel expenses from your business income. Report your net business profit, or loss, on Form 1040. If you're an employee, use Form 2106 Employee Business Expenses to calculate your travel expenses.

Tips & Warnings

• Deduct all expenses for traveling to and from your destination if the trip was entirely for business purposes. The IRS considers a business trip completely for business, even if you manage to include some fun and relaxation periods, if you don't have control over the details of your trip, you're not self-employed and you're not related to your employer.

References

• Internal Revenue Service: Resources, Services and Financial Management
• Internal Revenue Service: Travel
• American Council on Education: Travel Expense Report

Resources

• Internal Revenue Service: Form 2106
• Internal Revenue Service: Form 1040