Corporate travelers may have a laundry list of travel-related tax deductions they can take, provided those deductions adhere to the strict IRS guidelines. Before you break out your calculator and gleefully compile your receipts, first know that business travel expenses are only tax deductible if your employer has not yet reimbursed you for them. The second item of note is that a per diem allowance governs the total amount you can deduct.
How do Per Diem Taxes Work?
Per diem refers to the maximum daily allowance you’re able to deduct for business-related travel. The allowance covers the cost of lodging, meals and other incidental expenses incurred in the name of business.
Domestic per diem rates for travel within the continental United States are set by the General Services Administration (GSA). Each state has its own per diem rate, with up-to-date rates available on the GSA website.
Travel to Alaska, Hawaii, Guam and Puerto Rico, or non-foreign rates outside the continental United States, are set by the Department of Defense.
International per diem rates are set by the State Department; they apply to travel to foreign countries.
What Travel Expenses are Tax Deductible?
The IRS provides a wide range of potential travel-related deductions that can be taken if the travel was solely for business and the expenses are considered “ordinary and necessary.” That means the luxury suite, the $500 massage and the high-end limo service to and from the airport are probably not going to cut it.
What can make the cut are a number of expenses, such as:
- Airfare, train and bus fares
- Expenses related to operating and maintaining a vehicle for business travel
- Taxi fares for travel to airport, hotel, meeting places and related tips for drivers
- Shipping or transportation fees for display materials and other necessary business items
- Business calls, fax services, computer rentals
- Dry cleaning and laundry
- 50 percent of your meal costs while traveling
- Tips for staff and service providers on eligible expenses
- Certain entertainment expenses if they are a business necessity for clients
- The cost of obtaining a passport and visa, if both are used exclusively for business purposes
What Else Do I Need to Know?
While the IRS does provide tax breaks for deducting expenses related to corporate travel, the breaks are limited in scope and as a percentage of your overall income. To ensure you get the maximum return on your investment, the ideal solution would be to get directly reimbursed from your employer, or have your employer pay the expenses via company credit card or other method in the first place.
Employers can make it easier still for their business travelers (and themselves) by partnering with Swift for corporate passport and visa services. Feel free to contact Swift for more information or to answer any questions; we’re always happy to help.