What Travel Expenses Are Tax Deductible for Self-Employed Individuals?

Managing travel expenses is an important part of running a business, especially for self-employed individuals who travel for work. There are travel costs that you can claim as tax-deductible business expenses, allowing you to reduce the overall amount you pay.

This article outlines which costs qualify as tax deductions, how to document them, and what to consider when traveling internationally, so that you can make the most of these opportunities while staying compliant with tax laws.

What Travel Expenses are Tax Deductible for Self-Employed?

The Internal Revenue Service (IRS) allows businesses to deduct travel costs when an employee must travel away from their main place of work or tax home for business reasons. This is defined as traveling for longer than one ordinary workday.

Self-employed individuals can also deduct business-related travel expenses as long as they are necessary and ordinary for their trade or business – meaning they are not excessive or for personal reasons. Luxury expenses, such as first-class air travel or five-star hotels, are unlikely to be acceptable unless they can be justified for your business needs.

For instance, you can deduct expenses you incur to travel to attend a convention related to your profession, if you can demonstrate that attending will directly benefit your business. However, special rules apply for attending conventions held outside North America. You can find the details of these rules on the IRS website.¹

The IRS requires that you prove all your travel expenses are directly related to your business activities. If you fail to provide adequate records, the IRS could deny your deductions.

Types of Deductible Travel Expenses

Self-employed individuals can deduct the following travel-related costs if they are eligible, according to IRS guidelines:²

• Travel by airplane, train, bus or car between home and the business destination.
• Fares for taxis or other types of transportation between an airport or train station and a hotel, as well as a hotel and the work location of customers or clients, business meeting places, or a temporary work location.
• Shipping of baggage and sample or display material between the individual’s regular workplace and the temporary work location, such as a convention center or trade show.
• Car usage while at the business destination. Drivers can deduct actual expenses or the standard mileage rate, as well as tolls and parking fees incurred while traveling to conduct business. If the car is rented, only the business-use portion of the costs are deductible.
• Lodging and non-entertainment-related meals.
• Dry cleaning and laundry.
• Business calls and other communication (such as WiFi and fax) while traveling.
• Tips for services related to any of these expenses.
• Other expenses related to business travel. This might include transportation to and from business meals, public stenographer's fees, and computer rental fees.

You can keep the receipts from your meal expenses, or alternatively use a standard meal allowance, which varies depending on the travel destination. Deductions for business meals are typically limited to 50% of the unreimbursed cost.

How to Document and Claim Travel Deductions

If you're self-employed, you can deduct travel expenses onSchedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) when filing your annual tax return. You should include all relevant expenses under the Travel, Meals and Entertainment, and other relevant categories. More guidance is available on the IRS website.

Accurate record keeping is essential. Detailed, well-organized records make it easier to prepare and file tax returns and will help you provide correct answers if your tax return is selected for audit or if you receive an IRS notice.

You must keep records such as receipts, invoices, canceled checks and other documents that support a deduction until the period of limitations expires for that tax return. This is typically three years from the filing date.³ This includes electronic and paper records of receipts, travel logs, conference registrations, and correspondence, such as emails with clients confirming business meetings.

When claiming travel deductions, you should save all receipts such as transportation tickets and restaurant bills. The receipts should include the date, amount, and purpose of the expense.

Maintain a travel log detailing dates, locations, and purposes for trips, including business activities or meetings conducted and the names of individuals or organizations involved, such as clients, vendors and conference hosts. This information should demonstrate the benefits of the trip for your business.

Apps like QuickBooks or Expensify, or even a simple spreadsheet can help you to organize and store your travel expense records easily.

You must separate all your personal and business expenses, as only business-related costs are deductible. For example, you travel for business but extend your stay for vacation, you can only deduct expenses for the business part of the trip. Entertainment and non-business activities, like sightseeing, are not deductible. Expenses for family members who travel with you are not deductible unless they are employees of your business, and the trip is for legitimate business purposes.

As tax rules for travel expenses can be complex, you may want to consider consulting a professional tax adviser or accountant to ensure you comply with IRS requirements and maximise your eligible deductions.

Discover Wise Business: The Easy Way to Pay & Track Travel Expenses

If you run your own business, it’s important to understand what travel expenses are tax deductible for self-employed individuals, to make sure that you make the right deductions in your tax return.

Using a Wise Business account can help you save money on international payments and track your travel expenses with ease. Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. Paying for accomodation online, for example, is easy with Wise. It's simple to convert USD to the currency of the accomodation within your account, and you can send the payment with ease. No need to worry about hidden fees or unfavourable exchange rates.

Wise also connects to QuickBooks to track expenses and take the hassle out of account reconcilliation. Your accountant can simply check your expenses and will love how easy it is to sync with accounting software.

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You can make international payments at the mid-market exchange rate without monthly account fees or markups on the conversion. You can also hold and manage over 40 currencies in one place and receive payments from clients like a local with major currency account details.

What to Consider When Paying for Travel Expenses Abroad

Traveling internationally for business introduces unique considerations. When you pay for items in foreign currencies, it’s important to track the conversion rate to your home currency for tax purposes.

Record the exchange rate on the date each expense is incurred. This ensures you convert payments accurately into US dollars. You can use online currency converters or apps that record daily exchange rates to simplify the process.

Keep receipts showing the amount paid in the local currency as well as your conversion to US dollars. You should make sure you keep records of any value-added tax (VAT) or similar taxes paid, as in some cases you may be able to deduct or reclaim these amounts when you leave the country.

Fees for obtaining a business visa or work permit are typically deductible as a travel expense. And the cost of international phone calls, roaming charges, or portable internet devices used for business purposes are eligible for deduction.

You should be aware that stricter IRS rules apply if you want to deduct expenses from attending a business convention outside North America. You must demonstrate that the convention is directly related to your trade or business, and it is as reasonable to hold the event in the overseas location as it would be to hold it in North America.

Certain locations that are mainly known for tourism may attract closer scrutiny from the IRS. You should make sure that the purpose of the event and the justification for your attendance are clearly documented.

You should also ensure that your business activities abroad comply with local laws and regulations, especially regarding business registrations, import and export restrictions, and employment regulations if you hire local staff.

Sources checked December 2024.