Deducting travel expenses is not just for the self-employed. Taxpayers classified as employees can also deduct travel expenses if they are required to travel for their job and are not reimbursed or are only partially reimbursed for travel expense by their employer.
Travel expenses are one of the most frequently claimed work-related deductions. In most cases employers reimburse employees for work-related travel expense because it is a business deduction. In those cases where the employee is not reimbursed for work-related travel, eligible travel expenses can be claimed on Form 2106 and included with the taxpayer’s itemized deductions.
What expenses can be deducted as eligible work-related travel? Here is a list of some of the eligible expenses:
- Costs for taxis, planes, trains, buses or car rental while away on business.
- Tolls and parking while on a business trip as well as gas for the rental vehicle.
- If you use your personal vehicle for business purposes you can deduct either the standard mileage rate as issued by the IRS (54 cents per mile for 2016) or you can deduct the actual expenses to operate the vehicle (i.e. gas, maintenance, registration, insurance, etc.) based on the percentage of miles used for business purposes.
- Lodging if the business trip is overnight and the work assignment is of a temporary nature (less than one year in duration).
If you are claiming a deduction for business mileage, you will need to determine where your tax base home is. Your tax base home is your regular place of business. If you have more than one place of business, your tax base home would be where you spend the greater portion of your work hours. Business mileage is then determined from your tax base home to or from your business appointment. There is no deduction allowed for commuting mileage (i.e. from your personal home to your business home). For people who have their place of business at their personal residence, the business mileage would be calculated from the home to the business appointment and back.
All expenses related to business travel need to be substantiated with receipts for items purchased (gas, oil, tires, etc.), repairs performed and miles driven. For miles driven, it is highly recommended you maintain a log of all your business miles driven indicating the date of the trip, the name of the destination and business purpose, and the miles driven. Maintaining a mileage log is the surest way to substantiate your business miles driven. Keep the log right in the compartment of your vehicle for easy access and make it a normal part of your business practice to track your miles. Alternatively, there are many smartphone applications also available to track business mileage.
Travel expenses related to charitable work can also be deducted. This includes airfare and hotel expenses. Similar to normal business expenses, you can only deduct travel expenses if the trip does not have a significant personal component. If your charitable travel takes you to a location that is typically deemed a vacation spot, then expect the IRS to give your deduction closer scrutiny.
An important difference to note when deducting auto travel for charity is that only gas and oil are deductible. Additional expenses of repairs, depreciation and insurance are deductible for business use only. The standard mileage rate allowed for charity work is 14 cents per mile where the business rate is 54 cents per mile in 2016.
In addition, transportation costs to obtain medical care can also be deducted. This includes ambulance service, bus, taxi, train, plane fares, parking fees, tolls and use of your personal vehicles at 19 cents per mile. Medical transportation costs are subject to the standard medical deduction limitations.
As with business travel expenses, it is important to document your expenses. Keep receipts for expenses incurred and keep a log of charitable and medical miles driven.