Can you get a tax deduction on business travel expenses?

Travel is an essential component of many businesses in many industries, and it can oftentimes be costly. To ease the financial burden of work-related travel costs, many countries offer business travel tax deductions.

These tax deductions could apply to a variety of expenses incurred during a work trip, including transportation, meals, accommodations, entertainment, and more. There are some strict requirements and guidelines that must be met for a company or employee to claim tax relief on business expenses. Understanding which expenses are tax-deductible is crucial to helping your business cut costs and ensure compliance with local tax laws.

Read on to learn everything you need to know about business travel tax deduction.

What are travel expenses?

Business travel expenses are expenses incurred while performing work-related activities away from your usual place of business. Just about any cost directly involved in business travel can be considered a travel expense – as long as it’s wholly and exclusively for the purpose of business.

What counts as business travel?

What qualifies as a business trip isn’t strictly limited to overnight or out-of-town travel. While traveling from home to a permanent workplace doesn’t apply, mandatory travel to a temporary workplace may be eligible for travel expenses and tax deduction, even if it’s local. For example, if you have to travel to meet a client or customer for several hours, you may be able to expense the mileage and parking fees.

There are strict rules that can vary by country, but typically the travel must be ordinary—i.e. commonplace in your industry or business—and necessary for the employee or employees to fulfil their duties.

Does commuting count as business travel?

Traveling from your home to your permanent office doesn’t count as business travel. Some cases where you can claim expenses on commuting include traveling between multiple work locations in one day (e.g. from your main office to a client’s office), or traveling from home to temporary work locations.

Are travel expenses tax-deductible?

If travel is required for a business to operate, then costs associated with that travel can be expensed, and most of these expenses will be tax-deductible. It’s important to distinguish between personal and work-related costs when claiming travel expenses and tax deduction.

If you go on vacation and take a business call while you’re away, it can’t be counted as a business trip. Similarly, if you’re a site-based employee and travel to different customers’ homes for work every day, you can expense the mileage – but stopping for groceries along the way would be considered a personal trip and must be discounted.

Of course, you won’t be working 24/7 while on a legitimate business trip—and bleisure trips are increasingly common—but you can only claim back tax on travel expenses that are directly related to business activities.

Common tax-deductible travel expenses

The expenses that come with business travel can vary based on the nature of the industry and the trip purpose, but generally the most common types of expenses eligible for business travel tax deductions include:

Transportation costs

Transportation is one of the most common travel expenses and includes several different costs:

1. Transportation to your destination: However you get to your destination, the costs can be expensed and are fully deductible. This could be train, plane, or bus tickets, for example. In some countries, you may not be able to receive full tax relief if you go for luxury options like first-class tickets.
2. Car expenses: Whether you’re renting a car, using a company car, or your personal vehicle, you can deduct the expenses incurred from driving, such as fuel costs, parking fees, tolls, congestion surcharges, maintenance, and mileage. This could even include mileage and fuel costs for driving to the airport for an overseas business trip.
3. Taxis, ridesharing, and public transit at your destination: Once you reach your destination, your means of getting around can also be deductible. As long as you’re using them for business purposes (e.g. getting from your hotel to a client’s office), you can expense taxi fares, ridesharing, bus tickets, bike rental, etc. In some cases, local travel may also be deductible, such as traveling for in-person appointments around your hometown.

Accommodations for overnight travel

If your business travel requires you to stay somewhere overnight, your accommodation expenses will be tax-deductible. This can include hotels, apartments, or other lodging. However, some local tax laws enforce restrictions on the accommodations that can be deducted – for example, you may not be able to completely deduct a luxury suite if there’s a less expensive room available.

Food and drink costs

Meal costs are eligible for business travel tax deductions in most countries. Depending on the country, this can include both food and drink purchased while conducting business, like taking a client out for lunch, as well as general meal costs while traveling overnight for work.

As with accommodations, it’s important to remember that meal costs must be reasonable. Excessive purchases may not be eligible for tax deductions. To simplify the process, some countries established per diem rates for meals and incidental expenses, which allow businesses to deduct a set daily amount instead of tracking actual expenses.

Entertainment expenses

While more restricted in some countries than most other expenses, there are some cases where you might be able to deduct entertainment expenses. This refers to entertainment costs that directly relate to conducting business. Examples include attending a sporting event or show with a potential business partner, a golf outing that doubles as a business meeting, or a team outing during a company trip. For example, in the UK businesses are allowed to spend up to £150 per employee on staff entertainment expenses, and this is tax-deductible.

Entertainment expenses are generally not deductible for sole traders, since it would be considered personal entertainment. Similarly, if you’re traveling alone for business and use your free time to visit a spa for example, these costs can’t be expensed.

Entertainment expenses might also include tickets and fees for attending business conferences, trade shows, and personal development events.

Other tax-deductible expenses

There are other miscellaneous costs where business travel tax deductions may apply. This can include:

• Internet and phone costs: Business-related communication expenses (e.g. international calls, mobile data, etc.) while traveling.
• Laundry and dry cleaning: Necessary expenses for laundry and dry cleaning during extended trips are often deductible.
• Luggage costs: If your airline charges extra fees for checked luggage, and checked luggage is a necessity for the business trip, this can often be a deductible expense.
• Visas, passports, and other travel documentation: If travel documents (e.g. a visa) are required for a business trip, their costs can typically be deducted.

Non-deductible expenses

Not all expenses incurred while traveling for business are tax-deductible. Generally, only costs that directly relate to necessary business activity are deductible, while personal costs or unnecessary spending aren’t.

• Personal travel: Any travel that’s primarily personal, or expenses of family members who aren’t part of the business trip, aren’t deductible. Similarly, if you bring your family with you on a business trip and you all share a room, only a proportion of the lodging costs would be deductible as a business expense.
• Lavish or extravagant expenses: Excessive spending on luxury hotels or first-class flights may be refused if considered unreasonable by local tax authorities. As mentioned, this also applies to meals. Don’t expect to get full reimbursement if you’re claiming a seven-course meal at a fine dining restaurant by yourself as a business cost. Check the local tax laws for your destination to see if there are specific accommodation and meal allowance rates or per diems.
• Entertainment in some countries: Some countries like the US limit deductions for entertainment. Make sure your expenses fit the country's current tax rules.
• Unnecessary accommodations: There may be some cases where an overnight stay is deemed unnecessary on a business trip, such as if you’re able to reasonably travel to the destination, conduct business, and return home within one business day. This is determined based on each country’s labor laws.

Who can receive tax relief on business travel expenses?

Tax deductions are available to both businesses and employees. Generally speaking, businesses reimburse their employees for expenses and can receive tax breaks in turn. However, if the company doesn’t reimburse the employee, in some countries the employee would be able to claim a deduction on these costs when they file their personal taxes.

What’s the maximum you can claim on travel expenses?

The maximum you can claim on travel expenses depends on a number of factors, like the type of expense and the country your business is based in. Different countries have different restrictions on what can be tax-deductible, so it’s important to research the tax laws in your location to understand the limits and what’s allowed.

Let’s have a look at a couple of examples in more detail:

Example 1: Expenses and deductions in the US

The IRS allows a system of taxing per diem rates instead of tracking every single expense.

The General Services Administration (GSA) establishes standard tax on travel allowance rates that define the deductible amount an employer is allowed to give an employee for accommodations, meals, and incidentals when traveling for business. As of October 2024, the standard per diem rate is $178 ($110 for lodging and $68 for meals and incidentals). This can vary based on trip duration, destination, and other factors.

Companies that choose this system can opt to match the GSA rate, or set a higher per diem and pay taxes on the remainder that exceeds the standard rate.

The US also enforces 50% limit on meal deductions, so in most cases, an employer is only able to deduct 50% of meal costs (or 50% of the per diem rate if using one) for business travel.

Another important factor to consider for US businesses is that entertainment expenses are extremely limited. Most entertainment costs are no longer tax-deductible for US companies as of the Tax Cuts and Jobs Act (TCJA) of 2018, with some exceptions such as conferences or trade shows.

Example 2: What are UK meal allowance rates?

HMRC, the UK’s tax, payments, and customs authority, has set a standardized meal allowance rate known as subsistence allowance, which is essentially a per diem. Also known as “scale rate payments,” this is a set amount that can be spent on food and lodging rather than calculating on a case-by-case basis.

When it comes to tax deductions, expenditure within these defined rates will be tax-free, while any spending above this amount will be taxed. A company can choose to reimburse an employee’s expenses in full, but the reimbursement amount will only be tax-free up to the rate defined by the HMRC. Some companies can also negotiate a custom scale rate directly with the HMRC to better meet their needs.

The tax on travel allowance rates varies based on destination and trip time, and the rate varies for different subsistence types (e.g. room rates, breakfast, drinks, hotel to office travel, etc.)

Similar systems are in place around the world but the restrictions and allowances vary, so it’s crucial to consider the local tax laws when planning your business travel budget.

Managing expenses and business travel tax deductions

Claiming tax deductions is a simple way to save your business money. To make sure you aren’t spending any more than you need and are following compliance laws and regulations, it’s important to have a robust corporate travel management system in place. Using travel management booking software with a reliable expense tracker is one way to ensure you have everything in order.

When claiming travel expenses on taxes, you’ll need to retain detailed records of every cost, with receipts, mileage logs, tickets, and more. In most cases, you’ll need to provide clear proof of expenses to claim tax breaks.

The right travel and expense management software will help you keep it all together and streamline the process. Booking.com for Business offers a free, all-in-one platform to help small and medium-sized enterprises (SMEs) manage corporate travel and expenses. Intuitive expense monitoring tools, exclusive rates and benefits, 24/7 support, and more essential tools and resources make our free corporate travel management and booking software a perfect solution for small businesses.