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 a costly endeavour. In order 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 transport, meals, accommodation, 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, and understanding which expenses are tax-deductible is crucial to help your business cut costs and ensure compliance with local tax laws.

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

What are travel expenses?

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

What counts as business travel?

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

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

Does commuting count as business travel?

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

Are travelling 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 be very careful when claiming travel expenses and tax deduction to distinguish between personal costs and work-related costs.

If you go on holiday and happen to take a business call while you’re away – this can’t be counted as a business trip. Similarly, if you’re a site-based employee and you travel to different customer’s homes for work every day, you can expense the mileage – but stopping for groceries along the way would be deemed 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 purpose of the trip, but generally the most common types of expenses eligible for business travel tax deductions include:

Transportation costs

Transport is one of the most common travel expenses, and this encapsulates several different costs:

1. Transport to your destination: However you get to your destination, the costs can be expensed and are fully deductible. This could be railway, 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 – such as 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 charges, 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 transport within your destination: Once you’re in your destination, your means of getting around can also be deductible. Provided that you’re using them for business purposes (such as travelling from your hotel to a client’s office), you can expense taxi fares, ridesharing, bus tickets, bike hire, etc. In some cases, local travel may also be deductible, such as travelling for in-person appointments around your hometown.

Accommodation for overnight travel

If your business travel requires you to stay somewhere overnight, your accommodation expenses will be tax deductible. This may be hotels, apartments or other lodging; however, some local tax laws enforce restrictions on the accommodation that can be deducted, i.e. you may not be able to completely deduct a luxury suite if there is a more reasonable, less costly room available.

Food & 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 – such as if you’re taking a client out for lunch – as well as general meal costs while travelling overnight for work.

Like with accommodation, 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 have 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 tax 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 permitted 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, as it would be considered personal entertainment. Similarly, if you’re travelling alone for business and use your free time to visit a spa and sauna for example – these costs cannot 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 (international phone 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 (such as a visa) are required specifically for a business trip, their costs can typically be deducted.

Non-deductible expenses

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

• Personal travel: Any travel that is primarily personal, or expenses for family members who are not part of the business trip, are not 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 disallowed 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 7-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 U.S., limit deductions for entertainment. Ensure your expense fits the country's current tax rules.
• Unnecessary accommodation: 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 a working day. This may be determined based on each country’s labour laws.

Who can receive tax relief on business travel expenses?

Tax deductions are available both to businesses and employees. Generally speaking, businesses reimburse their employees for expenses, and are able to receive tax breaks in turn. On the other hand, if the company does not 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 is the maximum you can claim on travel expenses?

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

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

Example 1: Expenses and deductions in the United States 

The IRS in the United States 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 accommodation, meals and incidentals when travelling 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 who 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, meaning in most cases, an employer is only able to deduct 50% of meal costs (or 50% of the per diem rate if using a per diem) 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?

The UK’s tax, payments and customs authority – the HMRC – have set a standardised 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. So, 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 are also able to negotiate a custom scale rate directly with the HMRC to better suit their needs.

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

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

Managing expenses and business travel tax deductions

Claiming tax deductions is a simple way to save your business money. In order to ensure you’re not spending any more than you need to be and following compliance laws and regulations, it’s crucial 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 where it needs to be.

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 will 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.