What Travel Expenses are Tax Deductible for Self-employed or Freelancers?

What Travel Expenses are Tax Deductible for Self-employed or Freelancers?

As an entrepreneur, freelancer, independent contractor you can claim tax deductions for your business travels. According to the IRS, if you wish to claim a travel expense deduction, your trip has to be:

  • Mostly business-related
  • An “ordinary and necessary” expense
  • Someplace far away from your “tax home”

To understand business travel expenses, it is important to differentiate between ordinary and necessary expenses-

  1. An expense is ordinary if it is common and accepted in your industry
  2. An expense is necessary if it is helpful and appropriate for your business

To sum it up, business travel expenses are travel costs associated with running a business, or costs incurred when you are away from your tax home. You can claim business travel expenses when you're away from home but here, "home" doesn't refer to where your family lives. The “tax home” refers to the city where your main place of business is located- which may not be the same as the location of your family/residential home.

Your home office, downtown workspace, or where you live if you have multiple stores can be considered a tax home. However, there are special provisions for having more than one place of business.
To qualify for a business travel tax deduction, you need not fly first class or stay at a fancy hotel to claim travel expense tax deductions. Conferences, off-site business meetings, and worksite visits qualify as business travel and qualify for the business travel tax deduction.

Travel tax deductions for freelancers

When you’re self-employed, you’re bound to be on the lookout for ways to reduce your taxes. The good news is that you can deduct quite a few expenses while traveling, such as transportation, meals, lodging from your taxes.

List of business travel expenses

Air travel and pre-check

Catching a flight to attend a conference or a business meeting is considered a business expense. Your airfare and precheck charges are all tax-deductible.

Transportation

Any sort of transportation cost is a travel expense deduction, this includes flight, train, bus, or car. Moreover, the baggage fees are deductible, and so are Uber rides to and from the airport.

Local transportation costs for taxi fares or other transportation between the airport or station and a hotel, from one customer to another, or from one place of business to another is also considered as a deductible.

Rental car

Renting a car to attend a business trip counts as a travel expense deduction. The expenses of operating and maintaining a house trailer are also considered as a deductible, provided that using one is "ordinary" and "necessary" for your business

Lodging

Hotels, Airbnb stays, or any other accommodation charges are tax-deductible lodging expenses.

Tips paid during your business excursion

You can deduct the amount of $5 per day for tips paid during your business excursion, these include:

  • Tips offered to hotel staff
  • Tip offered to porters and baggage carriers

Meals

When you’re traveling for work, you can write off 50% of all food expenses, this also includes groceries and takeouts.

Moreover, for the years 2021 and 2022, every meal you have at a restaurant is 100% tax-deductible.

Internet and telephone expense

WiFi or any other internet expenses, whether on a plane or at a hotel is completely deductible when you’re traveling for work. This also includes hotspots and international calls.

Shipping of baggage or trade show material

Any shipping charges are also tax-deductible.

Dry cleaning and laundry while on a business trip

You can avail of laundry and dry-cleaning services and get them deducted from your taxes.

Aside from these common expenses, there are a couple of expenses that you cannot deduct from your taxes. These include

  • The cost of bringing your child or spouse: If you bring your child or spouse on a business trip, it is generally considered a personal expense, which means that it is not a deductible. However, under some circumstances, you may deduct travel expenses if your child or spouse is an employee, has a bona fide business purpose for traveling with you, or is capable of deducting the travel expense on their own.
  • Miscellaneous hotel bill charges: You may be required to stay at a hotel for travel purposes, which is why the accommodation charges are generally deductible. However, some hotel charges aren't tax-deductible:
    • Gym or fitness center fees
    • Spa or sauna fees
    • Shopping charges
    • Movie rental fees
    • Game rental fees

Many small business travel expenses are tax-deductible. They don’t include personal expenses or ones used to determine your business’ cost of goods sold. Trips for pleasure can never be deducted.

Travel expenses if you use your vehicle for business

If you drive your vehicle while heading out for a business trip, you can claim a deduction for your mileage and car expenses. Generally, there are two methods to claim the mileage tax deduction:

  • Standard Mileage Method- You can multiply your business miles driven by the standard rate (58.5 cents in 2022). This amount includes driving costs, gas, repairs/maintenance, and depreciation.
  • Actual Expenses Method- You can track the actual costs of operating your car. Qualified expenses for this purpose include gasoline, oil, tires, repairs, insurance, tolls, parking, garage fees, registration fees, lease payments, and depreciation licenses.

Business travel and transportation expenses

As mentioned above, any sort of transportation cost is deductible. This involves any business travel by airplane, train, bus, or car between your home and your business destination.

Similarly, fares for taxis or other types of ordinary and necessary expenses related to your business are eligible for travel expense deduction.

This can include transportation to and from a business meal, accountant or lawyer’s office, and operating and maintaining a house trailer.

How to claim your freelancer travel tax deductions?

As per the IRS, you can deduct travel expenses paid or incurred in connection with a temporary work assignment away from home. The following represent the rules set by the IRS:

  • The destination must be at least 100 miles from your tax home. The trip requires you to stay somewhere that isn’t your home.
  • You must work during regular working hours. It’s acceptable to take personal time in the evenings. But you can’t take an hour-long call from vacation and call it a business trip. However, there are certain circumstances where you can claim vacation as a legitimate business expense.
  • The trip must last less than a year. If you happen to stay somewhere for over a year, you’re essentially living there. However, traveling for a short period is fine!

If you fulfill the above criteria, then you can claim the travel expense tax deduction simply by opting for any of the following methods:

  1. You can track each expenditure, keeping in mind that lodging and round-trip travel is 100% deductible and that restaurant meals are 100% deductible.
  2. You can skip the manual tracking of each expense and use a per-day rate for lodging, meals, and incidental expenses. The manual tracking method is said to be more streamlined and can help you budget more easily.

If you are paying for the travel expenses of subcontractors, it also helps you set up a limit to your potential expenses because they will have to pay the difference if they exceed your established daily allowance. On the flip side, if they spend less than your daily allowance, they will keep the difference.

The first method is a traditional itemized deduction approach- which requires receipts and bills for every expense and record-keeping of each category of your travel expenses. However, this can become tedious due to the significant amount of time and commitment needed to collect receipts and track expenses using software or a tax professional.

If you go for the second option- the daily allowance method, theoretically, you will spend less time record-keeping as long as your per day rate does not exceed the daily rate established by the federal government for its employees traveling to the same destination.

To keep your per-day payments free of tax obligations, each expense must have a detailed record of its date, place, and purpose. With this proof, you can deduct 100% of lodging and restaurant meals per day.

Regardless of which method you choose, every expense must serve a legitimate business purpose.

Where to claim travel expenses if you are self-employed?

If you are self-employed, you can claim all your income tax deductions on Schedule C of Form 1040. Freelancers can often benefit by claiming travel expense deductions.

Conclusion

Tracking your travel expenses can be troublesome, but with FlyFin, you can reduce your tax burden. With the FlyFin app, you’ll get a detailed summary of all your travel-related expenses.

The A.I. can help you scan your transactions for business travel. It is the ideal app to help your figure out your freelance tax deductions.

The app will help you perform the calculations and provide you with an accurate tax amount since it is powered by AI and backed by CPAs whom you can consult to determine the right set of deductions. Plus, you can use FlyFin’s self-employed quarterly tax calculator to manage your quarterly taxes.

FlyFin CPA Team

FlyFin CPA Team

With a combined 150 years of experience, FlyFin's CPA tax team includes tax CPAs, IRS Enrolled Agents and other tax professionals, offering users the most comprehensive tax advice and preparation.

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