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Tax Deductions for Travel Expenses in 2023: for Freelancers and Self-employed
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Tax Deductions for Travel Expenses in 2023: for Freelancers and Self-employed
Traveling for work is a great way to get a change of scenery, and it’s one of the many ways to save on taxes. The IRS allows you to take travel tax deductions for business purposes to save the most possible before the 2023 tax filing deadline.
It can be confusing to keep track of your business-related deductions with the many rules and regulations the IRS has established. Rest assured, this guide will help you understand all the possible travel-related tax deductions and questions like What travel expenses are tax deductible for the self-employed or freelancers?
Key takeaways:
- One of the main criteria for claiming travel tax deductions is that you must leave your home and stay the night at a hotel, Airbnb or motel
- You can deduct the cost of dry cleaning when you are traveling for work
- You can deduct the cost of car rentals as a travel expense
Table of contents
You need to leave your home...Read more
The trip must be business-related...Read more
Expenses must be ordinary and necessary...Read more
What transportation expenses are tax deductible?...Read more
Hotels and other lodging expenses...Read more
Dry cleaning...Read more
Using a rental car...Read more
Meals...Read more
Luggage fees...Read more
Wifi and internet access...Read more
Traveling abroad...Read more
Bottom line...Read more
You need to leave your home
Leaving your home is the first step when going on a business trip and ultimately claiming a travel expense deductible. You will need to leave the general area of your residence and travel to another location that is not the same address you use to file your taxes. So if you live in a city, you would need to travel outside that city. Also, the trip should include enough travel that you need to stay somewhere to rest or sleep. This means that if you traveled to a location and came back the same day, it can't be considered a travel expense deductible. You can use a freelance tax calculator to check whether your trip counts as a write-off. Remember if your tax liability is over $1,000, the IRS will expect estimated tax payments from you every quarter. You will report these payments with Form 1040-ES.
Expenses must be ordinary and necessary
The last criteria for your trip to qualify as a business trip is that your expenses must be ordinary and necessary, according to the IRS. Your travel expenses must be ordinary relating to the business and not something over-the-top or out-of-the-ordinary.
The expenses must also be necessary, in the sense that there is a need for the expense. For example, you need to eat on your trip, so your food and travel expenses are necessary, and eating at a restaurant is an ordinary expense.
The IRS might raise an eyebrow if you're a freelance consultant trying to write off a three-hour massage or a scuba diving excursion. These expenses aren't necessary for your business and will be considered lavish. But flying first-class or staying in a hotel suite can fall into the ordinary category.
What transportation expenses are tax deductible?
You can claim tax deductions for travel expenses if you’re traveling for work. Some costs you might have while traveling for business include plane, bus or train tickets, cab fares, parking fees, fuel, Uber or Lyft rides or tolls.
You can claim your transportation expenses as travel tax deductions for 2023. If you're trying deduct Uber rides (or any taxi service), it’s important to keep copies of any receipts, tickets, credit or debit card statements, or canceled checks, to show the IRS.
Hotels and other lodging expenses
When traveling for business, you usually need to stay overnight since you're far away from your own bed. Since you will need somewhere to sleep, your hotel, Airbnb or guesthouse can count as a travel expense deductible. Renting an expensive suite in a hotel doesn’t count! The IRS does have some requirements in place for lodging when it comes to travel tax write-offs.
You must be self-employed, and it must be necessary to stay overnight to conduct business, including going to a conference or attending a meeting when traveling away from your tax home. In addition, you can deduct $5 per day for incidental expenses, such as tipping the hotel staff or valet staff.
Also, your hotel, Airbnb or guesthouse shouldn’t be too fancy and must fall into the ordinary category. If you take a day trip and don’t stay overnight, only transportation expenses count towards a business travel tax deduction. So you can deduct your driving costs but not meals or other expenses.
Dry cleaning
It’s important to look good while on your trip. Fortunately, laundry and dry-cleaning services count as travel expenses. No more excuses for wrinkled clothes!
Using a rental car
Renting a car for a business trip is tax-deductible. If you drive your own vehicle, you can either use the actual expenses like gas receipts or the standard mileage deduction. This includes expenses for gas, oil, car washes, repairs, vehicle parts, tires, supplies, parking fees and tolls. But think again if you’re using the rental car for personal use.
The IRS will not accept this as tax deductible for travel expenses. Instead, you’ll need to subtract the percentage for personal use from the deduction. The expenses of operating and maintaining a trailer are also deductible, but using one must be ordinary and necessary for your business.
Meals
Being on the road means no more cooking or dishes. Since eating out is a must, or something necessary, the IRS considers business trip meals to be tax-deductible. Business trip meals are eligible for a 50% deduction starting this year. For the 2021 and 2022 tax years, the IRS changed food and beverage deductions to be 100% tax-deductible. But, the agency has switched back to the 50% tax deduction norm for the 2023 tax season. There are three requirements that the IRS has in place for your meal to qualify as a business meal:
- The cost should not be extravagant
- The employer, employee or business owner should be the one claiming the deduction
- The business owner or employer provides the food or beverage to a business associate
Luggage fees
Are you an over-packer? Your excess baggage fee is tax-deductible, so go ahead and pack your favorite ten pairs of shoes.
Wifi and internet access
Wifi or any other internet expenses, whether on a plane or at a hotel, are completely deductible from your self-employment taxes when you’re traveling for work.
Traveling abroad
Pack your bags and get your passport ready. Traveling abroad for business also qualifies as a business trip. The IRS finally cut taxpayers some slack when going overseas on business trips, so now you only need to spend 25% of your time on business.
Let’s say you have a business proposal in London, and you’ll be gone for four days. As long as you spend one day conducting business, you can write off travel expenses and the rest of the trip is yours to spend however you want. So your overseas trip may count as both a business trip and a vacation. You might even be able to deduct your vacation.
Bottom line
In conclusion, understanding tax deductions for travel expenses as a freelancer can help you save money and maximize your earnings. By meeting the criteria for a business trip, you can deduct various expenses, such as transportation, lodging and meals. However, it's crucial to keep proper documentation of your expenses and ensure that they are ordinary and necessary for your business. You can always use A.I. tools like FlyFin to find all your deductions.
With a better understanding of which travel expenses are tax-deductible for freelancers in 2023, you can make the most of your business travels while minimizing your tax liability and saving the most possible.
What’s FlyFin?
FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors. It offers a host of cutting-edge tax tools that help you quickly find deductions. You can also use tools like a home office deduction calculator.
FlyFin uses an A.I. to track all your business expenses automatically and find every possible tax deduction.
Once you have all your possible deductions in one place, our CPA team files a guaranteed 100% accurate tax return for you. It saves you a couple of thousand dollars and a ton of time on your taxes.
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