travel expenses vacation

How Much to Travel to Hawaii: Average Vacation Costs and Budget Tips for Families

To travel to Hawaii, plan for about $4,000 per week. This cost depends on your choices of accommodation, activities, and island selection. Travel costs vary with transportation and dining expenses. Adjust your budget based on the duration of stay and what you want to do while there.

Accommodations vary widely. Budget hotels may charge around $150 per night, while luxury resorts can exceed $500 per night. Dining costs also fluctuate. Families can expect to spend $15 to $30 per person for casual dining, with hotel restaurants averaging higher.

To make traveling to Hawaii more affordable, families should consider several budget tips. Booking flights several months in advance can lead to lower prices. Additionally, traveling during the off-peak season can yield significant savings on accommodations and activities.

Planning activities in advance can help families set a reasonable daily budget. Many attractions offer discounts for children, making family outings more budget-friendly. By understanding these costs and tips, families can enjoy a memorable Hawaiian vacation without overspending.

Next, we will explore specific budget-friendly activities and dining options that families can enjoy while traveling to Hawaii.

What Are the Major Expenses to Consider While Traveling to Hawaii?

Traveling to Hawaii involves several major expenses that travelers should consider. These expenses can vary based on travel style, preferences, and the specific islands visited.

• Accommodation
• Transportation
• Food and Dining
• Activities and Experiences
• Travel Insurance
• Miscellaneous Expenses

Understanding these expenses will help travelers budget effectively and enjoy their trip without unexpected financial stress.

Airfare: Airfare represents one of the largest expenses when traveling to Hawaii. The cost can fluctuate based on the departure city, time of booking, and season. For example, round-trip flights from the U.S. mainland to Hawaii typically range from $300 to $700, depending on the season. Booking in advance can lead to significant savings, while peak seasons during holidays can see prices soar.

Accommodation: Accommodation expenses encompass hotels, vacation rentals, or hostels. Prices can vary significantly. A mid-range hotel in Hawaii can cost between $200 and $400 per night, while luxury resorts may exceed $600 or more. Alternatives like vacation rentals can fit different budgets. According to a 2022 report by the Hawaii Tourism Authority, travelers often seek value, driving the popularity of lower-cost lodging options.

Transportation: Transportation costs include car rentals, public transit, or rideshare services. Car rentals often range from $50 to $150 daily, depending on the vehicle type and rental duration. Public transportation is a budget-friendly option, especially in urban areas. However, some remote locations may require a rental.

Food and Dining: Food costs can vary widely, with casual dining at approximately $15 to $25 per meal and fine dining costing significantly more. Travelers who prefer cooking may save money by dining at home. According to a 2023 survey by WalletHub, dining out in Hawaii can be among the higher costs in the U.S. due to import prices.

Activities and Experiences: Expenses for activities, such as tours, excursions, and admission fees, should also be anticipated. Popular activities can range from free hiking trails to paid experiences like boat tours, which may cost around $75 to $200 per person. Planning ahead and researching free local attractions can help manage these costs.

Travel Insurance: Travel insurance can protect against unexpected events like medical emergencies or trip cancellations. Policies vary, costing from $50 to several hundred dollars based on coverage. According to InsureMyTrip, many travelers consider this a necessary expense for peace of mind while traveling.

Miscellaneous Expenses: Miscellaneous expenses include souvenirs, tips, and unexpected costs. It is advisable to budget an extra 10-15% of the total trip cost for these items. These expenses may vary based on individual habits and preferences.

Considering these expenses will provide a clearer picture of the overall costs involved in traveling to Hawaii, allowing travelers to enjoy the beauty and culture of the islands without financial strain.

How Much Should You Budget for Flights to Hawaii?

You should budget between $400 and $1,200 for round-trip flights to Hawaii, depending on several factors. The average domestic round-trip fare from the U.S. mainland to Hawaii typically falls between $700 and $900. Prices can vary significantly based on the departure city, time of year, and how far in advance you book your flights.

When traveling from the West Coast, such as Los Angeles or San Francisco, you might find lower fares, often ranging from $400 to $600. Conversely, flights from the East Coast, like New York City, may cost between $800 and $1,200 due to the longer distance. Many travelers save money by booking flights during off-peak seasons, which are typically from mid-April to June and September to mid-December.

For example, a family of four traveling from Los Angeles in June might spend around $2,400 on flights, whereas the same family flying from Miami could face a budget closer to $4,800 during peak vacation times.

Several external factors can influence flight prices. Airline competition plays a significant role; more competition usually leads to lower prices. Additionally, special promotion periods or discounts also impact costs. Booking well in advance generally yields better prices. However, last-minute deals can sometimes benefit flexible travelers.

In summary, when budgeting for flights to Hawaii, expect to spend anywhere from $400 to $1,200 per person, influenced by factors such as departure location, time of year, and booking timing. It’s advisable to monitor flight prices and consider various options to find the best deals.

What Is the Average Cost of Accommodation for Families in Hawaii?

The average cost of accommodation for families in Hawaii refers to the typical price range families might expect to pay for lodging during their stay in the state. This price includes hotels, vacation rentals, and other types of lodgings suitable for families.

According to the Hawaii Tourism Authority, the average nightly rate for accommodation in Hawaii can vary significantly based on location, time of year, and type of lodging. In 2023, the average rate ranged from $250 to $500 per night.

Accommodation costs in Hawaii can depend on several factors. These include the season, with peak tourist seasons generally resulting in higher prices, the type of accommodation, and the proximity to beaches or attractions. Families often prefer larger units or homes with kitchens, which can impact the price.

Research from the University of Hawaii indicates that vacation rental prices grew increasingly more expensive from 2020 to 2023, with a notable increase due to high demand. An estimated projection shows prices could rise an additional 5% to 10% over the next few years.

High accommodation costs create significant financial burdens on families, limiting their vacation options. It may also deter potential visitors, affecting the local economy reliant on tourism.

High costs can impact family health due to stress over finances, contribute to environmental concerns related to tourism, and strain local housing markets. For example, residents may face challenges finding affordable housing due to increased demand from short-term rentals.

Recommended solutions include promoting off-peak travel, the development of affordable accommodations, and incentivizing families to visit during less busy times. The Hawaii Tourism Authority advocates for balanced tourism development.

Strategies such as offering discounted family packages and ensuring a diverse range of lodging options can help address high accommodation costs. Employing technology to streamline booking processes may improve accessibility for families.

How Much Do Meals and Dining Typically Cost in Hawaii?

Meals and dining in Hawaii can be quite costly, with average expenses ranging from $15 to $60 per person per meal, depending on the type of restaurant and location. Fast-casual dining typically costs between $15 and $25 per person, while sit-down restaurants generally range from $30 to $60 or more for an entrée.

Grocery store prices in Hawaii are higher than the national average by about 15% to 30%, often leading visitors to spend around $70 to $150 for a week’s worth of groceries for one person. Popular food items, such as fruits and vegetables, can be significantly more expensive due to transportation costs.

Common examples include a simple meal at a fast-food restaurant costing about $10 to $15. In contrast, a seafood dinner at a mid-range restaurant may set you back $40 to $60, with premium places offering dishes priced even higher. A plate lunch of local cuisine, which is a popular option for both locals and tourists, can cost around $10 to $15.

Several factors can influence these costs. For instance, Hawaii’s geographical isolation increases the transportation costs of food supplies, affecting restaurant pricing. Additionally, high tourist demand during peak seasons can inflate prices. On the other hand, chain restaurants may offer more consistency in pricing regardless of location.

In summary, dining costs in Hawaii can vary widely based on meal type and location, with fast-casual meals generally costing between $15 and $25 and sit-down meals averaging $30 to $60. Visitors should consider both restaurant and grocery prices when budgeting their meals. Further exploration could include specific restaurants and local food markets to gain a better understanding of Hawaii’s diverse dining scene.

What Activities and Attractions Should Families Budget For in Hawaii?

Families should budget for a variety of activities and attractions in Hawaii, including outdoor adventures, cultural experiences, and family-friendly attractions.

• Outdoor Activities
• Cultural Experiences
• Water Sports
• Natural Attractions
• Family-Friendly Attractions
• Dining Experiences
• Transportation Costs

Transitioning from budget categories, let’s explore each activity and attraction in detail.

Outdoor Activities : Outdoor activities in Hawaii include hiking, sightseeing, and beach visits. Families can hike to scenic locations like Diamond Head or the Na Pali Coast. Popular beach spots such as Waikiki Beach offer relaxation and free activities like building sandcastles or swimming.

Cultural Experiences : Cultural experiences allow families to learn about Hawaiian history and traditions. Families can visit the Polynesian Cultural Center or attend a luau, which features traditional music, dance, and food. Such experiences can cost between $80 to $160 per person.

Water Sports : Water sports like snorkeling, surfing, and kayaking are popular in Hawaii. Families can rent equipment or join guided tours. Prices for snorkeling tours often range from $50 to $100 per person.

Natural Attractions : Natural attractions include national parks and botanical gardens. For example, Haleakalā National Park showcases unique landscapes and sunrise views. Entrance fees for national parks are typically around $30 per car.

Family-Friendly Attractions : Family-friendly attractions include the Honolulu Zoo and the Maui Ocean Center. These venues usually feature educational exhibits and activities suitable for children. Admission prices can vary, often between $10 to $25 per person.

Dining Experiences : Dining experiences in Hawaii range from food trucks to fine dining. Trying local cuisine like poke and loco moco can enhance the travel experience. Average meal prices typically range from $15 to $50 per person.

Transportation Costs : Transportation costs vary based on travel arrangements within the islands. Renting a car costs about $40 to $70 per day. Alternatively, using public transit or shuttles can be more economical.

Families should consider all these aspects to effectively budget for a fulfilling trip to Hawaii.

How Can Families Reduce Their Travel Costs to Hawaii?

Families can reduce their travel costs to Hawaii by planning ahead, traveling during off-peak seasons, utilizing package deals, and exploring budget accommodations and activities.

Planning ahead allows families to take advantage of lower airfares and accommodation rates. Booking flights and hotels several months in advance can yield significant savings. A study by CheapAir (2023) found that the best time to book flights to Hawaii is about 64 days before departure, securing an average savings of $50 per ticket.

Traveling during off-peak seasons can further reduce expenses. Costs can drop significantly, typically from mid-April to mid-June and again from September to mid-December. According to the Hawaii Tourism Authority (2022), traveling during these months can lower hotel prices by up to 30%.

Utilizing package deals is an effective strategy. Families can save money by booking flights and accommodations together from travel providers. A report from Expedia (2023) indicated that travelers could save up to 25% on overall costs when using bundled offers.

Exploring budget accommodations can also lead to savings. Options such as vacation rentals, hostels, or camping can provide more affordable lodging. A study by Airbnb (2023) showed that families saved an average of $105 per night compared to traditional hotels.

Participating in budget-friendly activities can enhance the travel experience without straining finances. Many beaches, parks, and hiking trails are free or low-cost. According to the Hawaii Department of Land and Natural Resources (2022), 90% of attractions on the islands can be explored without any entry fees.

By implementing these strategies, families can enjoy a memorable and cost-effective trip to Hawaii.

What Are the Best Times of Year to Find Lower Travel Expenses to Hawaii?

The best times of year to find lower travel expenses to Hawaii are during the shoulder seasons, specifically spring and fall. These periods typically offer better deals on flights and accommodations.

• Shoulder Seasons
• Off-Peak Months
• Booking Timing
• Limited Events
• Travel Packages

Transitioning to a more detailed exploration, we will break down each of these points, providing useful insights for prospective travelers.

Shoulder Seasons: The term “shoulder seasons” refers to the periods just before and after the peak tourist seasons. In Hawaii, this is generally from mid-April to mid-June and from September to mid-December. During these times, visitor numbers decrease, leading to lower prices on flights and hotels. A report from the Hawaii Tourism Authority in 2021 indicated that travel bookings during these months dropped by approximately 30%, driving down costs.

Off-Peak Months: Specific off-peak months like September and October see fewer tourists in Hawaii. This results in reduced rates for both flights and accommodations. According to the U.S. Department of Transportation, airfare prices can be up to 20% cheaper in these months compared to the peak summer months. Traveler feedback often highlights experiencing a more relaxed atmosphere during these less crowded times.

Booking Timing: The timing of your booking can significantly affect prices. Research from Skyscanner suggests that purchasing tickets about two to three months in advance can help travelers secure lower fares. Moreover, flexibility with travel dates allows for the possibility of taking advantage of sudden fare drops.

Limited Events: Periods with fewer events and festivals in Hawaii can also lead to lower travel expenses. For instance, major surf competitions and cultural festivals attract crowds and raise prices. Travelers often find better deals during months without such events. For example, February sees higher prices due to the famous Waimea Bay Big Wave season, while March tends to have fewer events.

Travel Packages: Investigating travel packages can offer additional savings. Some airlines and hotels provide bundled offers that include flights, accommodations, and activities. According to a study by The Vacationer in 2022, travelers who booked packages could save up to 30% compared to booking each element separately.

In conclusion, being strategic about the timing and approach to booking can yield significant savings when traveling to Hawaii.

How Can You Locate Discounts for Flights and Accommodations in Hawaii?

To locate discounts for flights and accommodations in Hawaii, use online travel comparison websites, sign up for fare alerts, and consider traveling during off-peak seasons.

Online travel comparison websites: These platforms aggregate information from various airlines and hotels. They allow users to compare prices easily. Websites like Kayak, Skyscanner, or Google Flights often highlight the best deals and provide flexible search options to find discounts.

Sign up for fare alerts: Many travel websites and airlines offer fare alerts through email. This feature allows users to receive notifications when prices drop for specific routes or hotel bookings. Setting up alerts for flights to Hawaii will ensure that you are informed promptly about any discounts.

Traveling during off-peak seasons: Traveling to Hawaii during less popular times can result in significant savings. Generally, off-peak seasons are from mid-April to mid-June and from September to mid-December. During these times, airlines and hotels often reduce prices to attract more visitors.

Utilizing loyalty programs: Joining frequent flyer programs and hotel loyalty programs can also yield discounts. Accruing points through these programs can lead to discounts or free upgrades.

Exploring local deals and promotions: Check websites that specialize in local deals, such as Groupon or Hotwire. These often offer package deals that include both flights and accommodations, which can save you money.

Considering vacation rentals: Platforms like Airbnb and Vrbo offer various accommodations often at competitive rates compared to traditional hotels. This can also provide a more local experience while potentially lowering costs.

By incorporating these strategies, you will enhance your ability to find discounts on flights and accommodations in Hawaii effectively.

What Are Some Free or Low-Cost Activities For Families in Hawaii?

Families in Hawaii can enjoy many free or low-cost activities. Popular options include beach outings, hiking trails, cultural festivals, and local parks.

• Beach Outings
• Hiking Trails
• Cultural Festivals
• Local Parks
• Farmer’s Markets
• Historical Sites
• Community Events

These activities offer various experiences for families, from relaxation to education. Each activity provides unique opportunities to bond and create lasting memories in Hawaii.

Beach Outings : Beach outings in Hawaii provide families with access to beautiful coastlines. The state’s beaches, such as Waikiki Beach on Oahu and Kaanapali Beach on Maui, are free to visit. Families can swim, paddle, or build sandcastles. According to a survey by the Hawaii Tourism Authority (2022), 78% of visitors to Hawaii cite beaches as their favorite activity.

Hiking Trails : Hiking trails offer families an exploration of Hawaii’s natural beauty. Trails like the Diamond Head Summit Trail or the Makapu’u Point Lighthouse Trail provide scenic views. The Hawaii State Parks Department maintains several trails free of charge. As reported by the U.S. Geological Survey (2021), nearly 60% of visitors engage in hiking, highlighting its popularity.

Cultural Festivals : Cultural festivals provide families with insights into Hawaiian traditions. Events like the Merrie Monarch Festival and Aloha Festivals celebrate dance, music, and crafts. Many of these events are free to attend. The Hawaii Arts Alliance (2020) found that participants appreciate how festivals foster community connection and cultural understanding.

Local Parks : Local parks, such as Kapi’olani Park in Honolulu, offer recreational spaces for families. Parks often feature playgrounds, picnic areas, and sports facilities. The National Recreation and Park Association (2019) emphasizes the importance of parks for community well-being, stating that parks contribute to physical and mental health.

Farmer’s Markets : Farmer’s markets showcase local produce and crafts at affordable prices. Families can enjoy fresh fruits, vegetables, and snacks while supporting local farmers. According to the USDA (2022), farmer’s markets promote community engagement and healthy eating.

Historical Sites : Historical sites, like Pearl Harbor and Iolani Palace, educate families on Hawaii’s rich history. Some sites offer free entry or reduced fees for residents and children. The National Park Service (2021) notes that heritage tourism enriches visitors’ understanding of local cultures.

Community Events : Community events, such as concerts and movie nights in parks, offer families entertainment at no or low cost. These events foster a sense of belonging and connection. The Hawaii Community Foundation (2020) reports that community activities enhance social bonds among residents.

Families in Hawaii can find various free or low-cost activities that cater to diverse interests. From enjoying nature to experiencing culture, there are many options available for memorable family outings.

What Other Factors Should Be Considered for a Family Travel Budget to Hawaii?

When planning a family travel budget to Hawaii, it is important to consider various factors beyond just airfare and accommodation.

• Travel Dates and Seasonality
• Accommodation Type
• Daily Expenses
• Activities and Excursions
• Souvenirs and Shopping
• Currency Exchange and Fees
• Travel Restrictions and Regulations

Understanding these factors will help create a balanced and realistic budget for your trip to Hawaii.

Travel Dates and Seasonality: Travel dates and seasonality significantly impact trip costs. Traveling during peak tourist season, typically from mid-December to mid-April, can lead to higher prices for flights and accommodation. Off-peak season visits may result in savings due to lower rates. According to the Hawaii Tourism Authority, average hotel rates can increase by as much as 30% during busy seasons.

Accommodation Type: Accommodation type influences overall expenses. Families can choose between hotels, vacation rentals, or resorts. Hotels may offer convenient amenities but can be expensive, especially for larger families. Vacation rentals provide more space and kitchen facilities, which can save money on meals. A survey by the American Hotel and Lodging Association (2022) shows that vacation rentals offer cost-effective options for families seeking multiple beds and cooking facilities.

Daily Expenses: Daily expenses encompass costs related to local transportation, entrance fees to parks, and miscellaneous costs. Budgeting approximately $50 to $150 per day, depending on activities, is prudent for a family. According to a 2023 report from the National Park Service, many parks charge entrance fees which can add up.

Activities and Excursions: Activities and excursions can vary widely in cost. Popular attractions, such as luaus and helicopter tours, may require significant financial commitment. For instance, a family of four could spend upwards of $400 on a luau. Planning ahead is essential for selecting cost-effective activities that suit different interests.

Transportation Costs: Transportation costs include car rentals, public transport, and inter-island flights. Renting a car can be beneficial for families wishing to explore different islands, but rental fees and fuel prices can accumulate. The Hawaii Tourism Authority suggests comparing various transportation options to find the most economical choice.

Food and Dining: Food and dining expenses can range widely. Dining out in Hawaii can be pricey, with meals often costing $15 to $30 per person. Alternatively, purchasing groceries and cooking at home can significantly reduce costs. A 2022 article from Food & Wine suggests budgeting around $150 per day for a family of four if choosing to dine out for all meals.

Travel Insurance: Travel insurance is a wise investment. It provides financial protection against unexpected events, such as trip cancellations or medical emergencies. According to the U.S. Travel Insurance Association, families should expect to spend between 4% and 10% of their trip cost on insurance.

Souvenirs and Shopping: Souvenirs and shopping can add additional expenses to a budget. Families may want to set aside a specific amount for local crafts and gifts. Setting a pre-determined budget for souvenirs helps avoid overspending.

Currency Exchange and Fees: Currency exchange and fees should not be overlooked. While Hawaii is a U.S. state, travelers using foreign currencies should check rates and possible exchange fees. Using credit cards with no foreign transaction fees can help manage costs effectively.

Travel Restrictions and Regulations: Travel restrictions and regulations may influence travel plans and expenses. Current health guidelines could necessitate additional spending on testing or insurance requirements. Staying updated on local regulations through government sources is crucial for family travel planning.

How Much Should You Allocate for Transportation and Rental Cars in Hawaii?

When planning a trip to Hawaii, you should allocate approximately 15% to 30% of your total travel budget for transportation and rental cars. On average, daily rental car rates in Hawaii range from $40 to $80, depending on the island, season, and vehicle type chosen.

In detail, transportation costs can include several categories. Rental car costs typically make up the largest portion. For example, renting a standard sedan may cost around $60 per day, while larger SUVs or premium vehicles can run $100 or more per day. If you rent a vehicle for a week, expect to spend between $280 and $700.

Public transportation options, such as buses, are generally more affordable but may not be as convenient. Bus fares in Honolulu, for instance, are about $3 for a one-way trip. In contrast, ridesharing services like Uber or Lyft can vary widely based on distance. A standard fare from the airport to Waikiki might cost between $30 and $50.

Additional factors impacting transportation costs include the island you visit and the duration of your stay. Island visits such as Maui or the Big Island may require additional costs for inter-island flights. Seasonal fluctuations also affect prices. For example, summer and winter holidays tend to see higher rental rates.

In summary, when budgeting for transportation and rental cars in Hawaii, consider a 15% to 30% allocation of your travel funds, with daily rental rates averaging between $40 and $80. Factor in your itinerary complexity and the time of year for accurate budgeting. Further exploration of public transit options or alternative transport like biking can also enhance your travel experience while potentially lowering costs.

How Can Travel Insurance Impact Your Overall Budget for Hawaii?

Travel insurance can significantly impact your overall budget for Hawaii by providing financial protection against unexpected events, thus mitigating potential losses.

Travel insurance offers several benefits that can influence your spending during a trip to Hawaii. Here are the key points to consider:

Trip Cancellation Coverage : This policy reimburses non-refundable expenses if you need to cancel your trip for covered reasons. According to the U.S. Travel Insurance Association, nearly 40% of travelers canceled their trips in 2019, indicating the importance of knowing how refund policies work (U.S. Travel Insurance Association, 2020).

Medical Emergency Expenses : Travel insurance can cover medical costs incurred during your trip. Healthcare in Hawaii can be expensive, especially for travelers from mainland U.S. In 2019, the average cost of a hospital stay in Hawaii was around $2,700 per day (Hawaii Department of Health, 2019).

Lost or Delayed Luggage : This coverage provides compensation for lost or delayed luggage. In 2019, approximately 1.24% of checked baggage was either lost or delayed, highlighting the necessity of coverage for your belongings (Airlines for America, 2020).

Emergency Evacuation : In case of a serious health issue or natural disaster, insurance can cover the costs of emergency evacuation. The average cost of an air ambulance service can range from $12,000 to $25,000 (Health Affairs, 2018).

Travel Assistance Services : Many travel insurance policies include assistance services that can offer support in emergencies. These services can help you find local medical facilities or coordinate travel changes.

In summary, although purchasing travel insurance adds to your upfront costs, its benefits can save you significant amounts of money in unforeseen situations, thus making it a valuable part of your overall budget for a trip to Hawaii.

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How to budget for your trip

Build a travel budget before you hit the road..

October 19, 2022 | 3 min read

Planning a big trip can be stressful, especially when you’re trying to do it on a budget. But knowing what you can afford, what you’ll need to spend and how to avoid overspending can help maximize the fun and minimize the stress. Here are a few ideas for building a travel expenses budget so you can feel as good about your finances as you do about your itinerary.

Start at home

If you don’t stick to an overall spending budget, you may find it hard to build and keep a travel budget. So start by figuring out exactly how you spend at home, making sure you have enough left over each month to put away in a savings account . If you don’t, search your budget for places to save. If you’re spending too much on á la carte workout classes or a gym membership, try online workout classes or free forms of exercise like running, biking and hiking to help keep costs down. Or hunt your bank statement for subscriptions , digital or otherwise, that you never use and cancel them. Once you’ve started padding your savings account, you’ll feel more confident about planning a big trip and building a budget for it.

Analyze that spending

The simplest way to figure out what you’ll spend on a trip is to look hard at where your money went on a previous trip. Using the website or app for your bank and credit cards, find every expenditure related to the trip, from your airfare to your cab ride home from the airport. Include things you bought for your trip (like new walking shoes or sunscreen) and things you bought during your trip (like souvenirs or dinner). Then, build a spreadsheet that summarizes what you spent in each category. It’s not the most fun evening activity, but analyzing past spending will offer a glimpse into how much you spent on food, drinks, taxis and other categories, helping you plan for your next trip.

If you’ve never traveled or are traveling abroad for the first time, you can still plan your travel budget. Using the categories in the next section and a little online sleuthing, you can do your best to estimate your trip costs. On your next trip, consider getting receipts as emails whenever possible, and take photos of your paper receipts. It can help you analyze your spending the next time around.

What travel expenses to budget for

If you’re not an experienced traveler, you may not know exactly how to budget for travel. So, start with categories. Imagine your trip from start to finish, focusing on how you’ll spend money along the way. As you go, create a travel budget worksheet that puts your spending into buckets. Those buckets will depend on where you’re traveling and how you like to travel. Planning an all-inclusive beach vacation will require different categories than a trip to a national park. But generally, the categories in your trip budget should include:

• Transportation. This includes how you get to and from your destination and how you get around when you get there. These days, many people are opting out of airplanes and trains in favor of more personal forms of travel, like rental cars. Make sure you’re taking these choices into consideration when you budget for things like gas, food pit stops, and prepping your car for a lot of road time. Then check out your options for how you’ll travel when you arrive—taxis, Lyfts, public transportation or just walking. It could be a good idea to add in some cushion in case your transportation needs shift once you get there.
• Lodging, including taxes and fees. This could be a big chunk of change, but luckily, you should know exactly how much it is before you leave.
• Food and drink. This depends on a lot of factors, including how you like to eat, where you’re traveling and how much you expect to tip. If you’re more comfortable grabbing take out or getting delivery, make sure you’re taking those extra fees into account.
• Activities like museum tickets, tours, excursions, golf outings, etc.
• Souvenirs—anything you might buy on your trip that you wouldn’t buy at home.

Look for places to save

Once you see how you spend, you may discover that traveling costs a lot more than you realize. If so, you may want to try traveling more cheaply.

Say your last trip included hundreds of dollars in spending on Lyft or taxis. Price out what it would cost to rent a car for the length of your trip, which is often the cheaper option.

Maybe your dinner bills regularly reached $100 on your last trip. Use local food blogs and magazines to seek out small, local eateries and street food vendors that will capture the local flavor while keeping your dinner tab manageable. Also consider staying near a farmers market or small grocery store, so you can try your hand at cooking meals with local ingredients.

Airfare often is the biggest expenditure on a trip budget, and right now, a lot of people just don’t feel comfortable with it. Instead, think about traveling by car. If you’re traveling with friends, make sure you’re keeping track of gas usage so you can split the cost later. Scope out the parking situation beforehand so you know where you can safely leave your car without racking up too high of a garage fee or getting an unexpected parking ticket.

Consider a staycation instead. If traveling away from home is something you don’t feel comfortable with right now or if it just isn’t in your current budget, planning a staycation could be a good alternative. You can still plan fun activities around the neighborhood, get your favorite take-out or go to your favorite local spot, or even set up a tent in the backyard. Finding some R&R with a staycation can give you the feeling of getting away, while being a lighter touch on your budget.

Adjust on the fly

Analyzing your spending after one trip might help you plan for the next. But it won’t keep you from sticking to your budget while you’re traveling. So, if money is tight, consider tracking your spending while you travel and comparing it daily against your trip budget planner.

One way to rein in your spending is to designate a daily budget for food, drinks and other costs. You may even set aside that amount in cash each day, so you know exactly how much you spend. Just be sure to bring along a debit card or credit card in case of an emergency.

Then, every afternoon, when you’re not wiped out but can use a short break, take a few minutes to see what you’ve spent. If you’ve overspent on food or drinks, consider something lighter for dinner. If you’ve already hit your target for activity spending, plan your next day around free sights. If you’re traveling somewhere that allows access to your favorite banking or budgeting app , use that. If not, bring a printout of your budget and just jot down what you spend in a notebook, then take a few minutes to compare.

If you stay on top of things, you might find it easier to stay on budget until your head hits the pillow the second you arrive home. You may even find that you have enough left over to start planning your next big adventure.

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How to Deduct Travel Expenses (with Examples)

Reviewed by

November 3, 2022

This article is Tax Professional approved

Good news: most of the regular costs of business travel are tax deductible.

Even better news: as long as the trip is primarily for business, you can tack on a few vacation days and still deduct the trip from your taxes (in good conscience).

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Even though we advise against exploiting this deduction, we do want you to understand how to leverage the process to save on your taxes, and get some R&R while you’re at it.

Follow the steps in this guide to exactly what qualifies as a travel expense, and how to not cross the line.

The travel needs to qualify as a “business trip”

Unfortunately, you can’t just jump on the next plane to the Bahamas and write the trip off as one giant business expense. To write off travel expenses, the IRS requires that the primary purpose of the trip needs to be for business purposes.

Here’s how to make sure your travel qualifies as a business trip.

1. You need to leave your tax home

Your tax home is the locale where your business is based. Traveling for work isn’t technically a “business trip” until you leave your tax home for longer than a normal work day, with the intention of doing business in another location.

2. Your trip must consist “mostly” of business

The IRS measures your time away in days. For a getaway to qualify as a business trip, you need to spend the majority of your trip doing business.

For example, say you go away for a week (seven days). You spend five days meeting with clients, and a couple of days lounging on the beach. That qualifies as business trip.

But if you spend three days meeting with clients, and four days on the beach? That’s a vacation. Luckily, the days that you travel to and from your location are counted as work days.

3. The trip needs to be an “ordinary and necessary” expense

“Ordinary and necessary ” is a term used by the IRS to designate expenses that are “ordinary” for a business, given the industry it’s in, and “necessary” for the sake of carrying out business activities.

If there are two virtually identical conferences taking place—one in Honolulu, the other in your hometown—you can’t write off an all-expense-paid trip to Hawaii.

Likewise, if you need to rent a car to get around, you’ll have trouble writing off the cost of a Range Rover if a Toyota Camry will get you there just as fast.

What qualifies as “ordinary and necessary” can seem like a gray area at times, and you may be tempted to fudge it. Our advice: err on the side of caution. if the IRS chooses to investigate and discovers you’ve claimed an expense that wasn’t necessary for conducting business, you could face serious penalties .

4. You need to plan the trip in advance

You can’t show up at Universal Studios , hand out business cards to everyone you meet in line for the roller coaster, call it “networking,” and deduct the cost of the trip from your taxes. A business trip needs to be planned in advance.

Before your trip, plan where you’ll be each day, when, and outline who you’ll spend it with. Document your plans in writing before you leave. If possible, email a copy to someone so it gets a timestamp. This helps prove that there was professional intent behind your trip.

The rules are different when you travel outside the United States

Business travel rules are slightly relaxed when you travel abroad.

If you travel outside the USA for more than a week (seven consecutive days, not counting the day you depart the United States):

You must spend at least 75% of your time outside of the country conducting business for the entire getaway to qualify as a business trip.

If you travel outside the USA for more than a week, but spend less than 75% of your time doing business, you can still deduct travel costs proportional to how much time you do spend working during the trip.

For example, say you go on an eight-day international trip. If you spend at least six days conducting business, you can deduct the entire cost of the trip as a business expense—because 6 is equivalent to 75% of your time away, which, remember, is the minimum you must spend on business in order for the entire trip to qualify as a deductible business expense.

But if you only spend four days out of the eight-day trip conducting business—or just 50% of your time away—you would only be able to deduct 50% of the cost of your travel expenses, because the trip no longer qualifies as entirely for business.

List of travel expenses

Here are some examples of business travel deductions you can claim:

• Plane, train, and bus tickets between your home and your business destination
• Baggage fees
• Laundry and dry cleaning during your trip
• Rental car costs
• Hotel and Airbnb costs
• 50% of eligible business meals
• 50% of meals while traveling to and from your destination

On a business trip, you can deduct 100% of the cost of travel to your destination, whether that’s a plane, train, or bus ticket. If you rent a car to get there, and to get around, that cost is deductible, too.

The cost of your lodging is tax deductible. You can also potentially deduct the cost of lodging on the days when you’re not conducting business, but it depends on how you schedule your trip. The trick is to wedge “vacation days” in between work days.

Here’s a sample itinerary to explain how this works:

Thursday: Fly to Durham, NC. Friday: Meet with clients. Saturday: Intermediate line dancing lessons. Sunday: Advanced line dancing lessons. Monday: Meet with clients. Tuesday: Fly home.

Thursday and Tuesday are travel days (remember: travel days on business trips count as work days). And Friday and Monday, you’ll be conducting business.

It wouldn’t make sense to fly home for the weekend (your non-work days), only to fly back into Durham for your business meetings on Monday morning.

So, since you’re technically staying in Durham on Saturday and Sunday, between the days when you’ll be conducting business, the total cost of your lodging on the trip is tax deductible, even if you aren’t actually doing any work on the weekend.

It’s not your fault that your client meetings are happening in Durham—the unofficial line dancing capital of America .

Meals and entertainment during your stay

Even on a business trip, you can only deduct a portion of the meal and entertainment expenses that specifically facilitate business. So, if you’re in Louisiana closing a deal over some alligator nuggets, you can write off 50% of the bill.

Just make sure you make a note on the receipt, or in your expense-tracking app , about the nature of the meeting you conducted—who you met with, when, and what you discussed.

On the other hand, if you’re sampling the local cuisine and there’s no clear business justification for doing so, you’ll have to pay for the meal out of your own pocket.

Meals and entertainment while you travel

While you are traveling to the destination where you’re doing business, the meals you eat along the way can be deducted by 50% as business expenses.

This could be your chance to sample local delicacies and write them off on your tax return. Just make sure your tastes aren’t too extravagant. Just like any deductible business expense, the meals must remain “ordinary and necessary” for conducting business.

How Bench can help

Surprised at the kinds of expenses that are tax-deductible? Travel expenses are just one of many unexpected deductible costs that can reduce your tax bill. But with messy or incomplete financials, you can miss these tax saving expenses and end up with a bigger bill than necessary.

Enter Bench, America’s largest bookkeeping service. With a Bench subscription, your team of bookkeepers imports every transaction from your bank, credit cards, and merchant processors, accurately categorizing each and reviewing for hidden tax deductions. We provide you with complete and up-to-date bookkeeping, guaranteeing that you won’t miss a single opportunity to save.

Want to talk taxes with a professional? With a premium subscription, you get access to unlimited, on-demand consultations with our tax professionals. They can help you identify deductions, find unexpected opportunities for savings, and ensure you’re paying the smallest possible tax bill. Learn more .

Bringing friends & family on a business trip

Don’t feel like spending the vacation portion of your business trip all alone? While you can’t directly deduct the expense of bringing friends and family on business trips, some costs can be offset indirectly.

Driving to your destination

Have three or four empty seats in your car? Feel free to fill them. As long as you’re traveling for business, and renting a vehicle is a “necessary and ordinary” expense, you can still deduct your business mileage or car rental costs even when others join you for the ride.

One exception: If you incur extra mileage or “unnecessary” rental costs because you bring your family along for the ride, the expense is no longer deductible because it isn’t “necessary or ordinary.”

For example, let’s say you had to rent an extra large van to bring your children on a business trip. If you wouldn’t have needed to rent the same vehicle to travel alone, the expense of the extra large van no longer qualifies as a business deduction.

Renting a place to stay

Similar to the driving expense, you can only deduct lodging equivalent to what you would use if you were travelling alone.

However, there is some flexibility. If you pay for lodging to accommodate you and your family, you can deduct the portion of lodging costs that is equivalent to what you would pay only for yourself .

For example, let’s say a hotel room for one person costs $100, but a hotel room that can accommodate your family costs $150. You can rent the $150 option and deduct $100 of the cost as a business expense—because $100 is how much you’d be paying if you were staying there alone.

This deduction has the potential to save you a lot of money on accommodation for your family. Just make sure you hold on to receipts and records that state the prices of different rooms, in case you need to justify the expense to the IRS

Heads up. When it comes to AirBnB, the lines get blurry. It’s easy to compare the cost of a hotel room with one bed to a hotel room with two beds. But when you’re comparing significantly different lodgings, with different owners—a pool house versus a condo, for example—it becomes hard to justify deductions. Sticking to “traditional” lodging like hotels and motels may help you avoid scrutiny during an audit. And when in doubt: ask your tax advisor.

So your trip is technically a vacation? You can still claim any business-related expenses

The moment your getaway crosses the line from “business trip” to “vacation” (e.g. you spend more days toasting your buns than closing deals) you can no longer deduct business travel expenses.

Generally, a “vacation” is:

• A trip where you don’t spend the majority of your days doing business
• A business trip you can’t back up with correct documentation

However, you can still deduct regular business-related expenses if you happen to conduct business while you’re on vacay.

For example, say you visit Portland for fun, and one of your clients also lives in that city. You have a lunch meeting with your client while you’re in town. Because the lunch is business related, you can write off 50% of the cost of the meal, the same way you would any other business meal and entertainment expense . Just make sure you keep the receipt.

Meanwhile, the other “vacation” related expenses that made it possible to meet with this client in person—plane tickets to Portland, vehicle rental so you could drive around the city—cannot be deducted; the trip is still a vacation.

If your business travel is with your own vehicle

There are two ways to deduct business travel expenses when you’re using your own vehicle.

• Actual expenses method
• Standard mileage rate method

Actual expenses is where you total up the actual cost associated with using your vehicle (gas, insurance, new tires, parking fees, parking tickets while visiting a client etc.) and multiply it by the percentage of time you used it for business. If it was 50% for business during the tax year, you’d multiply your total car costs by 50%, and that’d be the amount you deduct.

Standard mileage is where you keep track of the business miles you drove during the tax year, and then you claim the standard mileage rate .

The cost of breaking the rules

Don’t bother trying to claim a business trip unless you have the paperwork to back it up. Use an app like Expensify to track business expenditure (especially when you travel for work) and master the art of small business recordkeeping .

If you claim eligible write offs and maintain proper documentation, you should have all of the records you need to justify your deductions during a tax audit.

Speaking of which, if your business is flagged to be audited, the IRS will make it a goal to notify you by mail as soon as possible after your filing. Usually, this is within two years of the date for which you’ve filed. However, the IRS reserves the right to go as far back as six years.

Tax penalties for disallowed business expense deductions

If you’re caught claiming a deduction you don’t qualify for, which helped you pay substantially less income tax than you should have, you’ll be penalized. In this case, “substantially less” means the equivalent of a difference of 10% of what you should have paid, or $5,000—whichever amount is higher.

The penalty is typically 20% of the difference between what you should have paid and what you actually paid in income tax. This is on top of making up the difference.

Ultimately, you’re paying back 120% of what you cheated off the IRS.

If you’re slightly confused at this point, don’t stress. Here’s an example to show you how this works:

Suppose you would normally pay $30,000 income tax. But because of a deduction you claimed, you only pay $29,000 income tax.

If the IRS determines that the deduction you claimed is illegitimate, you’ll have to pay the IRS $1200. That’s $1000 to make up the difference, and $200 for the penalty.

Form 8275 can help you avoid tax penalties

If you think a tax deduction may be challenged by the IRS, there’s a way you can file it while avoiding any chance of being penalized.

File Form 8275 along with your tax return. This form gives you the chance to highlight and explain the deduction in detail.

In the event you’re audited and the deduction you’ve listed on Form 8275 turns out to be illegitimate, you’ll still have to pay the difference to make up for what you should have paid in income tax—but you’ll be saved the 20% penalty.

Unfortunately, filing Form 8275 doesn’t reduce your chances of being audited.

Where to claim travel expenses

If you’re self-employed, you’ll claim travel expenses on Schedule C , which is part of Form 1040.

When it comes to taking advantage of the tax write-offs we’ve discussed in this article—or any tax write-offs, for that matter—the support of a professional bookkeeping team and a trusted CPA is essential.

Accurate financial statements will help you understand cash flow and track deductible expenses. And beyond filing your taxes, a CPA can spot deductions you may have overlooked, and represent you during a tax audit.

Learn more about how to find, hire, and work with an accountant . And when you’re ready to outsource your bookkeeping, try Bench .

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Can You Deduct Your Vacation From Your Taxes? Experts Weigh In

Know what’s deductible and what’s not when it comes to submitting travel expenses on your taxes..

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If there’s a certain amount of work involved, you may be able to claim travel costs on your taxes.

Photo by GaudiLab/Shutterstock

People are traveling like crazy these days. The Sunday after Thanksgiving 2023 was the biggest single travel day in U.S. aviation history, with TSA screening more than 2.9 million passengers on November 26.

If you’re one of those travelers racking up frequent flier miles as quickly as you can fasten your seat belt, you may be looking for ways to recoup some of the cost. Can you legally write off your trip? If you’re self-employed (for example, if you’re an entrepreneur, freelancer, or consultant, or have an online business) and you did some work while on the road, there’s a good chance you can.

Here’s what it takes to get two thumbs up from the IRS.

Pass these four tests

For starters, your trip must have a business purpose, meaning it must include activities such as client meetings, attending a conference, being a guest speaker at a conference, doing research and development for the business, or holding a board meeting or annual shareholders’ meeting. The activity should have the potential to generate revenue.

“Don’t think you can take a personal trip, talk business for an hour and then try and deduct the whole amount of your trip. The intent of the trip needs to be business,” says Caitlynn Eldridge, founder and CEO of Eldridge CPA .

The second and third requirements deem that the trip must be both “ordinary and necessary,” according to IRS guidelines on business travel expenses . “An ordinary expense means it’s typical in your business, both [in terms of] amount [as well as in] frequency and purpose. Necessary means it actually helps you increase your profits or expand your business,” explains Tom Wheelwright, a certified public accountant and author of the book Tax-Free Wealth (BZK Press, 2018).

Lastly, every expense must be properly documented. To get a deduction for travel, Wheelwright said that you must spend more than half your time during the business day doing business and have everything documented. “So, if you spend four and a half hours a day doing business, it becomes deductible. You also must have documentation, which includes receipts, of what you did, and a log of your expenses,” says Wheelwright.

On receipts, write the name of the client who you had the meal with for further proof. “Save the emailed confirmation and receipt from the hotel reservation or conference ticket payment that show the dates, times, and name of the events as well as the receipts from the travel it took to get there and back [such as for gas or flights],” says Ben Watson, founder of Fiscal Fluency , a personal finance and business coaching company.

Note that for 2024, the IRS mileage reimbursement rate is 67 cents for employees or a self-employed individual traveling for work, up from 65.5 cents in 2023.

Know, too, that you must be away from home overnight—the IRS requires an overnight stay for the trip to qualify as business travel, Wheelwright says.

Domestic travel versus travel abroad

There’s a big difference between how you calculate deductions if the work trip was taken in the United States versus abroad. According to Wheelwright, “It’s an all-or-nothing test in the U.S., so either you spent more than 50 percent of your time on business, and it’s all deductible, or you spent 50 percent or less and none of it’s deductible.”

For international business travel, the deductions work differently. He explained that when you travel to another country, the deduction is proportionate. “For example, if you spent 40 percent of your time doing business in Italy, then 40 percent is deductible,” says Wheelwright.

Stick to the rules

If you normally stay in more modest hotels, trying to deduct a luxe property stay could raise red flags.

Photo by Yokwar/Shutterstock

It has to be a legitimate business trip. “You can’t simply do some work while on the beach and call it a business trip,” says Watson. But if you make it a “bleisure trip” by adding a couple days at the beach onto your preplanned business trip to the coast, you could still write off at least some of your lodging fees, he explained. If you do extend your trip for vacation, you can only deduct the expenses that were directly related to work and took place on the days that you conducted business. If you are traveling to multiple cities, keep in mind that each must have a business purpose.

You do have to work. If you are at a conference, make sure you fully participate, which means not just attending one or two sessions. If you only attend a small number of the business-related events, the entire purpose of the trip would be considered a personal trip with “incidental” business activities, Watson points out. Remember you need a log of what you did, and if it’s thin on details, it could prove problematic. “You don’t want to lose the ability to deduct transportation, lodging, meals, and other expenses,” says Watson.

If it’s a business trip of your own making, be sure it includes meetings with clients or participating in some work-related activity. “To demonstrate evidence of these events, it’s wise to put calendar appointments down in your phone in advance and hold onto receipts when the time comes to file your tax return and claim your deductions. Remember, the primary purpose of this trip is [supposed to be] for work,” says Riley Adams, a CPA and CEO and founder of WealthUp , a financial literacy website.

Don’t try to bend what “ordinary and necessary” means. “If you have the ability to accomplish the same business tasks while staying at a modest hotel as you would at the Four Seasons, you’ll have a hard time justifying the extra cost if you’re ever audited,” Watson cautions.

Stay at a place that is similar to places you normally stay on a business trip, so your expenses are considered “ordinary.” Wheelwright explains that if you usually stay at five-star hotels for your business trips, then the Four Seasons would fall into the same category. However, if you usually stay at hotels like the Comfort Inn, and suddenly switch to a luxury hotel, the high-end venue could raise red flags with the IRS. He says that it doesn’t matter whether you stay at a hotel or a vacation rental, the quality level and price tag should be similar to what is typical for your business trips.

When traveling with non–business companions, such as a spouse or family members, you may only deduct the cost of the lodging you would have paid if you were traveling alone—for example, if a single room costs $150 per night, and you paid $200 for a double room, you could only deduct at the $150 rate.

What can you deduct?

You can deduct 50 percent of the cost of business meals.

Photo by Rawpixel.com/Shutterstock

Personal meals are not deductible, but half the cost of food expenses related to business can be deducted. Expenses for your family’s meals and entertainment cannot be deducted unless they are actively engaged in the business and you can show that their expense is both ordinary and necessary.

Travel expenses are only deductible on the days in which the work-related event occurs. “For example, a taxi ride to the meeting, train to a conference, or plane ride to the event [are deductible],” says Adams. “Lodging, much like travel expenses, is deductible on the days in which business is set to occur.”

Understand too, that if you’re provided with a plane ticket paid for by your company, or you’re riding free because you’re redeeming frequent flier miles, your cost is zero, so you can’t deduct it.

But there are a couple of things you may not be aware of. For example, if you have to ship your baggage, you can deduct that cost; you also can deduct for tips for services, such as a tip to the waiter during a meal with a client.

Be strategic

It’s best to put your “vacation” days in the middle of the business days, advises CPA Greg O’Brien. “For example, if [a] business owner took a seven-day trip to Florida and spent five days meeting with clients or prospects and two days relaxing on the beach, this would still qualify as a deductible business trip. The trick is to stick the ‘vacation’ days in the middle of the business days,” he says.

By placing the vacation days in the middle, the travel days to and from are still considered business related, rather than personal.

Watson offers another tip: “Laundry, dry-cleaning and shoe-shine expenses are perfectly acceptable expenses if incurred shortly after returning home.”

Travel expenses list: A guide to managing your travel budget

Explore our travel expenses list and learn how to optimize your travel budget. Stay organized, track your spending, and make informed decisions with Accrue.

A travel expenses list is essential for mapping and managing your travel budget. It helps ensure you don’t overspend or underestimate the cost of your trip. You can keep track of planned and unplanned expenses, ensuring they fit within your overall budget.

Unfortunately, for most travelers, budgeting isn’t easy. The cost of airfare, accommodation, and meals vary greatly and can quickly add up. Without an organized strategy in place, it’s all too easy to blow your budget and end up with a mountain of debt.

Learn in this comprehensive guide the basics of creating a travel expenses list, including transportation, accommodations, food & beverage, and activities, and offer advice on saving money while traveling.

1. Transportation

Transportation costs refer to all your costs of moving from point A to point B. They account for the biggest chunk of most travel budgets and include:

Many travelers, especially those traveling for business purposes, prefer booking flights due to convenience, speed, and cost-effectiveness. Airfare is the amount you pay for the plane ticket and can vary greatly depending on the airline, route, and time of year. However, there are other additional airport expenses, such as luggage, taxes, and transfers you must factor into your budget. 

Car rental and gas

You may need a rental car at the destination to help you get around, especially if you plan to explore the area and take side trips. Depending on where you’re going and for how long, renting a car might be more cost-effective than using public transportation, taxis, or rideshares — factor in the rental cost, insurance, and gas. 

Other additional fees include parking fees, tolls, and pit stops on the road. If you’ll be driving a lot, look into getting a fuel-efficient car and research the average cost of gas in the area.

Public transit

Public transportation is typically the cheapest way to get around a city, especially if you plan on taking multiple trips. It includes subways, buses, ferries, and trains, each with its own rate. Buses, metro, and train tickets vary in price depending on the region. 

Consider buying a day pass or multipass to save transport money if you plan on taking multiple trips. Most cities also offer rideshare services like Uber and Lyft, which can be more cost-effective than driving a personal vehicle. Research the public transit options available at your destination to see which fits your budget.

Parking fees and tolls

If you plan to drive a lot during your trip, you might have to pay parking fees and tolls. Parking fees vary depending on the city and are usually hourly or daily. Some cities have free street parking but most paid lots and garages charge a fee. 

Tolls are charges for using certain roads and bridges. You can pay the tolls in advance or use a toll pass for the duration of your trip. Other expenses associated with car rentals include insurance, gas, and repairs.

2. Accommodations

Accommodation expenses are the costs of staying at a place during your trip. They include hotel stays, Airbnb rentals, hostels, and campsites. The prices vary depending on the accommodation type, amenities, and location — research various options to determine what works best for your budget.

Hotels and resorts

Hotels and resorts are the most common option for short-term stays. They can range from budget-friendly motels to luxurious five-star hotels and offer a range of amenities like swimming pools, spas, saunas, and fitness centers. 

Their prices depend on the location, star rating, and amenities. You will incur additional fees for hotel room service, extra beds, laundry, and other services. Book in advance or use hotel rewards and loyalty programs to save money .

Bed and breakfast (B&B) expenses

Bed and breakfast establishments offer a more affordable and intimate experience than hotels. They can range from private rooms in someone’s home to luxurious properties with multiple bedrooms. 

Prices usually include bed and breakfast, but you may be charged for extra amenities like housekeeping, dry cleaning, and Wi-Fi. Unlike hotels, you’ll be dealing directly with the owner, so it’s essential to read reviews and ask questions before booking.

Meal expenses also account for a considerable chunk of your travel budget, so it’s important to plan ahead and budget accordingly. How much money you spend on food depends on where you’re going, the type of food you like, and how often you plan to eat out. 

Local cuisine is usually the cheapest option, so find places that offer authentic dishes. Bringing snacks such as nuts, energy bars, and trail mix is always a good idea. You can save money by snacking instead of buying expensive meals. Ordinary meal expenses include:

Restaurants and dining out

Restaurant dining is the most common way to eat while on vacation or a business trip, but it can be costly. Prices vary depending on the type of restaurant, cuisine, and location. Fine dining establishments charge premium prices for their food and drinks, while casual eateries and fast food joints are more affordable. Check out local restaurants and read reviews before going out. Deals such as discounts for early birds or happy hours are creative ways to help you save on these expenses.

Street food and vendors

Street food is a popular option for travelers who want to indulge in the local culture and cuisine. Street vendors often serve traditional dishes at low prices. You can find food carts or stalls selling sandwiches, kebabs, tacos, and other dishes. However, be mindful of food safety and hygiene protocols to avoid getting sick. Research average prices for the area to make sure you’re not being overcharged.

Coffee and beverages

Coffee and beverages are usually the least expensive items on the menu. You can find coffee shops and cafes selling specialty drinks, like lattes, cappuccinos, and frappuccinos, at a fraction of the price of restaurants. 

Most places also offer tea, smoothies, juices, and other non-alcoholic drinks. Local markets will usually have cheaper options for bottled water and other beverages. For alcoholic drinks, look for local breweries, pubs, and bars and take advantage of happy hours and specials to save money.

Tipping and service charges

Tipping is common in many countries and is expected for certain services, such as restaurant meals and hotel stays. The tip amount varies depending on the quality of service and local customs. It’s usually 15-20% for a meal, but you can check with the restaurant or your server if in doubt. 

Service charges come with the bill and should be indicated on the menu. Allocate a portion of your travel budget to cover tips and service charges. Staff at hotels, restaurants, and other establishments rely on tips for their income, so be generous when you can.

4. Activities and entertainment

A vacation wouldn’t be complete without some fun and entertainment. You can find inexpensive or free activities to do depending on where you’re traveling. Museums, galleries, and other cultural attractions are usually free or have discounted admission for students and seniors. Typical expenses for activities and entertainment:

Sightseeing and attractions

Sightseeing is a big part of many people’s travel plans. Historical and cultural attractions, like monuments, churches, and museums, are usually the most popular sightseeing destinations. You can also visit theme parks, zoos, aquariums, and art galleries. 

Prices vary depending on the type of attraction, and access passes are usually cheaper than buying tickets for individual attractions. You can pay a small fee to take historical tours from locals, while in certain cities, free walking tours are also available.

Organized tours and excursions

The best and most fun-filled way to see a new place is to join an organized tour or excursion. Most cities have tours that take you to the must-see sights and attractions but you can also book day trips to castles, vineyards, or nature reserves. 

An organized tour covers entrance fees, transport, and sometimes meals. Compare rates and read customer reviews to find the best value for your money.

Outdoor activities

Outdoor activities like hiking, biking, and water sports are great ways to explore the local landscape. Many national parks and forests have trails for biking, horseback riding, and climbing. 

Some parks offer guided tours with experienced instructors. The guided tours usually include equipment rentals and safety gear, but you may incur park entrance or permit fees for certain activities.

Shows and performances

If you’re looking for a bit of culture, shows, and performances are a great way to spend an evening. Theaters and opera houses often have discounted prices for matinee shows or special performances. 

If you’re staying in a city, look out for street performers and enjoy free outdoor concerts. Cinemas are usually cheaper than live performances, so you can taste the local culture without breaking your budget.

Spa and wellness

Spa treatments are a great way to re-energize after a long flight or an intense sightseeing session. Some hotels offer complimentary spa treatments, while others have special deals for guests. 

Try a local massage parlor or a yoga studio if you want something more affordable. You will pay from a few dollars to hundreds, depending on your chosen services. Spa services usually include massages, facials, saunas, and steam rooms.

5. Shopping and souvenirs

Bringing back souvenirs is a fun part of any trip, but it can be easy to overspend on gifts for yourself and your loved ones. The cost of souvenirs depends on where you’re traveling and the type of item you want to buy. It’s common to bargain or haggle for lower prices in some places. Research the local currency and market prices to avoid getting ripped off. 

Travelers should also be aware of import laws and customs regulations. There may be restrictions on certain items such as food, alcohol, and tobacco.

6. Emergency and unprecedented expenses

Despite how well you plan your trip, there may be unexpected costs. Unforeseen events, such as a life-threatening medical emergency or natural disaster, can result in high expenses. Budget for emergency funds and purchase travel insurance to cover any medical costs or unexpected losses. 

Carry enough cash for emergencies, and use a debit or credit card for international purchases. Also, double-check your documents to ensure you have all the necessary visas and permits before your trip.

7. Currency exchange rates

Exchange rates make a huge difference when transferring money or paying in foreign currency. Compare current rates with those from the booking time to ensure you get the best deal. Check with your local bank or credit card provider for their rates and fees. 

You can also look up online currency converter tools to see how much you spend in your home currency. Be aware of hidden charges when exchanging money. Such hidden charges include ATM fees, commissions, and other administrative costs that can quickly add up.

Tips for managing travel expenses

Proper travel expense management is critical to a successful and enjoyable trip. Planning ahead and budgeting for each expense will help you manage your travel expenses.

Set daily spending limits and monitor your expenses

Estimate your total budget for the trip and then divide it into daily spending limits. This will help you stay on budget while still allowing you to enjoy the activities and attractions. Monitor your personal expenses throughout the trip to ensure you don’t exceed the budget.

Save money on product purchases with Accrue Savings

Saving money for travel expenses is a challenging feat. Juggling everyday expenses while saving for a trip can be overwhelming. Accrue Savings is a great way to save money for travel without having to scrimp and sacrifice everyday items. 

This easy-to-use service allows you to save money for travel expenses by automatically putting aside a portion of your everyday purchases. You only need to create a free Accrue account, fund your wallet, and track your progress. And there is no set amount you must contribute — save as little as $1 weekly or $50 monthly, depending on your flexibility.

Book everything in advance

Book flights, accommodations, and activities in advance to get the best deals and save on travel costs. Check for airline discounts or hotel loyalty programs, and watch for last-minute discounts and deals on attractions and activities.

Traveling during the off-peak season

Flights and accommodation prices tend to be higher during the peak season. Consider traveling during the off-peak season when prices are lower. Hotels usually offer discounts or special packages during this time, saving you money on accommodations. You may have to sacrifice some activities due to fewer available options, but you’ll get more bang for your buck.

Keep an eye out for discounts

Take advantage of discounts and special deals to save on out-of-pocket expenses. Look for coupons, student or senior discounts, and loyalty club memberships that offer discounts on activities and attractions. You can also find discount codes for car rentals, restaurants, and other services online. Business travel expenses, for instance, may be tax-deductible depending on your situation.

Save intelligently on your purchases Accrue Savings

Poor budgeting decisions can quickly put a damper on your trip. Accrue Savings provides a smart and easy way to save money for travel expenses while avoiding the risk of overspending.

It’s a great way to keep your travel expenses in check without missing out on the fun. Once you sign up and fund your wallet, you can track your progress and watch your savings grow. You will also earn rewards along the way to help you realize your travel dreams quickly. 

Register today and check out our partners to earn money toward your future travel expenses and purchases.

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The 12 Best Budgeting Apps for Travelers

Ashley Rossi

Ashley Rossi is always ready for her next trip. Follow her on Twitter and Instagram for travel tips, destination ideas, and off the beaten path spots.

After interning at SmarterTravel, Ashley joined the team full time in 2015. She's lived on three continents, but still never knows where her next adventure will take her. She's always searching for upcoming destination hotspots, secluded retreats, and hidden gems to share with the world.

Ashley's stories have been featured online on USA Today, Business Insider, TripAdvisor, Huffington Post, Jetsetter, and Yahoo! Travel, as well as other publications.

The Handy Item I Always Pack : "A reusable filtered water bottle—it saves you money, keeps you hydrated, and eliminates waste—win-win."

Ultimate Bucket List Experience : "A week in a bamboo beach hut on India's Andaman Islands."

Travel Motto : "Travel light, often, and in good company."

Aisle, Window, or Middle Seat : "Window—best view in the house."

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While you’re stuck daydreaming about your next bucket-list vacation, why don’t you get a hold of your finances and make it a reality by first budgeting out your travel expenses? Whether it’s a road trip or international vacation that you’re planning, easily forgettable items like parking fees can add up. That’s why you should use a travel-specific budgeting app to help streamline your costs on your next trip. Here are 12 budget apps to help you plan your expenses.

PocketGuard

Link all of your financial accounts and cards to this app, and it will automatically update and categorize your spending in real time. It then tells you what spending money you have with the “in my pocket” feature. It also automatically builds you a spending budget based on income, bills, and the goals you set. It even finds ways to lower some of your monthly bills for you … sign us up.

Download: iOS | Google Play

Tripcoin lets you enter in your expenses per day and even works offline. It then processes your spending to give you a spending summary of your trip, which you can export for other uses. This lets you see how much you’re spending on each category of your trip, broken down by day, so you can monitor your vacation expenses in real time.

Download: iOS

9 Sneaky Travel Costs You Might Forget to Budget For

Trip Expense Manager

The Trip Expense Manager app is ideal for large traveling groups that need help planning and monitoring travel expenses. For each trip you take, you can add Google users, a list of places to go, and expenses, and even mark who paid which bill.

Download: Google Play

TravelSpend

I love TravelSpend for its easy-to-use features and simple design. How it works: You add expenses as they happen (the app works offline and even converts foreign currencies) and the app tracks your spending by total and by day. You can even follow your spending on a map throughout your vacation.

Wally connects to your current financial accounts and tracks your spending so you can get a handle on your cash flow and spending by category. Wally is useful because unlike some of the other budgeting apps, it lets you use private groups for managing trip spending or other budgets. You can even add reminders, notes, lists, documents, and comments.

Users love TripMate for its simplicity and easy-to-use features, plus it’s all free. This travel expense tracker app lets you create a trip and then add and remove users as needed. You can add expenses, receive a personalized summary, and even get hotel, and other booking-related information.

Trail Wallet

If you’re looking for a travel-specific budget tool and expense tracker, this is your best bet. Input your expenses into Trail Wallet and the app will split them up based on category so you can get a closer look at your spending. Note that only the first 25 items you enter are free.

11 Budget Travel Lies You Should Stop Believing Right Now

This travel expense app makes splitting costs a breeze. Simply invite your travel partners to the trip you’ve created on the app, and each person can enter in his or her expenses. Once the trip is over (and all expenses have been entered) you can see who owes whom what amount.

Splitwise is another useful cost-tracking platform that easily lets you split group expenses while traveling. You can split by percentage or shares, and it’s even available in offline mode. It’s great for international trips, too, as the app is available in seven languages and over 100 currencies. Plus, it’s integrated with Venmo and PayPal for easy payback.

Mint is so much more than just a travel expense app—it connects with all of your bank accounts to give you an overall summary of your cash flow. You can then easily create a budget for different categories, like saving for a vacation.

30 Essential Non-Travel Apps for Travelers

For those who have been involved in the planning of a bachelor or bachelorette party, you know the trials and tribulations that come with splitting large group expenses. This app was created specifically for those organizing large group trips and includes building an itinerary, polls, and chat features as well as ways to track payments and bar tabs within your group.

YNAB (You Need a Budget) is a popular software used for budgeting. While it’s slightly pricey ($84 annually), the positive reviews are endless. On the app version, you can set savings goals and itemize your vaca expenses. There is a free 34-day trial to get you started.

More from SmarterTravel:

• Single Travel: Essential Tips for Planning a Solo Trip
• 5 Ways to Stay Sane When Planning a Trip with Friends
• The 7 Best Trip Planner Apps for Travelers

Ashley Rossi is always ready for her next trip. Follow her on  Twitter   and  Instagram   for travel tips, destination ideas, and off the beaten path spots.

We hand-pick everything we recommend and select items through testing and reviews. Some products are sent to us free of charge with no incentive to offer a favorable review. We offer our unbiased opinions and do not accept compensation to review products. All items are in stock and prices are accurate at the time of publication. If you buy something through our links, we may earn a commission.

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What Are Travel Expenses?

Understanding travel expenses, the bottom line.

• Deductions & Credits
• Tax Deductions

Travel Expenses Definition and Tax Deductible Categories

Michelle P. Scott is a New York attorney with extensive experience in tax, corporate, financial, and nonprofit law, and public policy. As General Counsel, private practitioner, and Congressional counsel, she has advised financial institutions, businesses, charities, individuals, and public officials, and written and lectured extensively.

For tax purposes, travel expenses are costs associated with traveling to conduct business-related activities. Reasonable travel expenses can generally be deducted from taxable income by a company when its employees incur costs while traveling away from home specifically for business. That business can include conferences or meetings.

Key Takeaways

• Travel expenses are tax-deductible only if they were incurred to conduct business-related activities.
• Only ordinary and necessary travel expenses are deductible; expenses that are deemed unreasonable, lavish, or extravagant are not deductible.
• The IRS considers employees to be traveling if their business obligations require them to be away from their "tax home” substantially longer than an ordinary day's work.
• Examples of deductible travel expenses include airfare, lodging, transportation services, meals and tips, and the use of communications devices.

Travel expenses incurred while on an indefinite work assignment that lasts more than one year are not deductible for tax purposes.

The Internal Revenue Service (IRS) considers employees to be traveling if their business obligations require them to be away from their "tax home" (the area where their main place of business is located) for substantially longer than an ordinary workday, and they need to get sleep or rest to meet the demands of their work while away.

Well-organized records—such as receipts, canceled checks, and other documents that support a deduction—can help you get reimbursed by your employer and can help your employer prepare tax returns. Examples of travel expenses can include:

• Airfare and lodging for the express purpose of conducting business away from home
• Transportation services such as taxis, buses, or trains to the airport or to and around the travel destination
• The cost of meals and tips, dry cleaning service for clothes, and the cost of business calls during business travel
• The cost of computer rental and other communications devices while on the business trip

Travel expenses do not include regular commuting costs.

Individual wage earners can no longer deduct unreimbursed business expenses. That deduction was one of many eliminated by the Tax Cuts and Jobs Act of 2017.

While many travel expenses can be deducted by businesses, those that are deemed unreasonable, lavish, or extravagant, or expenditures for personal purposes, may be excluded.

Types of Travel Expenses

Types of travel expenses can include:

• Personal vehicle expenses
• Taxi or rideshare expenses
• Airfare, train fare, or ferry fees
• Laundry and dry cleaning
• Business meals
• Business calls
• Shipment costs for work-related materials
• Some equipment rentals, such as computers or trailers

The use of a personal vehicle in conjunction with a business trip, including actual mileage, tolls, and parking fees, can be included as a travel expense. The cost of using rental vehicles can also be counted as a travel expense, though only for the business-use portion of the trip. For instance, if in the course of a business trip, you visited a family member or acquaintance, the cost of driving from the hotel to visit them would not qualify for travel expense deductions .

The IRS allows other types of ordinary and necessary expenses to be treated as related to business travel for deduction purposes. Such expenses can include transport to and from a business meal, the hiring of a public stenographer, payment for computer rental fees related to the trip, and the shipment of luggage and display materials used for business presentations.

Travel expenses can also include operating and maintaining a house trailer as part of the business trip.

Can I Deduct My Business Travel Expenses?

Business travel expenses can no longer be deducted by individuals.

If you are self-employed or operate your own business, you can deduct those "ordinary and necessary" business expenses from your return.

If you work for a company and are reimbursed for the costs of your business travel , your employer will deduct those costs at tax time.

Do I Need Receipts for Travel Expenses?

Yes. Whether you're an employee claiming reimbursement from an employer or a business owner claiming a tax deduction, you need to prepare to prove your expenditures. Keep a running log of your expenses and file away the receipts as backup.

What Are Reasonable Travel Expenses?

Reasonable travel expenses, from the viewpoint of an employer or the IRS, would include transportation to and from the business destination, accommodation costs, and meal costs. Certainly, business supplies and equipment necessary to do the job away from home are reasonable. Taxis or Ubers taken during the business trip are reasonable.

Unreasonable is a judgment call. The boss or the IRS might well frown upon a bill for a hotel suite instead of a room, or a sports car rental instead of a sedan.

Individual taxpayers need no longer fret over recordkeeping for unreimbursed travel expenses. They're no longer tax deductible by individuals, at least until 2025 when the provisions in the latest tax reform package are due to expire or be extended.

If you are self-employed or own your own business, you should keep records of your business travel expenses so that you can deduct them properly.

Internal Revenue Service. " Topic No. 511, Business Travel Expenses ."

Internal Revenue Service. " Publication 463, Travel, Gift, and Car Expenses ," Page 13.

Internal Revenue Service. " Publication 5307, Tax Reform Basics for Individuals and Families ," Page 7.

Internal Revenue Service. " Publication 463, Travel, Gift, and Car Expenses ," Pages 6-7, 13-14.

Internal Revenue Service. " Publication 463, Travel, Gift, and Car Expenses ," Page 4.

Internal Revenue Service. " Publication 5307, Tax Reform Basics for Individuals and Families ," Pages 5, 7.

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10 Travel Expenses You’re Forgetting in Your Vacation Budget

By Eden Ashley To cover the cost of this website and the time I spend writing these posts, sometimes I link to affiliate products. If you choose to buy through these links (at no additional cost to you), thank you so much! It makes it possible for me to keep doing this. Disclosure Policy

When it comes to planning and booking your next vacation, you’re probably just factoring the three big expenses into your travel budget:

• Transportation (airfare/ car rental)
• Accommodations (hotels, vacation home)
• Sightseeing (attractions, entertainment)

However, there are several smaller expenses that could eat up a big part of your travel budget. Many services in the travel industry which used to be complimentary are no longer free.

This is why I always recommend having extra room in your budget so you can cover these unexpected costs.

In order to help you plan and budget effectively for your next vacation, I’ve rounded up a list of 10 hidden travel expenses so you can avoid them and actually enjoy your trip.

Related Posts:

• 10 easy ways to make money traveling
• 70 travel hacks everyone should know
• 23 secrets to booking cheap flights

Table of Contents

1. Emergency expenses

Unfortunately unplanned expenses can arise when you’re on vacation, which is why it’s important to leave some wiggle room in your budget for these costs.

Emergency expenses can include:

• Getting an injury that is not covered by your travel insurance
• Missing your flight and having to pay out of pocket for another one
• Having to book different accommodations because you were unhappy with the original booking

When my sister and I traveled to New Orleans for her birthday, we missed our connection flight home due to weather delays. We were flying to from New Orleans to Toronto with a stop in New York City.

Because we missed our connecting flight due to weather delays, we had to take a flight home the following day. This meant we had to pay out of pocket for a hotel near the airport.

Fortunately we had extra money in our budget planned for emergencies to cover this cost. I like to use this Travel Planner to help me organize my vacation budget. It includes a vacation budget template to help you breakdown the cost of your trip and other helpful worksheets to plan your holiday.

2. Foreign transaction fees

If you’re traveling abroad, you’ll most likely encounter foreign transactions fees from your credit or debit card. These fees can quickly add up if you’re using your card a lot during your trip.

This is why I recommend using a card that has no foreign transaction fees. It’s also important to call your bank beforehand to let them know you’ll be traveling. This will ensure that you won’t run into any problems when using your card abroad.

Read Next: 20 things we forget to do before traveling internationally

3. Spontaneous travel activities

If you’re traveling to a new destination, it’s natural to want to see and do as much as you can. That’s why it’s important to leave room in your budget for spontaneous travel activities.

Whether it’s a rainy day and you need to do some unexpected indoor activities or you want to do a fun activity that’s unique to your travel destination, having a flexible budget can allow you to enjoy these spontaneous adventures.

I like to use this Acitivty Planner worksheet included in my Travel Planner to help me plan bucket list activities that I want to do on vacation. This helps me to figure out how much money to set aside in my vacation budget for activities.

4. Food and drink

Yes, food and drink costs are an obvious part of your travel budget. However, if you’re eating out for three meals a day plus snacks, these costs can add up quickly.

I recommend searching for restaurants in your budget before your trip. This will prevent you from having to search around for an affordable place to eat and help maximize your vacation time.

I like to use this Destination Planner worksheet included in my Travel Planner to help me research where I want to eat on vacation.

It’s also a good idea to bring your own snacks and drinks to help you stay on budget. Head to a local grocery store or bring stuff from home. I like to bring granola bars to eat for snacks. This helps me save a lot of money on food costs.

5. Vaccinations and medications

Some countries require proof that you have received a vaccination before allowing you to enter the country. You may also want to get some of the recommend immunizations, which can be an effective way to prevent travel-related infections.

I like to follow this Pre-Vacation Checklist worksheet included in my Travel Planner to help me research anything I need to do before going on vacation.

Travel insurance doesn’t usually cover the costs of vaccination, but it can protect you from unexpected medical costs while you’re away.

I also recommend putting together a travel first aid kit . You’ll want to include band-aids, antibiotic ointment, gauze, Tylenol or Advil, anti-nausea medication, anti-diarrhea medication, and so on.

6. Items you forget to bring with y ou

This can include toiletries, proper clothing, footwear, sunscreen , an umbrella and more.

When I went on my first trip abroad to Italy, I forgot to bring proper footwear. I didn’t realize how much walking I’d be doing and literally broke my flats. Having to buy new shoes was an unexpected costs, which is why I’m more mindful about what I pack in my luggage.

Also, some items are not easy to find at your destination. For example, I noticed that it was hard to find affordable deodorant in South Korea, so I recommend making a packing list and checking it twice!

Related Post: 20 things we forget to do before going on vacation

7. Transportation costs (taxi and transit)

When flying to your destination, you’ll need to take public transportation, a shuttle car or a taxi to get to your hotel. It’s important to know how much each of these transportation methods will costs so you can plan accordingly.

When I went to New York City , I was planning on taking public transportation to get to my hotel. However, our flight was delayed by almost 9 hours so we arrived late at night and took a taxi to our hotel instead. Plans can change, so it’s good to have some extra cash on you to cover these expenses.

You’ll also want to budget for your daily transportation costs during your trip. If you plan on using the city’s public transportation a lot, it might be cheaper to buy a daily or weekly transit pass, instead of paying per ride.

8. Mobile phone charges

Our smartphones can be helpful when traveling. It’s a great way to take photos and keep in touch with family and friends back home.

Plus, I love using my smartphone to check for nearby restaurants and directions when traveling. However, if you’re not careful, roaming charges can cost a fortune.

To save money, I like to turn my phone on airplane mode and use free WiFi when traveling. If WiFi is not easily available, I like to buy an affordable Talk, Text and Data package (depending on my needs) before my trip.

I also recommend bringing a portable charger with you. This has been one of the best travel investments I’ve made. I never leave home without my portable charger.

9. Forgetting to store liquids in your checked luggage

Have you ever had to throw out liquid or gel products when going through airport security? I remember when I was coming home from South Korea, I bought a bunch of Korean skincare products and completely forgot to put them in my checked luggage .

I was questioned by airport security about why the products were in my carry-on bag . Airport security was ready to confiscate all my liquids and throw them out, but fortunately they looked at them closely and decided to let me keep everything.

Now I always remember to store liquid and gel products in my checked luggage , so I don’t have to worry about throwing anything out when I go through airport security.

10. Hidden hotel and resort fees

You just booked a fun trip to Vegas, but did you remember to include the hotel’s daily resort fee in your travel budget? Some hotels tack on resort fees, which can add an additional $25-$50+ to the cost of your nightly rate.

It’s important to be aware of what’s included and not included in your hotels’ advertised price. Is WiFi and parking included in your room rate for free?

Sometimes hotels can charge if you want extra towels, a rollaway bed, or daily maid service. I always recommend asking what’s included in the hotel room rate before booking.

Ready to book your next adventure? Click the link to find deals on hotels thanks to Booking.com .

Travel Expenses FAQs

What are some travel expenses.

Below are some common travel expenses that you’ll want to consider when planning your vacation.

Transportation

• Airfare (Checked luggage, Seat selection, On-flight meals & Entertainment)
• Car Rental (Gas, Car insurance, Tolls & Parking fees)
• Bus, Taxi, Train, Boat, Metro (Public Transportation)

Accommodations

• Hotel / Vacation rental / Camp sites
• Daily resort fee (for some hotels)
• Extra fees & Tips

Food & Drinks

• Restaurants
• Coffee / Tea
• Pubs & Bars
• Groceries & Snacks

Entertainment

• Organized tours
• Sightseeing & Attractions
• Nightlife / Concerts
• Shopping (Gifts, souvenirs)
• Spa treatments

Administrative Travel Expenses

• Travel insurance
• Passport / Visa / Travel documents
• Vaccinations & Medications
• Mobile phone fees / Calling card
• Currency exchange
• Maps / Guide books
• Pet / Child care

Misc. Travel Expenses

• Luggage / Carry-on bag (if necessary to purchase a new one)
• Toiletries (I like to pack mine in these handy travel-sized containers )
• Clothing you need to purchase for your trip
• Reading material for the plane
• Travel gear ( money belt , packing cubes , camera equipment , and so on)

About Eden Ashley

As a new mom (and homeowner), I know the importance of having a budget that works. I'm passionate about finding unique ways to earn more and save more money so I can reach financial freedom sooner. Starting this blog allowed me to quit my 9-5 job and build multiple six-figures in savings. Click here to learn how to start your own blog today!

Free Travel Budget Calculator: Easily Make Your Vacation Budget

Packed for Life contains affiliate links. If you make a purchase using one of these links, we may receive compensation at no extra cost to you. As an Amazon Associate, I earn from qualifying purchases. See my Disclosure policy for more info.

Ready to take the hassle out of planning and managing your vacation budget? Our online Free Travel Budget Calculator is  simple, and easy to use, and can help you plan and track your vacation expenses in just a few clicks.  

I’ve used these same methods and categories of expenses for every trip I’ve taken over the last 25 years. From multiple  3 month solo adventures through Europe and South America, to weeks long trips to Cuba and Vancouver Island, Canada with my family. 

Now online with automatic calculations, so you don’t have to mess around with spreadsheets or hand write in printables that clutter up your home. 

In this post you’ll get access to this free tool, plus, you’ll get my top tips for planning your budget effectively for your trips and how to save money on travel. All the advice you need for smarter travel planning is right here.

How to Use the Travel Budget Calculator & Try It Out!

Make sure to bookmark this page so you can come back to it anytime you need to track your vacation expenses and make travel plans.

This free vacation budget calculator will give you an estimate of total travel costs for your trip and whether your budget is enough to cover what you want to do.

It can help you identify areas you can potentially save money on trip expenses. Whether it’s choosing more budget-friendly hotels, walking or taking the bus instead of taxis, or prioritizing your top not-to-miss activities.

You can also start with your budget.

Then play around with the length of your trip, how much hotels, flights etc will cost to help you determine your price range for each travel expense as well.

• Enter 0 (zero) if there are certain categories you don’t need . The calculator will output an error ($NaN) if you don’t.
• Instructions for the calculator are below the Travel Budget Calculator, to give you an idea of what you should include under each budget item.

Vacation Budget Calculator

Calculator instructions.

Enter all your estimated expenses you’ve gathered during your vacation research.

Make sure it’s actually a realistic travel budget. For a  family trip with young kids, you’ll also need to factor other things like diapers, baby wipes etc.

• Travel Budget : Enter your overall vacation budget you have for this trip.
• Number of Travellers: Enter the number of people you are paying for on this trip
• Number of Nights: Enter the number of nights you will need accommodations for. This will be used to calculate hotel costs.
• Number of Vacation Days: Enter the number of days you will be on vacation. Include travel days to be safe . This will be used to calculate your overall food & drink, daily transportation and activity costs.
• Total Flight Costs: Enter the estimated total of flight costs for everyone travelling. Be sure to include any baggage fees.
• Transportation Costs: Enter the total transportation costs for the trip. This is for any major transport costs that aren’t flights like trains, city transfers, car or RV rentals.
• Daily Transportation Costs: Enter your anticipated daily transport costs. This is for things like taxis, buses, Ubers, parking costs etc, you might need to get around every day.
• Hotel Costs (Per Night): Enter the amount your accommodations will cost each night. Don’t forget to include any tips for housekeeping staff etc. you may need to pay.
• Total Tour Costs: Enter your overall total budget or cost for tours, including guide tips.
• Activity Costs (Per Day) : Enter the amount you expect to spend on activities daily (do not include tours). These are for things like seeing movies, souvenirs, shopping, trips to a rec centre / pool, bowling, seeing a hockey game or a concert etc.
• Food & Drink Costs (per Day): Enter your overall daily food & drink budget or expected costs for everyone. Don’t forget to include tips.
• Miscellaneous Expenses: Enter an amount of money you will have overall for unexpected expenses or miscellaneous costs that pop up. Be sure to also include extra travel expenses not covered elsewhere.
• Travel Insurance: Enter the overall amount of money you will pay for travel insurance for everyone. This is for things like travel health insurance, trip cancellation insurance etc.

Budget Outputs

Currency Note: While the output is in dollars (uses the $ symbol), you can really use any numerical currency you’d like. Just ignore the $ symbol.

Once you hit the calculate button, you will get 4 pieces of info based on the numbers you provided:

• Total Vacation Costs : This is the estimated cost for your vacation based on the info you provided.
• Over Budget / Under Budget: This is the amount you are either over or under budget. If your expenses are over your vacation budget, it will say Over Budget and the number will be negative. If it says Under Budget, that is the amount you are under your estimated budget.
• Travel Costs Per Day: This is the amount of money your trip will cost you each day.
• Cost Per Person Per Day: This is the amount of money your trip will cost you per person, each day.

Make sure to review your results. If your over budget are there things you can do to bring the costs down? Or is there a way you can save or make more money before your trip?

Why You Need A Travel Budget

Listen, I am all for spending a little extra to do things our family doesn’t get to do at home. 

But there is nothing more anxiety-inducing than running out of money on a trip, or having to pay off huge credit card bills at 28%  interest because you didn’t plan ahead.

This is where a vacation budget can really help. 

It doesn’t mean you can’t have fun or spend money.

Creating a budget will actually help you be able to afford your dreams. Plus be able to relax & have fun on your vacation knowing you won’t be in debt when you get back home.

The trip budget calculator will make financial planning fun, and easy.

How To Set Your Travel Budget & Determine Expenses

1. determine your overall travel budget.

First things first. Decide on your overall vacation budget or the money you are willing to spend on this trip.

When determining your overall vacation budget, you’ll want to consider a few things:

• How much money are you willing to spend on this trip?
• How much have you already saved?
• How long do you plan to go for? (more or less time can impact your budget)
• How many people will be travelling? (some places like Europe limit 4 people to a hotel room, this can significantly impact cost)
• When do you want to travel and how much time do you have to add to your vacation fund?
• How much extra can you afford to put away every week / month on top of your regular bills & household expenses?
• Is there any way you can decrease household expenses, or increase your income to add to your vacation fund faster?

Just make sure it’s a realistic budget. It doesn’t do anybody any good to use too low or too high numbers as a starting point. 

2. Do Your Research

The type of trip you want to take, the length and the type of activities you want to do, will really impact your budget.

For example a week long trip to Thailand will be much different than a week in Japan, or a trip to Disneyworld.

Do some intial research to give you an idea of what your basic travel expenses will costs, so you can have ballpark figures to enter in the travel cost calculator.

You can always google average costs of living / travelling at your destination.

Careful planning is an important part of any travel budget. 

3. Find Ways to Cut Costs

Unless you have a rich benefactor, or suddenly won the lottery, it’s a good idea to consider ways you can cut costs, save money and use your travel budget wisely.

Besides using our holiday budget calculator, our favourite ways to save money on travel expenses.

Transportation & Accommodation

• Find flight deals & error fares : The best way is with Going (Formerly Scott’s Cheap Flights) Flight tickets can be a big expense and make up a good portion of the total cost usually. 
• Consider housesitting: is our go-to site for housesitting around the world.
• Rent a place with a kitchen : Save money on food with a vacation rental . They can also be cheaper than renting multiple hotel rooms if you have a large family or group.
• Compare car rentals: Using Discover Cars can help you save up to 70% by quickly comparing rental cars options.
• Book early: Hotels, flights and trains are generally cheaper booked in advance. You won’t want to risk paying significantly more waiting until last minute.
• Take public transportation: If it’s safe to do so, take the local bus, or walk instead of relying on expensive taxis all the time.

⭐️ Also check out our list of the best ways to save money on flights .

General Money Saving Tips

• Travel off season or peak season: Not only is it usually much cheaper, there’s usually fewer tourists.
• Use a credit card with no foreign transaction fees : Those transaction fees can really add up. Also consider if travel credit cards with points are for you.
• Eat where the locals eat : Avoiding the touristy restuarants, and eating where the locals eat will not only save you lots of money, it will give you a more authentic look into their local cuisine and culture.
• Avoid popular destinations:  The most popular touristy destinations  often cost a lot of money, compared to smaller, lesser known destinations.  
• Consider using travel agents: Sometimes a travel agent can find you a great deal, with much less work on your part. 
• Adjust your travel style: Luxury resorts may be out of your price range. Road trips, camping trips can be just as memorable for for a family vacation.
• Plan free activities : Pick some free activities to do in between your more expensive tours, theme parks, & day trips to ancient ruins. 
• Check out these ways to save on flights

Final Thoughts Using The Vacation Budget Calendar

Creating a vacation budget might seem challenging, but don’t worry! Equipped with the right tools and a bit of strategic planning, your next epic adventure is closer than you think.

Using a vacation budget calculator can help guide you to make smart, affordable choices, allowing you to experience the journey you’ve always dreamed of, without stressing about expenses.

Travel can be exciting and enjoyable at all budget levels. So here’s to making memories with your family, and friends.

Related travel planning resources:

• Ultimate Pre-Travel Checklist
• Family beach vacation tips
• Tips for saving money on road trips
• Easy ways to build a travel fund
• Save money on attractions: Where to buy online tour tickets

Donna Garrison is the founder of Packed for Life, an ever curious traveler with a passion for making memories with her family. With a unique perspective on travelling on a budget gathered over 30 years, 20 countries and 5 continents she gives families the tools & resources they need to experience the joys of travelling more for less through practical solutions. She helps over 20,000 families a month plan & take the family travel, camping and road trip adventures of their dreams in Canada, the USA and around the world. Contact her at: Donna [at] packedforlife.com

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Travel expenses defined.

Members of the Armed Forces.

Main place of business or work.

No main place of business or work.

Factors used to determine tax home.

Tax Home Different From Family Home

Temporary assignment vs. indefinite assignment.

Exception for federal crime investigations or prosecutions.

Determining temporary or indefinite.

Going home on days off.

Probationary work period.

Separating costs.

Travel expenses for another individual.

Business associate.

Bona fide business purpose.

Lavish or extravagant.

50% limit on meals.

Actual Cost

Incidental expenses.

Incidental-expenses-only method.

50% limit may apply.

Who can use the standard meal allowance.

Use of the standard meal allowance for other travel.

Amount of standard meal allowance.

Federal government's fiscal year.

Standard meal allowance for areas outside the continental United States.

Special rate for transportation workers.

Travel for days you depart and return.

Trip Primarily for Business

Trip primarily for personal reasons.

Public transportation.

Private car.

Travel entirely for business.

Travel considered entirely for business.

Exception 1—No substantial control.

Exception 2—Outside United States no more than a week.

Exception 3—Less than 25% of time on personal activities.

Exception 4—Vacation not a major consideration.

Travel allocation rules.

Counting business days.

Transportation day.

Presence required.

Day spent on business.

Certain weekends and holidays.

Nonbusiness activity on the way to or from your business destination.

Nonbusiness activity at, near, or beyond business destination.

Other methods.

Travel Primarily for Personal Reasons

Daily limit on luxury water travel.

Meals and entertainment.

Not separately stated.

Convention agenda.

North American area.

Reasonableness test.

Cruise Ships

Deduction may depend on your type of business.

Exceptions to the Rules

Entertainment events.

Entertainment facilities.

Club dues and membership fees.

Gift or entertainment.

Other rules for meals and entertainment expenses.

Costs to include or exclude.

Application of 50% limit.

When to apply the 50% limit.

Taking turns paying for meals.

1—Expenses treated as compensation.

2—Employee's reimbursed expenses.

3—Self-employed reimbursed expenses.

4—Recreational expenses for employees.

5—Advertising expenses.

6—Sale of meals.

Individuals subject to “hours of service” limits.

Incidental costs.

Exceptions.

• Illustration of transportation expenses.

Temporary work location.

No regular place of work.

Two places of work.

Armed Forces reservists.

Commuting expenses.

Parking fees.

Advertising display on car.

Hauling tools or instruments.

Union members' trips from a union hall.

Office in the home.

Examples of deductible transportation.

Choosing the standard mileage rate.

Standard mileage rate not allowed.

Five or more cars.

Personal property taxes.

Parking fees and tolls.

Sale, trade-in, or other disposition.

Business and personal use.

Employer-provided vehicle.

Interest on car loans.

Taxes paid on your car.

Sales taxes.

Fines and collateral.

Casualty and theft losses.

Depreciation and section 179 deductions.

Car defined.

Qualified nonpersonal use vehicles.

More information.

More than 50% business use requirement.

Limit on the amount of the section 179 deduction.

Limit for sport utility and certain other vehicles.

Limit on total section 179 deduction, special depreciation allowance, and depreciation deduction.

Cost of car.

Basis of car for depreciation.

When to elect.

How to elect.

Revoking an election.

Recapture of section 179 deduction.

Dispositions.

Combined depreciation.

Qualified car.

Election not to claim the special depreciation allowance.

Placed in service.

Car placed in service and disposed of in the same year.

Methods of depreciation.

More-than-50%-use test.

Qualified business use.

Use of your car by another person.

Business use changes.

Use for more than one purpose.

Change from personal to business use.

Unadjusted basis.

Improvements.

Car trade-in.

Effect of trade-in on basis.

Traded car used only for business.

Traded car used partly in business.

Modified Accelerated Cost Recovery System (MACRS).

Recovery period.

Depreciation methods.

MACRS depreciation chart.

Depreciation in future years.

Disposition of car during recovery period.

How to use the 2023 chart.

Trucks and vans.

Car used less than full year.

Reduction for personal use.

Section 179 deduction.

Deductions in years after the recovery period.

Unrecovered basis.

The recovery period.

How to treat unrecovered basis.

• Table 4-1. 2023 MACRS Depreciation Chart      (Use To Figure Depreciation for 2023)

Qualified business use 50% or less in year placed in service.

Qualified business use 50% or less in a later year.

Excess depreciation.

Deductible payments.

Fair market value.

Figuring the inclusion amount.

Leased car changed from business to personal use.

Leased car changed from personal to business use.

Reporting inclusion amounts.

Casualty or theft.

Depreciation adjustment when you used the standard mileage rate.

Depreciation deduction for the year of disposition.

Documentary evidence.

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Canceled check.

Duplicate information.

Timely kept records.

Proving business purpose.

Confidential information.

Exceptional circumstances.

Destroyed records.

Separating expenses.

Combining items.

Car expenses.

Gift expenses.

Allocating total cost.

If your return is examined.

Reimbursed for expenses.

Examples of Records

Self-employed.

Both self-employed and an employee.

Statutory employees.

Reimbursement for personal expenses.

Income-producing property.

Value reported on Form W-2.

Full value included in your income.

Less than full value included in your income.

No reimbursement.

Reimbursement, allowance, or advance.

Reasonable period of time.

Employee meets accountable plan rules.

Accountable plan rules not met.

Failure to return excess reimbursements.

Reimbursement of nondeductible expenses.

Adequate Accounting

Related to employer.

The federal rate.

Regular federal per diem rate.

The standard meal allowance.

High-low rate.

Prorating the standard meal allowance on partial days of travel.

The standard mileage rate.

Fixed and variable rate (FAVR).

Reporting your expenses with a per diem or car allowance.

Allowance less than or equal to the federal rate.

Allowance more than the federal rate.

Travel advance.

Unproven amounts.

Per diem allowance more than federal rate.

Reporting your expenses under a nonaccountable plan.

Adequate accounting.

How to report.

Contractor adequately accounts.

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High-low method.

Regular federal per diem rate method.

Federal per diem rate method.

Information on use of cars.

Standard mileage rate.

Actual expenses.

Car rentals.

Transportation expenses.

Employee business expenses other than nonentertainment meals.

Non-entertainment-related meal expenses.

“Hours of service” limits.

Reimbursements.

Allocating your reimbursement.

After you complete the form.

Limits on employee business expenses.

1. Limit on meals and entertainment.

2. Limit on total itemized deductions.

Member of a reserve component.

Officials Paid on a Fee Basis

Special rules for married persons.

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Impairment-Related Work Expenses of Disabled Employees

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What Is TAS?

How can you learn about your taxpayer rights, what can tas do for you, how can you reach tas, how else does tas help taxpayers, low income taxpayer clinics (litcs), appendix a-1. inclusion amounts for passenger automobiles first leased in 2018, appendix a-2. inclusion amounts for passenger automobiles first leased in 2019, appendix a-3. inclusion amounts for passenger automobiles first leased in 2020, appendix a-4. inclusion amounts for passenger automobiles first leased in 2021, appendix a-5. inclusion amounts for passenger automobiles first leased in 2022, appendix a-6. inclusion amounts for passenger automobiles first leased in 2023, publication 463 - additional material, publication 463 (2023), travel, gift, and car expenses.

For use in preparing 2023 Returns

Publication 463 - Introductory Material

For the latest information about developments related to Pub. 463, such as legislation enacted after it was published, go to IRS.gov/Pub463 .

Standard mileage rate. For 2023, the standard mileage rate for the cost of operating your car for business use is 65.5 cents ($0.655) per mile. Car expenses and use of the standard mileage rate are explained in chapter 4.

Depreciation limits on cars, trucks, and vans. The first-year limit on the depreciation deduction, special depreciation allowance, and section 179 deduction for vehicles acquired before September 28, 2017, and placed in service during 2023, is $12,200. The first-year limit on depreciation, special depreciation allowance, and section 179 deduction for vehicles acquired after September 27, 2017, and placed in service during 2023 increases to $20,200. If you elect not to claim a special depreciation allowance for a vehicle placed in service in 2023, the amount increases to $12,200. Depreciation limits are explained in chapter 4.

Section 179 deduction. The maximum amount you can elect to deduct for section 179 property (including cars, trucks, and vans) you placed in service in tax years beginning in 2023 is $1,160,000. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $2,890,000. Section 179 deduction is explained in chapter 4.Also, the maximum section 179 expense deduction for sport utility vehicles placed in service in tax years beginning in 2023 is $28,900.

Temporary deduction of 100% business meals. The 100% deduction on certain business meals expenses as amended under the Taxpayer Certainty and Disaster Tax Relief Act of 2020, and enacted by the Consolidated Appropriations Act, 2021, has expired. Generally, the cost of business meals remains deductible, subject to the 50% limitation. See 50% Limit in chapter 2 for more information.

Photographs of missing children. The IRS is a proud partner with the National Center for Missing & Exploited Children® (NCMEC) . Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 800-THE-LOST (800-843-5678) if you recognize a child.

Per diem rates. Current and prior per diem rates may be found on the U.S. General Services Administration (GSA) website at GSA.gov/travel/plan-book/per-diem-rates .

Introduction

You may be able to deduct the ordinary and necessary business-related expenses you have for:

Non-entertainment-related meals,

Transportation.

This publication explains:

What expenses are deductible,

How to report them on your return,

What records you need to prove your expenses, and

How to treat any expense reimbursements you may receive.

You should read this publication if you are an employee or a sole proprietor who has business-related travel, non-entertainment-related meals, gift, or transportation expenses.

If an employer-provided vehicle was available for your use, you received a fringe benefit. Generally, your employer must include the value of the use or availability of the vehicle in your income. However, there are exceptions if the use of the vehicle qualifies as a working condition fringe benefit (such as the use of a qualified nonpersonal use vehicle).

A working condition fringe benefit is any property or service provided to you by your employer, the cost of which would be allowable as an employee business expense deduction if you had paid for it.

A qualified nonpersonal use vehicle is one that isn’t likely to be used more than minimally for personal purposes because of its design. See Qualified nonpersonal use vehicles under Actual Car Expenses in chapter 4.

For information on how to report your car expenses that your employer didn’t provide or reimburse you for (such as when you pay for gas and maintenance for a car your employer provides), see Vehicle Provided by Your Employer in chapter 6.

Partnerships, corporations, trusts, and employers who reimburse their employees for business expenses should refer to the instructions for their required tax forms, for information on deducting travel, meals, and entertainment expenses.

If you are an employee, you won’t need to read this publication if all of the following are true.

You fully accounted to your employer for your work-related expenses.

You received full reimbursement for your expenses.

Your employer required you to return any excess reimbursement and you did so.

There is no amount shown with a code L in box 12 of your Form W-2, Wage and Tax Statement.

If you perform services as a volunteer worker for a qualified charity, you may be able to deduct some of your costs as a charitable contribution. See Out-of-Pocket Expenses in Giving Services in Pub. 526, Charitable Contributions, for information on the expenses you can deduct.

We welcome your comments about this publication and suggestions for future editions.

You can send us comments through IRS.gov/FormComments . Or, you can write to the Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224.

Although we can’t respond individually to each comment received, we do appreciate your feedback and will consider your comments and suggestions as we revise our tax forms, instructions, and publications. Don’t send tax questions, tax returns, or payments to the above address.

If you have a tax question not answered by this publication or the How To Get Tax Help section at the end of this publication, go to the IRS Interactive Tax Assistant page at IRS.gov/Help/ITA where you can find topics by using the search feature or viewing the categories listed.

Go to IRS.gov/Forms to download current and prior-year forms, instructions, and publications.

Go to IRS.gov/OrderForms to order current forms, instructions, and publications; call 800-829-3676 to order prior-year forms and instructions. The IRS will process your order for forms and publications as soon as possible. Don’t resubmit requests you’ve already sent us. You can get forms and publications faster online.

Useful Items

Publication

946 How To Depreciate Property

Form (and Instructions)

Schedule A (Form 1040) Itemized Deductions

Schedule C (Form 1040) Profit or Loss From Business (Sole Proprietorship)

Schedule F (Form 1040) Profit or Loss From Farming

2106 Employee Business Expenses

4562 Depreciation and Amortization (Including Information on Listed Property)

See How To Get Tax Help for information about getting these publications and forms.

If you temporarily travel away from your tax home, you can use this chapter to determine if you have deductible travel expenses.

This chapter discusses:

Traveling away from home,

Temporary assignment or job, and

What travel expenses are deductible.

For tax purposes, travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job.

An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your business. An expense doesn’t have to be required to be considered necessary.

You will find examples of deductible travel expenses in Table 1-1 .

Traveling Away From Home

You are traveling away from home if:

Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work, and

You need to sleep or rest to meet the demands of your work while away from home.

You are a railroad conductor. You leave your home terminal on a regularly scheduled round-trip run between two cities and return home 16 hours later. During the run, you have 6 hours off at your turnaround point where you eat two meals and rent a hotel room to get necessary sleep before starting the return trip. You are considered to be away from home.

You are a truck driver. You leave your terminal and return to it later the same day. You get an hour off at your turnaround point to eat. Because you aren’t off to get necessary sleep and the brief time off isn’t an adequate rest period, you aren’t traveling away from home.

If you are a member of the U.S. Armed Forces on a permanent duty assignment overseas, you aren’t traveling away from home. You can’t deduct your expenses for meals and lodging. You can’t deduct these expenses even if you have to maintain a home in the United States for your family members who aren’t allowed to accompany you overseas. If you are transferred from one permanent duty station to another, you may have deductible moving expenses, which are explained in Pub. 3, Armed Forces' Tax Guide.

A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a tax home (explained next) aboard the ship for travel expense purposes.

To determine whether you are traveling away from home, you must first determine the location of your tax home.

Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. It includes the entire city or general area in which your business or work is located.

If you have more than one regular place of business, your tax home is your main place of business. See Main place of business or work , later.

If you don’t have a regular or a main place of business because of the nature of your work, then your tax home may be the place where you regularly live. See No main place of business or work , later.

If you don’t have a regular or main place of business or post of duty and there is no place where you regularly live, you are considered an itinerant (a transient) and your tax home is wherever you work. As an itinerant, you can’t claim a travel expense deduction because you are never considered to be traveling away from home.

If you have more than one place of work, consider the following when determining which one is your main place of business or work.

The total time you ordinarily spend in each place.

The level of your business activity in each place.

Whether your income from each place is significant or insignificant.

You live in Cincinnati where you have a seasonal job for 8 months each year and earn $40,000. You work the other 4 months in Miami, also at a seasonal job, and earn $15,000. Cincinnati is your main place of work because you spend most of your time there and earn most of your income there.

You may have a tax home even if you don’t have a regular or main place of work. Your tax home may be the home where you regularly live.

If you don’t have a regular or main place of business or work, use the following three factors to determine where your tax home is.

You perform part of your business in the area of your main home and use that home for lodging while doing business in the area.

You have living expenses at your main home that you duplicate because your business requires you to be away from that home.

You haven’t abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging.

If you satisfy all three factors, your tax home is the home where you regularly live. If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. If you satisfy only one factor, you are an itinerant; your tax home is wherever you work and you can’t deduct travel expenses.

You are single and live in Boston in an apartment you rent. You have worked for your employer in Boston for a number of years. Your employer enrolls you in a 12-month executive training program. You don’t expect to return to work in Boston after you complete your training.

During your training, you don’t do any work in Boston. Instead, you receive classroom and on-the-job training throughout the United States. You keep your apartment in Boston and return to it frequently. You use your apartment to conduct your personal business. You also keep up your community contacts in Boston. When you complete your training, you are transferred to Los Angeles.

You don’t satisfy factor (1) because you didn’t work in Boston. You satisfy factor (2) because you had duplicate living expenses. You also satisfy factor (3) because you didn’t abandon your apartment in Boston as your main home, you kept your community contacts, and you frequently returned to live in your apartment. Therefore, you have a tax home in Boston.

You are an outside salesperson with a sales territory covering several states. Your employer's main office is in Newark, but you don’t conduct any business there. Your work assignments are temporary, and you have no way of knowing where your future assignments will be located. You have a room in your married sister's house in Dayton. You stay there for one or two weekends a year, but you do no work in the area. You don’t pay your sister for the use of the room.

You don’t satisfy any of the three factors listed earlier. You are an itinerant and have no tax home.

If you (and your family) don’t live at your tax home (defined earlier), you can’t deduct the cost of traveling between your tax home and your family home. You also can’t deduct the cost of meals and lodging while at your tax home. See Example 1 , later.

If you are working temporarily in the same city where you and your family live, you may be considered as traveling away from home. See Example 2 , later.

You are a truck driver and you and your family live in Tucson. You are employed by a trucking firm that has its terminal in Phoenix. At the end of your long runs, you return to your home terminal in Phoenix and spend one night there before returning home. You can’t deduct any expenses you have for meals and lodging in Phoenix or the cost of traveling from Phoenix to Tucson. This is because Phoenix is your tax home.

Your family home is in Pittsburgh, where you work 12 weeks a year. The rest of the year you work for the same employer in Baltimore. In Baltimore, you eat in restaurants and sleep in a rooming house. Your salary is the same whether you are in Pittsburgh or Baltimore.

Because you spend most of your working time and earn most of your salary in Baltimore, that city is your tax home. You can’t deduct any expenses you have for meals and lodging there. However, when you return to work in Pittsburgh, you are away from your tax home even though you stay at your family home. You can deduct the cost of your round trip between Baltimore and Pittsburgh. You can also deduct your part of your family's living expenses for non-entertainment-related meals and lodging while you are living and working in Pittsburgh.

Temporary Assignment or Job

You may regularly work at your tax home and also work at another location. It may not be practical to return to your tax home from this other location at the end of each workday.

If your assignment or job away from your main place of work is temporary, your tax home doesn’t change. You are considered to be away from home for the whole period you are away from your main place of work. You can deduct your travel expenses if they otherwise qualify for deduction. Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less.

However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you can’t deduct your travel expenses while there. An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than 1 year, whether or not it actually lasts for more than 1 year.

If your assignment is indefinite, you must include in your income any amounts you receive from your employer for living expenses, even if they are called “travel allowances” and you account to your employer for them. You may be able to deduct the cost of relocating to your new tax home as a moving expense. See Pub. 3 for more information.

If you are a federal employee participating in a federal crime investigation or prosecution, you aren’t subject to the 1-year rule. This means you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year provided you meet the other requirements for deductibility.

For you to qualify, the Attorney General (or their designee) must certify that you are traveling:

For the federal government;

In a temporary duty status; and

To investigate, prosecute, or provide support services for the investigation or prosecution of a federal crime.

You must determine whether your assignment is temporary or indefinite when you start work. If you expect an assignment or job to last for 1 year or less, it is temporary unless there are facts and circumstances that indicate otherwise. An assignment or job that is initially temporary may become indefinite due to changed circumstances. A series of assignments to the same location, all for short periods but that together cover a long period, may be considered an indefinite assignment.

The following examples illustrate whether an assignment or job is temporary or indefinite.

You are a construction worker. You live and regularly work in Los Angeles. You are a member of a trade union in Los Angeles that helps you get work in the Los Angeles area. Your tax home is Los Angeles. Because of a shortage of work, you took a job on a construction project in Fresno. Your job was scheduled to end in 8 months. The job actually lasted 10 months.

You realistically expected the job in Fresno to last 8 months. The job actually did last less than 1 year. The job is temporary and your tax home is still in Los Angeles.

The facts are the same as in Example 1 , except that you realistically expected the work in Fresno to last 18 months. The job was actually completed in 10 months.

Your job in Fresno is indefinite because you realistically expected the work to last longer than 1 year, even though it actually lasted less than 1 year. You can’t deduct any travel expenses you had in Fresno because Fresno became your tax home.

The facts are the same as in Example 1 , except that you realistically expected the work in Fresno to last 9 months. After 8 months, however, you were asked to remain for 7 more months (for a total actual stay of 15 months).

Initially, you realistically expected the job in Fresno to last for only 9 months. However, due to changed circumstances occurring after 8 months, it was no longer realistic for you to expect that the job in Fresno would last for 1 year or less. You can deduct only your travel expenses for the first 8 months. You can’t deduct any travel expenses you had after that time because Fresno became your tax home when the job became indefinite.

If you go back to your tax home from a temporary assignment on your days off, you aren’t considered away from home while you are in your hometown. You can’t deduct the cost of your meals and lodging there. However, you can deduct your travel expenses, including meals and lodging, while traveling between your temporary place of work and your tax home. You can claim these expenses up to the amount it would have cost you to stay at your temporary place of work.

If you keep your hotel room during your visit home, you can deduct the cost of your hotel room. In addition, you can deduct your expenses of returning home up to the amount you would have spent for meals had you stayed at your temporary place of work.

If you take a job that requires you to move, with the understanding that you will keep the job if your work is satisfactory during a probationary period, the job is indefinite. You can’t deduct any of your expenses for meals and lodging during the probationary period.

What Travel Expenses Are Deductible?

Once you have determined that you are traveling away from your tax home, you can determine what travel expenses are deductible.

You can deduct ordinary and necessary expenses you have when you travel away from home on business. The type of expense you can deduct depends on the facts and your circumstances.

Table 1-1 summarizes travel expenses you may be able to deduct. You may have other deductible travel expenses that aren’t covered there, depending on the facts and your circumstances.

If you have one expense that includes the costs of non-entertainment-related meals, entertainment, and other services (such as lodging or transportation), you must allocate that expense between the cost of non-entertainment-related meals, and entertainment and the cost of other services. You must have a reasonable basis for making this allocation. For example, you must allocate your expenses if a hotel includes one or more meals in its room charge.

If a spouse, dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, you generally can’t deduct their travel expenses.

You can deduct the travel expenses of someone who goes with you if that person:

Is your employee,

Has a bona fide business purpose for the travel, and

Would otherwise be allowed to deduct the travel expenses.

If a business associate travels with you and meets the conditions in (2) and (3) above, you can deduct the travel expenses you have for that person. A business associate is someone with whom you could reasonably expect to actively conduct business. A business associate can be a current or prospective (likely to become) customer, client, supplier, employee, agent, partner, or professional advisor.

Table 1-1. Travel Expenses You Can Deduct

A bona fide business purpose exists if you can prove a real business purpose for the individual's presence. Incidental services, such as typing notes or assisting in entertaining customers, aren’t enough to make the expenses deductible.

You drive to Chicago on business and take your spouse with you. Your spouse isn’t your employee. Your spouse occasionally types notes, performs similar services, and accompanies you to luncheons and dinners. The performance of these services doesn’t establish that your spouse’s presence on the trip is necessary to the conduct of your business. Your spouse’s expenses aren’t deductible.

You pay $199 a day for a double room. A single room costs $149 a day. You can deduct the total cost of driving your car to and from Chicago, but only $149 a day for your hotel room. If both you and your spouse use public transportation, you can only deduct your fare.

You can deduct a portion of the cost of meals if it is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business. Meal and entertainment expenses are discussed in chapter 2 .

You can't deduct expenses for meals that are lavish or extravagant. An expense isn't considered lavish or extravagant if it is reasonable based on the facts and circumstances. Meal expenses won't be disallowed merely because they are more than a fixed dollar amount or because the meals take place at deluxe restaurants, hotels, or resorts.

You can figure your meal expenses using either of the following methods.

Actual cost.

If you are reimbursed for the cost of your meals, how you apply the 50% limit depends on whether your employer's reimbursement plan was accountable or nonaccountable. If you aren’t reimbursed, the 50% limit applies even if the unreimbursed meal expense is for business travel. Chapter 2 discusses the 50% Limit in more detail, and chapter 6 discusses accountable and nonaccountable plans.

You can use the actual cost of your meals to figure the amount of your expense before reimbursement and application of the 50% deduction limit. If you use this method, you must keep records of your actual cost.

Standard Meal Allowance

Generally, you can use the “standard meal allowance” method as an alternative to the actual cost method. It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs. The set amount varies depending on where and when you travel. In this publication, “standard meal allowance” refers to the federal rate for M&IE, discussed later under Amount of standard meal allowance . If you use the standard meal allowance, you must still keep records to prove the time, place, and business purpose of your travel. See the recordkeeping rules for travel in chapter 5 .

The term “incidental expenses” means fees and tips given to porters, baggage carriers, hotel staff, and staff on ships.

Incidental expenses don’t include expenses for laundry, cleaning and pressing of clothing, lodging taxes, costs of telegrams or telephone calls, transportation between places of lodging or business and places where meals are taken, or the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings.

You can use an optional method (instead of actual cost) for deducting incidental expenses only. The amount of the deduction is $5 a day. You can use this method only if you didn’t pay or incur any meal expenses. You can’t use this method on any day that you use the standard meal allowance. This method is subject to the proration rules for partial days. See Travel for days you depart and return , later, in this chapter.

The incidental-expenses-only method isn’t subject to the 50% limit discussed below.

If you use the standard meal allowance method for non-entertainment-related meal expenses and you aren’t reimbursed or you are reimbursed under a nonaccountable plan, you can generally deduct only 50% of the standard meal allowance. If you are reimbursed under an accountable plan and you are deducting amounts that are more than your reimbursements, you can deduct only 50% of the excess amount. The 50% Limit is discussed in more detail in chapter 2, and accountable and nonaccountable plans are discussed in chapter 6.

You can use the standard meal allowance whether you are an employee or self-employed, and whether or not you are reimbursed for your traveling expenses.

You can use the standard meal allowance to figure your meal expenses when you travel in connection with investment and other income-producing property. You can also use it to figure your meal expenses when you travel for qualifying educational purposes. You can’t use the standard meal allowance to figure the cost of your meals when you travel for medical or charitable purposes.

The standard meal allowance is the federal M&IE rate. For travel in 2023, the rate for most small localities in the United States is $59 per day.

Most major cities and many other localities in the United States are designated as high-cost areas, qualifying for higher standard meal allowances.

If you travel to more than one location in one day, use the rate in effect for the area where you stop for sleep or rest. If you work in the transportation industry, however, see Special rate for transportation workers , later.

Per diem rates are listed by the federal government's fiscal year, which runs from October 1 to September 30. You can choose to use the rates from the 2022 fiscal year per diem tables or the rates from the 2023 fiscal year tables, but you must consistently use the same tables for all travel you are reporting on your income tax return for the year. See Transition Rules , later.

The standard meal allowance rates above don’t apply to travel in Alaska, Hawaii, or any other location outside the continental United States. The Department of Defense establishes per diem rates for Alaska, Hawaii, Puerto Rico, American Samoa, Guam, Midway, the Northern Mariana Islands, the U.S. Virgin Islands, Wake Island, and other non-foreign areas outside the continental United States. The Department of State establishes per diem rates for all other foreign areas.

You can use a special standard meal allowance if you work in the transportation industry. You are in the transportation industry if your work:

Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck; and

Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates.

Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. If you choose to use the special rate for any trip, you must use the special rate (and not use the regular standard meal allowance rates) for all trips you take that year.

For both the day you depart for and the day you return from a business trip, you must prorate the standard meal allowance (figure a reduced amount for each day). You can do so by one of two methods.

Method 1: You can claim 3 / 4 of the standard meal allowance.

Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice.

You are employed in New Orleans as a convention planner. In March, your employer sent you on a 3-day trip to Washington, DC, to attend a planning seminar. You left your home in New Orleans at 10 a.m. on Wednesday and arrived in Washington, DC, at 5:30 p.m. After spending 2 nights there, you flew back to New Orleans on Friday and arrived back home at 8 p.m. Your employer gave you a flat amount to cover your expenses and included it with your wages.

Under Method 1 , you can claim 2½ days of the standard meal allowance for Washington, DC: 3 / 4 of the daily rate for Wednesday and Friday (the days you departed and returned), and the full daily rate for Thursday.

Under Method 2 , you could also use any method that you apply consistently and that is in accordance with reasonable business practice. For example, you could claim 3 days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited to only 2½ days.

Travel in the United States

The following discussion applies to travel in the United States. For this purpose, the United States includes the 50 states and the District of Columbia. The treatment of your travel expenses depends on how much of your trip was business related and on how much of your trip occurred within the United States. See Part of Trip Outside the United States , later.

You can deduct all of your travel expenses if your trip was entirely business related. If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct only your business-related travel expenses. These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination.

You work in Atlanta and take a business trip to New Orleans in May. Your business travel totals 900 miles round trip. On your way home, you stop in Mobile to visit your parents. You spend $2,165 for the 9 days you are away from home for travel, non-entertainment-related meals, lodging, and other travel expenses. If you hadn’t stopped in Mobile, you would have been gone only 6 days, and your total cost would have been $1,633.50. You can deduct $1,633.50 for your trip, including the cost of round-trip transportation to and from New Orleans. The deduction for your non-entertainment-related meals is subject to the 50% limit on meals mentioned earlier.

If your trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. However, you can deduct any expenses you have while at your destination that are directly related to your business.

A trip to a resort or on a cruise ship may be a vacation even if the promoter advertises that it is primarily for business. The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, won’t change what is really a vacation into a business trip.

Part of Trip Outside the United States

If part of your trip is outside the United States, use the rules described later in this chapter under Travel Outside the United States for that part of the trip. For the part of your trip that is inside the United States, use the rules for travel in the United States. Travel outside the United States doesn’t include travel from one point in the United States to another point in the United States. The following discussion can help you determine whether your trip was entirely within the United States.

If you travel by public transportation, any place in the United States where that vehicle makes a scheduled stop is a point in the United States. Once the vehicle leaves the last scheduled stop in the United States on its way to a point outside the United States, you apply the rules under Travel Outside the United States , later.

You fly from New York to Puerto Rico with a scheduled stop in Miami. Puerto Rico isn’t considered part of the United States for purposes of travel. You return to New York nonstop. The flight from New York to Miami is in the United States, so only the flight from Miami to Puerto Rico is outside the United States. Because there are no scheduled stops between Puerto Rico and New York, all of the return trip is outside the United States.

Travel by private car in the United States is travel between points in the United States, even though you are on your way to a destination outside the United States.

You travel by car from Denver to Mexico City and return. Your travel from Denver to the border and from the border back to Denver is travel in the United States, and the rules in this section apply. The rules below under Travel Outside the United States apply to your trip from the border to Mexico City and back to the border.

Travel Outside the United States

If any part of your business travel is outside the United States, some of your deductions for the cost of getting to and from your destination may be limited. For this purpose, the United States includes the 50 states and the District of Columbia.

How much of your travel expenses you can deduct depends in part upon how much of your trip outside the United States was business related.

Travel Entirely for Business or Considered Entirely for Business

You can deduct all your travel expenses of getting to and from your business destination if your trip is entirely for business or considered entirely for business.

If you travel outside the United States and you spend the entire time on business activities, you can deduct all of your travel expenses.

Even if you didn’t spend your entire time on business activities, your trip is considered entirely for business if you meet at least one of the following four exceptions.

Your trip is considered entirely for business if you didn’t have substantial control over arranging the trip. The fact that you control the timing of your trip doesn’t, by itself, mean that you have substantial control over arranging your trip.

You don’t have substantial control over your trip if you:

Are an employee who was reimbursed or paid a travel expense allowance, and

Aren’t related to your employer, or

Aren’t a managing executive.

“Related to your employer” is defined later in chapter 6 under Per Diem and Car Allowances .

A “managing executive” is an employee who has the authority and responsibility, without being subject to the veto of another, to decide on the need for the business travel.

A self-employed person generally has substantial control over arranging business trips.

Your trip is considered entirely for business if you were outside the United States for a week or less, combining business and nonbusiness activities. One week means 7 consecutive days. In counting the days, don’t count the day you leave the United States, but do count the day you return to the United States.

You traveled to Brussels primarily for business. You left Denver on Tuesday and flew to New York. On Wednesday, you flew from New York to Brussels, arriving the next morning. On Thursday and Friday, you had business discussions, and from Saturday until Tuesday, you were sightseeing. You flew back to New York, arriving Wednesday afternoon. On Thursday, you flew back to Denver.

Although you were away from your home in Denver for more than a week, you weren’t outside the United States for more than a week. This is because the day you depart doesn’t count as a day outside the United States.

You can deduct your cost of the round-trip flight between Denver and Brussels. You can also deduct the cost of your stay in Brussels for Thursday and Friday while you conducted business. However, you can’t deduct the cost of your stay in Brussels from Saturday through Tuesday because those days were spent on nonbusiness activities.

Your trip is considered entirely for business if:

You were outside the United States for more than a week, and

You spent less than 25% of the total time you were outside the United States on nonbusiness activities.

You flew from Seattle to Tokyo, where you spent 14 days on business and 5 days on personal matters. You then flew back to Seattle. You spent 1 day flying in each direction.

Because only 5 / 21 (less than 25%) of your total time abroad was for nonbusiness activities, you can deduct as travel expenses what it would have cost you to make the trip if you hadn’t engaged in any nonbusiness activity. The amount you can deduct is the cost of the round-trip plane fare and 16 days of non-entertainment-related meals (subject to the 50% Limit ), lodging, and other related expenses.

Your trip is considered entirely for business if you can establish that a personal vacation wasn’t a major consideration, even if you have substantial control over arranging the trip.

Travel Primarily for Business

If you travel outside the United States primarily for business but spend some of your time on other activities, you generally can’t deduct all of your travel expenses. You can only deduct the business portion of your cost of getting to and from your destination. You must allocate the costs between your business and other activities to determine your deductible amount. See Travel allocation rules , later.

If your trip outside the United States was primarily for business, you must allocate your travel time on a day-to-day basis between business days and nonbusiness days. The days you depart from and return to the United States are both counted as days outside the United States.

To figure the deductible amount of your round-trip travel expenses, use the following fraction. The numerator (top number) is the total number of business days outside the United States. The denominator (bottom number) is the total number of business and nonbusiness days of travel.

Your business days include transportation days, days your presence was required, days you spent on business, and certain weekends and holidays.

Count as a business day any day you spend traveling to or from a business destination. However, if because of a nonbusiness activity you don’t travel by a direct route, your business days are the days it would take you to travel a reasonably direct route to your business destination. Extra days for side trips or nonbusiness activities can’t be counted as business days.

Count as a business day any day your presence is required at a particular place for a specific business purpose. Count it as a business day even if you spend most of the day on nonbusiness activities.

If your principal activity during working hours is the pursuit of your trade or business, count the day as a business day. Also, count as a business day any day you are prevented from working because of circumstances beyond your control.

Count weekends, holidays, and other necessary standby days as business days if they fall between business days. But if they follow your business meetings or activity and you remain at your business destination for nonbusiness or personal reasons, don’t count them as business days.

Your tax home is New York City. You travel to Quebec, where you have a business meeting on Friday. You have another meeting on the following Monday. Because your presence was required on both Friday and Monday, they are business days. Because the weekend is between business days, Saturday and Sunday are counted as business days. This is true even though you use the weekend for sightseeing, visiting friends, or other nonbusiness activity.

If, in Example 1 , you had no business in Quebec after Friday, but stayed until Monday before starting home, Saturday and Sunday would be nonbusiness days.

If you stopped for a vacation or other nonbusiness activity either on the way from the United States to your business destination, or on the way back to the United States from your business destination, you must allocate part of your travel expenses to the nonbusiness activity.

The part you must allocate is the amount it would have cost you to travel between the point where travel outside the United States begins and your nonbusiness destination and a return to the point where travel outside the United States ends.

You determine the nonbusiness portion of that expense by multiplying it by a fraction. The numerator (top number) of the fraction is the number of nonbusiness days during your travel outside the United States, and the denominator (bottom number) is the total number of days you spend outside the United States.

You live in New York. On May 4, you flew to Paris to attend a business conference that began on May 5. The conference ended at noon on May 14. That evening, you flew to Dublin where you visited with friends until the afternoon of May 21, when you flew directly home to New York. The primary purpose for the trip was to attend the conference.

If you hadn’t stopped in Dublin, you would have arrived home the evening of May 14. You don’t meet any of the exceptions that would allow you to consider your travel entirely for business. May 4 through May 14 (11 days) are business days and May 15 through May 21 (7 days) are nonbusiness days.

You can deduct the cost of your non-entertainment-related meals (subject to the 50% Limit ), lodging, and other business-related travel expenses while in Paris.

You can’t deduct your expenses while in Dublin. You also can’t deduct 7 / 18 of what it would have cost you to travel round trip between New York and Dublin.

You paid $750 to fly from New York to Paris, $400 to fly from Paris to Dublin, and $700 to fly from Dublin back to New York. Round-trip airfare from New York to Dublin would have been $1,250.

You figure the deductible part of your air travel expenses by subtracting 7 / 18 of the round-trip airfare and other expenses you would have had in traveling directly between New York and Dublin ($1,250 × 7 / 18 = $486) from your total expenses in traveling from New York to Paris to Dublin and back to New York ($750 + $400 + $700 = $1,850).

Your deductible air travel expense is $1,364 ($1,850 − $486).

If you had a vacation or other nonbusiness activity at, near, or beyond your business destination, you must allocate part of your travel expenses to the nonbusiness activity.

The part you must allocate is the amount it would have cost you to travel between the point where travel outside the United States begins and your business destination and a return to the point where travel outside the United States ends.

None of your travel expenses for nonbusiness activities at, near, or beyond your business destination are deductible.

Assume that the dates are the same as in the previous example but that instead of going to Dublin for your vacation, you fly to Venice, Italy, for a vacation.

You can’t deduct any part of the cost of your trip from Paris to Venice and return to Paris. In addition, you can’t deduct 7 / 18 of the airfare and other expenses from New York to Paris and back to New York.

You can deduct 11 / 18 of the round-trip plane fare and other travel expenses from New York to Paris, plus your non-entertainment-related meals (subject to the 50% Limit ), lodging, and any other business expenses you had in Paris. (Assume these expenses total $4,939.) If the round-trip plane fare and other travel-related expenses (such as food during the trip) are $1,750, you can deduct travel costs of $1,069 ( 11 / 18 × $1,750), plus the full $4,939 for the expenses you had in Paris.

You can use another method of counting business days if you establish that it more clearly reflects the time spent on other than business activities outside the United States.

If you travel outside the United States primarily for vacation or for investment purposes, the entire cost of the trip is a nondeductible personal expense. However, if you spend some time attending brief professional seminars or a continuing education program, you can deduct your registration fees and other expenses you have that are directly related to your business.

The university from which you graduated has a continuing education program for members of its alumni association. This program consists of trips to various foreign countries where academic exercises and conferences are set up to acquaint individuals in most occupations with selected facilities in several regions of the world. However, none of the conferences are directed toward specific occupations or professions. It is up to each participant to seek out specialists and organizational settings appropriate to their occupational interests.

Three-hour sessions are held each day over a 5-day period at each of the selected overseas facilities where participants can meet with individual practitioners. These sessions are composed of a variety of activities including workshops, mini-lectures, roleplaying, skill development, and exercises. Professional conference directors schedule and conduct the sessions. Participants can choose those sessions they wish to attend.

You can participate in this program because you are a member of the alumni association. You and your family take one of the trips. You spend about 2 hours at each of the planned sessions. The rest of the time you go touring and sightseeing with your family. The trip lasts less than 1 week.

Your travel expenses for the trip aren’t deductible since the trip was primarily a vacation. However, registration fees and any other incidental expenses you have for the five planned sessions you attended that are directly related and beneficial to your business are deductible business expenses. These expenses should be specifically stated in your records to ensure proper allocation of your deductible business expenses.

Luxury Water Travel

If you travel by ocean liner, cruise ship, or other form of luxury water transportation for business purposes, there is a daily limit on the amount you can deduct. The limit is twice the highest federal per diem rate allowable at the time of your travel. (Generally, the federal per diem is the amount paid to federal government employees for daily living expenses when they travel away from home within the United States for business purposes.)

The highest federal per diem rate allowed and the daily limit for luxury water travel in 2023 are shown in the following table.

You are a travel agent and traveled by ocean liner from New York to London, England, on business in May. Your expense for the 6-day cruise was $6,200. Your deduction for the cruise can’t exceed $4,776 (6 days × $796 daily limit).

If your expenses for luxury water travel include separately stated amounts for meals or entertainment, those amounts are subject to the 50% limit on non-entertainment-related meals and entertainment before you apply the daily limit. For a discussion of the 50% Limit , see chapter 2.

In the previous example, your luxury water travel had a total cost of $6,200. Of that amount, $3,700 was separately stated as non-entertainment-related meals and $1,000 was separately stated as entertainment. Considering that you are self-employed, you aren’t reimbursed for any of your travel expenses. You figure your deductible travel expenses as follows.

If your meal or entertainment charges aren’t separately stated or aren’t clearly identifiable, you don’t have to allocate any portion of the total charge to meals or entertainment.

The daily limit on luxury water travel (discussed earlier) doesn’t apply to expenses you have to attend a convention, seminar, or meeting on board a cruise ship. See Cruise Ships , later, under Conventions.

Conventions

You can deduct your travel expenses when you attend a convention if you can show that your attendance benefits your trade or business. You can’t deduct the travel expenses for your family.

If the convention is for investment, political, social, or other purposes unrelated to your trade or business, you can’t deduct the expenses.

The convention agenda or program generally shows the purpose of the convention. You can show your attendance at the convention benefits your trade or business by comparing the agenda with the official duties and responsibilities of your position. The agenda doesn’t have to deal specifically with your official duties and responsibilities; it will be enough if the agenda is so related to your position that it shows your attendance was for business purposes.

Conventions Held Outside the North American Area

You can’t deduct expenses for attending a convention, seminar, or similar meeting held outside the North American area unless:

The meeting is directly related to the active conduct of your trade or business, and

It is as reasonable to hold the meeting outside the North American area as within the North American area. See Reasonableness test , later.

The North American area includes the following locations.

The following factors are taken into account to determine if it was as reasonable to hold the meeting outside the North American area as within the North American area.

The purpose of the meeting and the activities taking place at the meeting.

The purposes and activities of the sponsoring organizations or groups.

The homes of the active members of the sponsoring organizations and the places at which other meetings of the sponsoring organizations or groups have been or will be held.

Other relevant factors you may present.

You can deduct up to $2,000 per year of your expenses of attending conventions, seminars, or similar meetings held on cruise ships. All ships that sail are considered cruise ships.

You can deduct these expenses only if all of the following requirements are met.

The convention, seminar, or meeting is directly related to the active conduct of your trade or business.

The cruise ship is a vessel registered in the United States.

All of the cruise ship's ports of call are in the United States or in territories of the United States.

You attach to your return a written statement signed by you that includes information about:

The total days of the trip (not including the days of transportation to and from the cruise ship port),

The number of hours each day that you devoted to scheduled business activities, and

A program of the scheduled business activities of the meeting.

You attach to your return a written statement signed by an officer of the organization or group sponsoring the meeting that includes:

A schedule of the business activities of each day of the meeting, and

The number of hours you attended the scheduled business activities.

2. Meals and Entertainment

You can no longer take a deduction for any expense related to activities generally considered entertainment, amusement, or recreation. You can continue to deduct 50% of the cost of business meals if you (or your employee) are present and the food or beverages aren't considered lavish or extravagant.

Entertainment

Entertainment—defined.

Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; on yachts; or on hunting, fishing, vacation, and similar trips. Entertainment may also include meeting personal, living, or family needs of individuals, such as providing meals, a hotel suite, or a car to customers or their families.

Your kind of business may determine if a particular activity is considered entertainment. For example, if you are a dress designer and have a fashion show to introduce your new designs to store buyers, the show generally isn’t considered entertainment. This is because fashion shows are typical in your business. But, if you are an appliance distributor and hold a fashion show for the spouses of your retailers, the show is generally considered entertainment.

If you have one expense that includes the costs of entertainment and other services (such as lodging or transportation), you must allocate that expense between the cost of entertainment and the cost of other services. You must have a reasonable basis for making this allocation. For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge.

In general, entertainment expenses are nondeductible. However, there are a few exceptions to the general rule, including:

Entertainment treated as compensation on your originally filed tax returns (and treated as wages to your employees);

Recreational expenses for employees such as a holiday party or a summer picnic;

Expenses related to attending business meetings or conventions of certain exempt organizations such as business leagues, chambers of commerce, professional associations, etc.; and

Entertainment sold to customers. For example, if you run a nightclub, your expenses for the entertainment you furnish to your customers, such as a floor show, aren’t subject to the nondeductible rules.

Examples of Nondeductible Entertainment

Generally, you can't deduct any expense for an entertainment event. This includes expenses for entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; on yachts; or on hunting, fishing, vacation, and similar trips.

Generally, you can’t deduct any expense for the use of an entertainment facility. This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection.

An entertainment facility is any property you own, rent, or use for entertainment. Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort.

You can’t deduct dues (including initiation fees) for membership in any club organized for business, pleasure, recreation, or other social purposes.

This rule applies to any membership organization if one of its principal purposes is either:

To conduct entertainment activities for members or their guests; or

To provide members or their guests with access to entertainment facilities, discussed later.

The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. You can’t deduct dues paid to:

Country clubs,

Golf and athletic clubs,

Airline clubs,

Hotel clubs, and

Clubs operated to provide meals under circumstances generally considered to be conducive to business discussions.

Any item that might be considered either a gift or entertainment will generally be considered entertainment. However, if you give a customer packaged food or beverages that you intend the customer to use at a later date, treat it as a gift.

As discussed above, entertainment expenses are generally nondeductible. However, you may continue to deduct 50% of the cost of business meals if you (or an employee) is present and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant, or similar business contact.

Food and beverages that are provided during entertainment events are not considered entertainment if purchased separately from the entertainment, or if the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts. However, the entertainment disallowance rule may not be circumvented through inflating the amount charged for food and beverages.

Any allowed expense must be ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your business. An expense doesn't have to be required to be considered necessary. Expenses must not be lavish or extravagant. An expense isn't considered lavish or extravagant if it is reasonable based on the facts and circumstances.

For each example, assume that the food and beverage expenses are ordinary and necessary expenses under section 162(a) paid or incurred during the tax year in carrying on a trade or business and are not lavish or extravagant under the circumstances. Also assume that the taxpayer and the business contact are not engaged in a trade or business that has any relation to the entertainment activity.

Taxpayer A invites B, a business contact, to a baseball game. A purchases tickets for A and B to attend the game. While at the game, A buys hot dogs and drinks for A and B. The baseball game is entertainment as defined in Regulations section 1.274-11(b)(1)(i) and, thus, the cost of the game tickets is an entertainment expense and is not deductible by A. The cost of the hot dogs and drinks, which are purchased separately from the game tickets, is not an entertainment expense and is not subject to the section 274(a)(1) disallowance. Therefore, A may deduct 50% of the expenses associated with the hot dogs and drinks purchased at the game.

Taxpayer C invites D, a business contact, to a basketball game. C purchases tickets for C and D to attend the game in a suite, where they have access to food and beverages. The cost of the basketball game tickets, as stated on the invoice, includes the food and beverages. The basketball game is entertainment as defined in Regulations section 1.274-11(b)(1)(i) and, thus, the cost of the game tickets is an entertainment expense and is not deductible by C. The cost of the food and beverages, which are not purchased separately from the game tickets, is not stated separately on the invoice. Thus, the cost of the food and beverages is also an entertainment expense that is subject to the section 274(a)(1) disallowance. Therefore, C may not deduct any of the expenses associated with the basketball game.

Assume the same facts as in Example 2 , except that the invoice for the basketball game tickets separately states the cost of the food and beverages. As in Example 2 , the basketball game is entertainment as defined in Regulations section 1.274-2(b)(1)(i) and, thus, the cost of the game tickets, other than the cost of the food and beverages, is an entertainment expense and is not deductible by C. However, the cost of the food and beverages, which is stated separately on the invoice for the game tickets, is not an entertainment expense and is not subject to the section 274(a)(1) disallowance. Therefore, C may deduct 50% of the expenses associated with the food and beverages provided at the game.

In general, you can deduct only 50% of your business-related meal expenses, unless an exception applies. (If you are subject to the Department of Transportation's “hours of service” limits, you can deduct 80% of your business-related meal expenses. See Individuals subject to hours of service limits , later.)

The 50% limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed.

Examples of meals might include:

Meals while traveling away from home (whether eating alone or with others) on business, or

Meal at a business convention or business league meeting.

Figure A. Does the 50% Limit Apply to Your Expenses?

There are exceptions to these rules. See Exceptions to the 50% Limit for Meals , later.

Figure A. Does the 50% limit apply to Your Expenses?TAs for Figure A are: Notice 87-23; Form 2106 instructions

Summary: This is a flowchart used to determine if employees and self-employed persons need to put a 50% limit on their business expense deductions.

This is the starting of the flowchart.

Decision (1)

Were your meal and entertainment expenses reimbursed? (Count only reimbursements your employer didn’t include in box 1 of your Form W-2. If self-employed, count only reimbursements from clients or customers that aren’t included on Form 1099-MISC, Miscellaneous Income.)

Decision (2)

If an employee, did you adequately account to your employer under an accountable plan? If self-employed, did you provide the payer with adequate records? (See Chapter 6.)

Decision (3)

Did your expenses exceed the reimbursement?

Decision (4)

Process (a)

Your meal and entertainment expenses are NOT subject to the limitations. However, since the reimbursement wasn’t treated as wages or as other taxable income, you can’t deduct the expenses.

Process (b)

Your nonentertainment meal expenses ARE subject to the 50% limit. Your entertainment expenses are nondeductible.

This is the ending of the flowchart.

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Taxes and tips relating to a business meal are included as a cost of the meal and are subject to the 50% limit. However, the cost of transportation to and from the meal is not treated as part of the cost and would not be subject to the limit.

The 50% limit on meal expenses applies if the expense is otherwise deductible and isn’t covered by one of the exceptions discussed later. Figure A can help you determine if the 50% limit applies to you.

The 50% limit also applies to certain meal expenses that aren’t business related. It applies to meal expenses you have for the production of income, including rental or royalty income. It also applies to the cost of meals included in deductible educational expenses.

The 50% limit will apply after determining the amount that would otherwise qualify for a deduction. You first have to determine the amount of meal expenses that would be deductible under the other rules discussed in this publication.

If a group of business acquaintances takes turns picking up each others' meal checks primarily for personal reasons, without regard to whether any business purposes are served, no member of the group can deduct any part of the expense.

You spend $200 (including tax and tip) for a business meal. If $110 of that amount isn’t allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. Your deduction can’t be more than $45 (50% (0.50) × $90).

You purchase two tickets to a concert for $200 for you and your client. Your deduction is zero because no deduction is allowed for entertainment expenses.

Exception to the 50% Limit for Meals

Your meal expense isn’t subject to the 50% limit if the expense meets one of the following exceptions.

In general, expenses for goods, services, and facilities, to the extent the expenses are treated by the taxpayer, with respect to entertainment, amusement, or recreation, as compensation to an employee and as wages to the employee for tax purposes.

If you are an employee, you aren’t subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. Accountable plans are discussed in chapter 6.

If you are self-employed, your deductible meal expenses aren’t subject to the 50% limit if all of the following requirements are met.

You have these expenses as an independent contractor.

Your customer or client reimburses you or gives you an allowance for these expenses in connection with services you perform.

You provide adequate records of these expenses to your customer or client. (See chapter 5 .)

In this case, your client or customer is subject to the 50% limit on the expenses.

You are a self-employed attorney who adequately accounts for meal expenses to a client who reimburses you for these expenses. You aren’t subject to the limitation on meal expenses. If the client can deduct the expenses, the client is subject to the 50% limit.

If you (as an independent contractor) have expenses for meals related to providing services for a client but don’t adequately account for and seek reimbursement from the client for those expenses, you are subject to the 50% limit on non-entertainment-related meals and the entertainment-related meal expenses are nondeductible to you.

You aren't subject to the 50% limit for expenses for recreational, social, or similar activities (including facilities) such as a holiday party or a summer picnic.

You aren’t subject to the 50% limit if you provide meals to the general public as a means of advertising or promoting goodwill in the community. For example, neither the expense of sponsoring a television or radio show nor the expense of distributing free food and beverages to the general public is subject to the 50% limit.

You aren’t subject to the 50% limit if you actually sell meals to the public. For example, if you run a restaurant, your expense for the food you furnish to your customers isn’t subject to the 50% limit.

You can deduct a higher percentage of your meal expenses while traveling away from your tax home if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. The percentage is 80%.

Individuals subject to the Department of Transportation's “hours of service” limits include the following persons.

Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations.

Interstate truck operators and bus drivers who are under Department of Transportation regulations.

Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations.

Certain merchant mariners who are under Coast Guard regulations.

If you give gifts in the course of your trade or business, you may be able to deduct all or part of the cost. This chapter explains the limits and rules for deducting the costs of gifts.

You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift.

If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. This rule doesn’t apply if you have a bona fide, independent business connection with that family member and the gift isn’t intended for the customer's eventual use.

If you and your spouse both give gifts, both of you are treated as one taxpayer. It doesn’t matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. If a partnership gives gifts, the partnership and the partners are treated as one taxpayer.

You sell products to a local company. You and your spouse gave the local company three gourmet gift baskets to thank them for their business. You and your spouse paid $80 for each gift basket, or $240 total. Three of the local company's executives took the gift baskets home for their families' use. You and your spouse have no independent business relationship with any of the executives' other family members. You and your spouse can deduct a total of $75 ($25 limit × 3) for the gift baskets.

Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit.

A cost is incidental only if it doesn’t add substantial value to the gift. For example, the cost of gift wrapping is an incidental cost. However, the purchase of an ornamental basket for packaging fruit isn’t an incidental cost if the value of the basket is substantial compared to the value of the fruit.

The following items aren’t considered gifts for purposes of the $25 limit.

An item that costs $4 or less and:

Has your name clearly and permanently imprinted on the gift, and

Is one of a number of identical items you widely distribute. Examples include pens, desk sets, and plastic bags and cases.

Signs, display racks, or other promotional material to be used on the business premises of the recipient.

Figure B. When Are Transportation Expenses Deductible?

Most employees and self-employed persons can use this chart. (Don’t use this chart if your home is your principal place of business. See Office in the home , later.)

Figure B. When Are Local Transportation Expenses Deductible?TAs for Figure B are: Reg 1.162-1(a); RR 55–109; RR 94–47

Summary: This illustration depicts the rules used to determine if transportation expenses are deductible.

The image then lists definitions for words used in the graphic:

Any item that might be considered either a gift or entertainment will generally be considered entertainment. However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift.

4. Transportation

This chapter discusses expenses you can deduct for business transportation when you aren’t traveling away from home , as defined in chapter 1. These expenses include the cost of transportation by air, rail, bus, taxi, etc., and the cost of driving and maintaining your car.

Transportation expenses include the ordinary and necessary costs of all of the following.

Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Tax home is defined in chapter 1.

Visiting clients or customers.

Going to a business meeting away from your regular workplace.

Getting from your home to a temporary workplace when you have one or more regular places of work. These temporary workplaces can be either within the area of your tax home or outside that area.

Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. However, there may be exceptions to this general rule. You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. Also, daily transportation expenses can be deducted if (1) you have one or more regular work locations away from your residence; or (2) your residence is your principal place of business and you incur expenses going between the residence and another work location in the same trade or business, regardless of whether the work is temporary or permanent and regardless of the distance.

Illustration of transportation expenses.

Figure B above illustrates the rules that apply for deducting transportation expenses when you have a regular or main job away from your home. You may want to refer to it when deciding whether you can deduct your transportation expenses.

If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance.

If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise.

If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment isn’t temporary, regardless of whether it actually lasts for more than 1 year.

If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. It won’t be treated as temporary after the date you determine it will last more than 1 year.

If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. You may have deductible travel expenses, as discussed in chapter 1 .

If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area.

Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area.

You can’t deduct daily transportation costs between your home and temporary work sites within your metropolitan area. These are nondeductible commuting expenses.

If you work at two places in 1 day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. However, if for some personal reason you don’t go directly from one location to the other, you can’t deduct more than the amount it would have cost you to go directly from the first location to the second.

Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. You can’t deduct them.

A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work .

You usually can’t deduct the expense if the reserve meeting is held on a day on which you don’t work at your regular job. In this case, your transportation is generally a nondeductible commuting expense. However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work.

If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses.

If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. These expenses are discussed in chapter 1 .

If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to gross income rather than as an itemized deduction. For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules in chapter 6.

You can’t deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. These costs are personal commuting expenses. You can’t deduct commuting expenses no matter how far your home is from your regular place of work. You can’t deduct commuting expenses even if you work during the commuting trip.

You sometimes use your cell phone to make business calls while commuting to and from work. Sometimes business associates ride with you to and from work, and you have a business discussion in the car. These activities don’t change the trip from personal to business. You can’t deduct your commuting expenses.

Fees you pay to park your car at your place of business are nondeductible commuting expenses. You can, however, deduct business-related parking fees when visiting a customer or client.

Putting display material that advertises your business on your car doesn’t change the use of your car from personal use to business use. If you use this car for commuting or other personal uses, you still can’t deduct your expenses for those uses.

You can’t deduct the cost of using your car in a nonprofit car pool. Don’t include payments you receive from the passengers in your income. These payments are considered reimbursements of your expenses. However, if you operate a car pool for a profit, you must include payments from passengers in your income. You can then deduct your car expenses (using the rules in this publication).

Hauling tools or instruments in your car while commuting to and from work doesn’t make your car expenses deductible. However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car).

If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located.

If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. (See Pub. 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business.)

The following examples show when you can deduct transportation expenses based on the location of your work and your home.

You regularly work in an office in the city where you live. Your employer sends you to a 1-week training session at a different office in the same city. You travel directly from your home to the training location and return each day. You can deduct the cost of your daily round-trip transportation between your home and the training location.

Your principal place of business is in your home. You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business.

You have no regular office, and you don’t have an office in your home. In this case, the location of your first business contact inside the metropolitan area is considered your office. Transportation expenses between your home and this first contact are nondeductible commuting expenses. Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. While you can’t deduct the costs of these trips, you can deduct the costs of going from one client or customer to another.

Car Expenses

If you use your car for business purposes, you may be able to deduct car expenses. You can generally use one of the two following methods to figure your deductible expenses.

Actual car expenses.

The cost of using your car as an employee, whether measured using actual expenses or the standard mileage rate, will no longer be allowed to be claimed as an unreimbursed employee travel expense as a miscellaneous itemized deduction due to the suspension of miscellaneous itemized deductions that are subject to the 2% floor under section 67(a). The suspension applies to tax years beginning after December 2017 and before January 2026. Deductions for expenses that are deductible in determining adjusted gross income are not suspended. For example, Armed Forces reservists, qualified performing artists, and fee-basis state or local government officials are allowed to deduct unreimbursed employee travel expenses as an adjustment to total income on Schedule 1 (Form 1040), line 12.

If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. See Leasing a Car , later.

In this publication, “car” includes a van, pickup, or panel truck. For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses , later.

Standard Mileage Rate

For 2023, the standard mileage rate for the cost of operating your car for business use is 65.5 cents ($0.655) per mile.

You can generally use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. See chapter 6 for more information on reimbursements .

If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then, in later years, you can choose to use either the standard mileage rate or actual expenses.

If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after 1997.

You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. You can’t revoke the choice. However, in later years, you can switch from the standard mileage rate to the actual expenses method. If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation for the car’s remaining estimated useful life, subject to depreciation limits (discussed later).

For more information about depreciation included in the standard mileage rate, see Exception under Methods of depreciation , later.

You can’t use the standard mileage rate if you:

Use five or more cars at the same time (such as in fleet operations);

Claimed a depreciation deduction for the car using any method other than straight line for the car’s estimated useful life;

Used the Modified Accelerated Cost Recovery System (MACRS) (as discussed later under Depreciation Deduction );

Claimed a section 179 deduction (discussed later) on the car;

Claimed the special depreciation allowance on the car; or

Claimed actual car expenses after 1997 for a car you leased.

You can elect to use the standard mileage rate if you used a car for hire (such as a taxi) unless the standard mileage rate is otherwise not allowed, as discussed above.

If you own or lease five or more cars that are used for business at the same time, you can’t use the standard mileage rate for the business use of any car. However, you may be able to deduct your actual expenses for operating each of the cars in your business. See Actual Car Expenses , later, for information on how to figure your deduction.

You aren’t using five or more cars for business at the same time if you alternate using (use at different times) the cars for business.

The following examples illustrate the rules for when you can and can’t use the standard mileage rate for five or more cars.

A salesperson owns three cars and two vans that they alternate using for calling on their customers. The salesperson can use the standard mileage rate for the business mileage of the three cars and the two vans because they don’t use them at the same time.

You and your employees use your four pickup trucks in your landscaping business. During the year, you traded in two of your old trucks for two newer ones. You can use the standard mileage rate for the business mileage of all six of the trucks you owned during the year.

You own a repair shop and an insurance business. You and your employees use your two pickup trucks and van for the repair shop. You alternate using your two cars for the insurance business. No one else uses the cars for business purposes. You can use the standard mileage rate for the business use of the pickup trucks, the van, and the cars because you never have more than four vehicles used for business at the same time.

You own a car and four vans that are used in your housecleaning business. Your employees use the vans, and you use the car to travel to various customers. You can’t use the standard mileage rate for the car or the vans. This is because all five vehicles are used in your business at the same time. You must use actual expenses for all vehicles.

If you are an employee, you can’t deduct any interest paid on a car loan. This applies even if you use the car 100% for business as an employee.

However, if you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car. For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). You can’t deduct the part of the interest expense that represents your personal use of the car.

If you itemize your deductions on Schedule A (Form 1040), you can deduct on line 5c state and local personal property taxes on motor vehicles. You can take this deduction even if you use the standard mileage rate or if you don’t use the car for business.

If you are self-employed and use your car in your business, you can deduct the business part of state and local personal property taxes on motor vehicles on Schedule C (Form 1040), or Schedule F (Form 1040). If you itemize your deductions, you can include the remainder of your state and local personal property taxes on the car on Schedule A (Form 1040).

In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses.)

If you sell, trade in, or otherwise dispose of your car, you may have a gain or loss on the transaction or an adjustment to the basis of your new car. See Disposition of a Car , later.

Actual Car Expenses

If you don’t use the standard mileage rate, you may be able to deduct your actual car expenses.

Actual car expenses include:

If you have fully depreciated a car that you still use in your business, you can continue to claim your other actual car expenses. Continue to keep records, as explained later in chapter 5 .

If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. You can divide your expense based on the miles driven for each purpose.

You are a contractor and drive your car 20,000 miles during the year: 12,000 miles for business use and 8,000 miles for personal use. You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense.

If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. You can’t use the standard mileage rate. See Vehicle Provided by Your Employer in chapter 6.

If you are an employee, you can’t deduct any interest paid on a car loan. This interest is treated as personal interest and isn’t deductible. If you are self-employed and use your car in that business, see Interest , earlier, under Standard Mileage Rate.

If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. Enter the amount paid on Schedule A (Form 1040), line 5c.

Generally, sales taxes on your car are part of your car's basis and are recovered through depreciation, discussed later.

You can’t deduct fines you pay or collateral you forfeit for traffic violations.

If your car is damaged, destroyed, or stolen, you may be able to deduct part of the loss not covered by insurance. See Pub. 547, Casualties, Disasters, and Thefts, for information on deducting a loss on your car.

Generally, the cost of a car, plus sales tax and improvements, is a capital expense. Because the benefits last longer than 1 year, you generally can’t deduct a capital expense. However, you can recover this cost through the section 179 deduction (the deduction allowed by section 179 of the Internal Revenue Code), special depreciation allowance, and depreciation deductions. Depreciation allows you to recover the cost over more than 1 year by deducting part of it each year. The section 179 deduction , special depreciation allowance , and depreciation deductions are discussed later.

Generally, there are limits on these deductions. Special rules apply if you use your car 50% or less in your work or business.

You can claim a section 179 deduction and use a depreciation method other than straight line only if you don’t use the standard mileage rate to figure your business-related car expenses in the year you first place a car in service.

If, in the year you first place a car in service, you claim either a section 179 deduction or use a depreciation method other than straight line for its estimated useful life, you can’t use the standard mileage rate on that car in any future year.

For depreciation purposes, a car is any four-wheeled vehicle (including a truck or van) made primarily for use on public streets, roads, and highways. Its unloaded gross vehicle weight (for trucks and vans, gross vehicle weight) must not be more than 6,000 pounds. A car includes any part, component, or other item physically attached to it or usually included in the purchase price.

A car doesn’t include:

An ambulance, hearse, or combination ambulance-hearse used directly in a business;

A vehicle used directly in the business of transporting persons or property for pay or hire; or

A truck or van that is a qualified nonpersonal use vehicle.

These are vehicles that by their nature aren’t likely to be used more than a minimal amount for personal purposes. They include trucks and vans that have been specially modified so that they aren’t likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles.

See Depreciation Deduction , later, for more information on how to depreciate your vehicle.

Section 179 Deduction

You can elect to recover all or part of the cost of a car that is qualifying section 179 property, up to a limit, by deducting it in the year you place the property in service. This is the section 179 deduction. If you elect the section 179 deduction, you must reduce your depreciable basis in the car by the amount of the section 179 deduction.

You can claim the section 179 deduction only in the year you place the car in service. For this purpose, a car is placed in service when it is ready and available for a specifically assigned use in a trade or business. Even if you aren’t using the property, it is in service when it is ready and available for its specifically assigned use.

A car first used for personal purposes can’t qualify for the deduction in a later year when its use changes to business.

In 2022, you bought a new car and used it for personal purposes. In 2023, you began to use it for business. Changing its use to business use doesn’t qualify the cost of your car for a section 179 deduction in 2023. However, you can claim a depreciation deduction for the business use of the car starting in 2023. See Depreciation Deduction , later.

You must use the property more than 50% for business to claim any section 179 deduction. If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. The result is the cost of the property that can qualify for the section 179 deduction.

You purchased a new car in April 2023 for $24,500 and used it 60% for business. Based on your business usage, the total cost of your car that qualifies for the section 179 deduction is $14,700 ($24,500 cost × 60% (0.60) business use). But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later.

There are limits on:

The amount of the section 179 deduction;

The section 179 deduction for sport utility and certain other vehicles; and

The total amount of the section 179 deduction, special depreciation allowance, and depreciation deduction (discussed later ) you can claim for a qualified property.

For tax years beginning in 2023, the total amount you can elect to deduct under section 179 can’t be more than $1,160,000.

If the cost of your section 179 property placed in service in tax years beginning in 2023 is over $2,890,000, you must reduce the $1,160,000 dollar limit (but not below zero) by the amount of cost over $2,890,000. If the cost of your section 179 property placed in service during tax years beginning in 2023 is $4,050,000 or more, you can’t take a section 179 deduction.

The total amount you can deduct under section 179 each year after you apply the limits listed above cannot be more than the taxable income from the active conduct of any trade or business during the year.

If you are married and file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service.

If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit. You must allocate the dollar limit (after any reduction) between you.

For more information on the above section 179 deduction limits, see Pub. 946, How To Depreciate Property.

You cannot elect to deduct more than $28,900 of the cost of any heavy sport utility vehicle (SUV) and certain other vehicles placed in service during the tax years beginning in 2023. This rule applies to any four-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways that isn’t subject to any of the passenger automobile limits explained under Depreciation Limits , later, and that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. However, the $28,900 limit doesn’t apply to any vehicle:

Designed to have a seating capacity of more than nine persons behind the driver's seat;

Equipped with a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and isn’t readily accessible directly from the passenger compartment; or

That has an integral enclosure, fully enclosing the driver compartment and load carrying device, doesn’t have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield.

The first-year limit on the depreciation deduction, special depreciation allowance, and section 179 deduction for vehicles acquired before September 28, 2017, and placed in service during 2023, is $12,200. The first-year limit on depreciation, special depreciation allowance, and section 179 deduction for vehicles acquired after September 27, 2017, and placed in service during 2023 increases to $20,200. If you elect not to claim a special depreciation allowance for a vehicle placed in service in 2023, the amount increases to $12,200. The limit is reduced if your business use of the vehicle is less than 100%. See Depreciation Limits , later, for more information.

In the earlier example under More than 50% business use requirement , you had a car with a cost (for purposes of the section 179 deduction) of $14,700. However, based on your business usage of the car, the total of your section 179 deduction, special depreciation allowance, and depreciation deductions is limited to $12,120 ($20,200 limit x 60% (0.60) business use) because the car was acquired after September 27, 2017, and placed in service during 2023.

For purposes of the section 179 deduction, the cost of the car doesn’t include any amount figured by reference to any other property held by you at any time. For example, if you buy a car as a replacement for a car that was stolen or that was destroyed in a casualty loss, and you use section 1033 to determine the basis in your replacement vehicle, your cost for purposes of the section 179 deduction doesn’t include your adjusted basis in the relinquished car. In that case, your cost includes only the cash you paid.

The amount of the section 179 deduction reduces your basis in your car. If you choose the section 179 deduction, you must subtract the amount of the deduction from the cost of your car. The resulting amount is the basis in your car you use to figure your depreciation deduction.

If you want to take the section 179 deduction, you must make the election in the tax year you place the car in service for business or work.

Employees use Form 2106, Employee Business Expenses, to make the election and report the section 179 deduction. All others use Form 4562, Depreciation and Amortization, to make an election.

File the appropriate form with either of the following.

Your original tax return filed for the year the property was placed in service (whether or not you file it timely).

An amended return filed within the time prescribed by law. An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. The amended return must also include any resulting adjustments to taxable income.

An election (or any specification made in the election) to take a section 179 deduction for 2023 can only be revoked with the Commissioner's approval.

To be eligible to claim the section 179 deduction, you must use your car more than 50% for business or work in the year you acquired it. If your business use of the car is 50% or less in a later tax year during the recovery period, you have to recapture (include in income) in that later year any excess depreciation. Any section 179 deduction claimed on the car is included in figuring the excess depreciation. For information on this calculation, see Excess depreciation , later in this chapter under Car Used 50% or Less for Business. For more information on recapture of a section 179 deduction, see Pub. 946.

If you dispose of a car on which you had claimed the section 179 deduction, the amount of that deduction is treated as a depreciation deduction for recapture purposes. You treat any gain on the disposition of the property as ordinary income up to the amount of the section 179 deduction and any allowable depreciation (unless you establish the amount actually allowed). For information on the disposition of a car, see Disposition of a Car , later. For more information on recapture of a section 179 deduction, see Pub. 946.

Special Depreciation Allowance

You may be able to claim the special depreciation allowance for your car, truck, or van if it is qualified property and was placed in service in 2023. The allowance for 2023 is an additional depreciation deduction for 100% of the car's depreciable basis (after any section 179 deduction, but before figuring your regular depreciation deduction under MACRS) if the vehicle was acquired after September 27, 2017, and placed in service during 2023. Further, while it applies to a new vehicle, it also applies to a used vehicle only if the vehicle meets the used property requirements. For more information on the used property requirements, see section 168(k)(2)(E)(ii). To qualify for the allowance, more than 50% of the use of the car must be in a qualified business use (as defined under Depreciation Deduction , later).

The first-year limit on the depreciation deduction, special depreciation allowance, and section 179 deduction for vehicles acquired before September 28, 2017, and placed in service during 2023, is $12,200. Your combined section 179 depreciation, special depreciation allowance, and regular MACRS depreciation deduction is limited to the maximum allowable depreciation deduction for vehicles acquired after September 27, 2017, and placed in service during 2023 is $20,200. If you elect not to claim a special depreciation allowance for a vehicle placed in service in 2023, the amount is $12,200. See Depreciation Limits , later in this chapter.

To be qualified property, the car (including the truck or van) must meet all of the following tests.

You acquired the car after September 27, 2017, but only if no written binding contract to acquire the car existed before September 28, 2017.

You acquired the car new or used.

You placed the car in service in your trade or business before January 1, 2027.

You used the car more than 50% in a qualified business use during the tax year.

You can elect not to claim the special depreciation allowance for your car, truck, or van that is qualified property. If you make this election, it applies to all 5-year property placed in service during the year.

To make this election, attach a statement to your timely filed return (including extensions) indicating the class of property (5-year for cars) for which you are making the election and that you are electing not to claim the special depreciation allowance for qualified property in that class of property.

Depreciation Deduction

If you use actual car expenses to figure your deduction for a car you own and use in your business, you can claim a depreciation deduction. This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car.

You generally need to know the following things about the car you intend to depreciate.

Your basis in the car.

The date you place the car in service.

The method of depreciation and recovery period you will use.

Your basis in a car for figuring depreciation is generally its cost. This includes any amount you borrow or pay in cash, other property, or services.

Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis , later). However, in some situations, you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). For one of these situations, see Exception under Methods of depreciation , later.

If you change the use of a car from personal to business, your basis for depreciation is the lesser of the fair market value or your adjusted basis in the car on the date of conversion. Additional rules concerning basis are discussed later in this chapter under Unadjusted basis .

You generally place a car in service when it is available for use in your work or business, in an income-producing activity, or in a personal activity. Depreciation begins when the car is placed in service for use in your work or business or for the production of income.

For purposes of figuring depreciation, if you first start using the car only for personal use and later convert it to business use, you place the car in service on the date of conversion.

If you place a car in service and dispose of it in the same tax year, you can’t claim any depreciation deduction for that car.

Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery (MACRS) discussed later in this chapter.

If you used the standard mileage rate in the first year of business use and change to the actual expenses method in a later year, you can’t depreciate your car under the MACRS rules. You must use straight line depreciation over the estimated remaining useful life of the car. The amount you depreciate can’t be more than the depreciation limit that applies for that year. See Depreciation Limits , later.

To figure depreciation under the straight line method, you must reduce your basis in the car (but not below zero) by a set rate per mile for all miles for which you used the standard mileage rate. The rate per mile varies depending on the year(s) you used the standard mileage rate. For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car , later.

This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis . You must use your adjusted basis in your car to figure your depreciation deduction. For additional information on the straight line method of depreciation, see Pub. 946.

Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car.

If your business use is 50% or less, you must use the straight line method to depreciate your car. This is explained later under Car Used 50% or Less for Business .

A qualified business use is any use in your trade or business. It doesn’t include use for the production of income (investment use), or use provided under lease to, or as compensation to, a 5% owner or related person. However, you do combine your business and investment use to figure your depreciation deduction for the tax year.

Don’t treat any use of your car by another person as use in your trade or business unless that use meets one of the following conditions.

It is directly connected with your business.

It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income).

It results in a payment of fair market rent. This includes any payment to you for the use of your car.

If you used your car more than 50% in qualified business use in the year you placed it in service, but 50% or less in a later year (including the year of disposition), you have to change to the straight line method of depreciation. See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business , later.

If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. You do this on the basis of mileage. Figure the percentage of qualified business use by dividing the number of miles you drive your car for business purposes during the year by the total number of miles you drive the car during the year for any purpose.

If you change the use of a car from 100% personal use to business use during the tax year, you may not have mileage records for the time before the change to business use. In this case, you figure the percentage of business use for the year as follows.

Determine the percentage of business use for the period following the change. Do this by dividing business miles by total miles driven during that period.

Multiply the percentage in (1) by a fraction. The numerator (top number) is the number of months the car is used for business, and the denominator (bottom number) is 12.

You use a car only for personal purposes during the first 6 months of the year. During the last 6 months of the year, you drive the car a total of 15,000 miles of which 12,000 miles are for business. This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. Your business use for the year is 40% (80% (0.80) × 6 / 12 ).

The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. The maximum amount you can claim depends on the year in which you placed your car in service. You have to reduce the maximum amount if you did not use the car exclusively for business. See Depreciation Limits , later.

You use your unadjusted basis (often referred to as your basis or your basis for depreciation) to figure your depreciation using the MACRS depreciation chart, explained later under Modified Accelerated Cost Recovery System (MACRS) . Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts.

To figure your unadjusted basis, begin with your car's original basis, which is generally its cost. Cost includes sales taxes (see Sales taxes , earlier), destination charges, and dealer preparation. Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. Decrease your basis by any section 179 deduction, special depreciation allowance, gas guzzler tax, and vehicle credits claimed. See Pub. 551, Basis of Assets, for further details.

If you acquired the car by gift or inheritance, see Pub. 551, Basis of Assets, for information on your basis in the car.

A major improvement to a car is treated as a new item of 5-year recovery property. It is treated as placed in service in the year the improvement is made. It doesn’t matter how old the car is when the improvement is added. Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. Your car's depreciation deduction for the year (plus any section 179 deduction, special depreciation allowance, and depreciation on any improvements) can’t be more than the depreciation limit that applies for that year. See Depreciation Limits , later.

If you traded one car (the “old car”) for another car (the “new car”) in 2023, you must treat the transaction as a disposition of the old car and the purchase of the new car. You must treat the old car as disposed of at the time of the trade-in. The depreciable basis of the new car is the adjusted basis of the old car (figured as if 100% of the car’s use had been for business purposes) plus any additional amount you paid for the new car. You then figure your depreciation deduction for the new car beginning with the date you placed it in service. You must also complete Form 2106, Part II, Section D. This method is explained later, beginning at Effect of trade-in on basis .

The discussion that follows applies to trade-ins of cars in 2023, where the election was made to treat the transaction as a disposition of the old car and the purchase of the new car. For information on how to figure depreciation for cars involved in a like-kind exchange (trade-in) in 2023, for which the election wasn’t made, see Pub. 946 and Regulations section 1.168(i)-6(d)(3).

Like‐kind exchanges completed after December 31, 2017, are generally limited to exchanges of real property not held primarily for sale. Regulations section 1.168(i)-6 doesn't reflect this change in law.

If you trade in a car you used only in your business for another car that will be used only in your business, your original basis in the new car is your adjusted basis in the old car, plus any additional amount you pay for the new car.

You trade in a car that has an adjusted basis of $5,000 for a new car. In addition, you pay cash of $20,000 for the new car. Your original basis of the new car is $25,000 (your $5,000 adjusted basis in the old car plus the $20,000 cash paid). Your unadjusted basis is $25,000 unless you claim the section 179 deduction, special depreciation allowance, or have other increases or decreases to your original basis, discussed under Unadjusted basis , earlier.

If you trade in a car you used partly in your business for a new car you will use in your business, you must make a “trade-in” adjustment for the personal use of the old car. This adjustment has the effect of reducing your basis in your old car, but not below zero, for purposes of figuring your depreciation deduction for the new car. (This adjustment isn’t used, however, when you determine the gain or loss on the later disposition of the new car. See Pub. 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car.)

To figure the unadjusted basis of your new car for depreciation, first add to your adjusted basis in the old car any additional amount you pay for the new car. Then subtract from that total the excess, if any, of:

The total of the amounts that would have been allowable as depreciation during the tax years before the trade if 100% of the use of the car had been business and investment use, over

The total of the amounts actually allowed as depreciation during those years.

MACRS is the name given to the tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income.

The maximum amount you can deduct is limited, depending on the year you placed your car in service. See Depreciation Limits , later.

Under MACRS, cars are classified as 5-year property. You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. This is because your car is generally treated as placed in service in the middle of the year, and you claim depreciation for one-half of both the first year and the sixth year.

For more information on the qualifications for this shorter recovery period and the percentages to use in figuring the depreciation deduction, see chapter 4 of Pub. 946.

You can use one of the following methods to depreciate your car.

The 200% declining balance method (200% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction.

The 150% declining balance method (150% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction.

The straight line method (SL) over a 5-year recovery period.

Before choosing a method, you may wish to consider the following facts.

Using the straight line method provides equal yearly deductions throughout the recovery period.

Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year.

A 2023 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1 . Using this table will make it easy for you to figure the 2023 depreciation deduction for your car. A similar chart appears in the Instructions for Form 2106.

You must use the Depreciation Tables in Pub. 946 rather than the 2023 MACRS Depreciation Chart in this publication if any one of the following three conditions applies to you.

You file your return on a fiscal year basis.

You file your return for a short tax year (less than 12 months).

During the year, all of the following conditions apply.

You placed some property in service from January through September.

You placed some property in service from October through December.

Your basis in the property you placed in service from October through December (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) was more than 40% of your total bases in all property you placed in service during the year.

If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. However, you can’t continue to use the chart if your basis in your car is adjusted because of a casualty. In that case, for the year of the adjustment and the remaining recovery period, figure the depreciation without the chart using your adjusted basis in the car at the end of the year of the adjustment and over the remaining recovery period. See Figuring the Deduction Without Using the Tables in chapter 4 of Pub. 946.

If you dispose of the car before the last year of the recovery period, you are generally allowed a half-year of depreciation in the year of disposition. This rule applies unless the mid-quarter convention applies to the vehicle being disposed of. See Depreciation deduction for the year of disposition under Disposition of a Car , later, for information on how to figure the depreciation allowed in the year of disposition.

To figure your depreciation deduction for 2023, find the percentage in the column of Table 4-1 based on the date that you first placed the car in service and the depreciation method that you are using. Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. If you prefer to figure your depreciation deduction without the help of the chart, see Pub. 946.

You bought a used truck in February 2022 to use exclusively in your landscape business. You paid $9,200 for the truck with no trade-in. You didn’t claim any section 179 deduction, the truck didn’t qualify for the special depreciation allowance, and you chose to use the 200% DB method to get the largest depreciation deduction in the early years.

You used the MACRS Depreciation Chart in 2022 to find your percentage. The unadjusted basis of the truck equals its cost because you used it exclusively for business. You multiplied the unadjusted basis of the truck, $9,200, by the percentage that applied, 20%, to figure your 2022 depreciation deduction of $1,840.

In 2023, you used the truck for personal purposes when you repaired your parent’s cabin. Your records show that the business use of the truck was 90% in 2023. You used Table 4-1 to find your percentage. Reading down the first column for the date placed in service and across to the 200% DB column, you locate your percentage, 32%. You multiply the unadjusted basis of the truck, $8,280 ($9,200 cost × 90% (0.90) business use), by 32% (0.32) to figure your 2023 depreciation deduction of $2,650.

Depreciation Limits

There are limits on the amount you can deduct for depreciation of your car, truck, or van. The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. The maximum amount you can deduct each year depends on the date you acquired the passenger automobile and the year you place the passenger automobile in service. These limits are shown in the following tables for 2023.

Maximum Depreciation Deduction for Passenger Automobiles (Including Trucks and Vans) Acquired Before September 28, 2017, and Placed in Service During 2018–2023

Maximum depreciation deduction for passenger automobiles (including trucks and vans) acquired after september 27, 2017, and placed in service during 2018 or later.

The maximum amount you can deduct each year depends on the year you place the car in service. These limits are shown in the following tables for prior years.

Maximum Depreciation Deduction for Cars Placed in Service Prior to 2018

For tax years prior to 2018, the maximum depreciation deductions for trucks and vans are generally higher than those for cars. A truck or van is a passenger automobile that is classified by the manufacturer as a truck or van and rated at 6,000 pounds gross vehicle weight or less.

Maximum Depreciation Deduction for Trucks and Vans Placed in Service Prior to 2018

The depreciation limits aren’t reduced if you use a car for less than a full year. This means that you don’t reduce the limit when you either place a car in service or dispose of a car during the year. However, the depreciation limits are reduced if you don’t use the car exclusively for business and investment purposes. See Reduction for personal use next.

The depreciation limits are reduced based on your percentage of personal use. If you use a car less than 100% in your business or work, you must determine the depreciation deduction limit by multiplying the limit amount by the percentage of business and investment use during the tax year.

The section 179 deduction is treated as a depreciation deduction. If you acquired a passenger automobile (including trucks and vans) after September 27, 2017, and placed it in service in 2023, use it only for business, and choose the section 179 deduction, the special depreciation allowance and depreciation deduction for that vehicle for 2023 is limited to $20,200.

On September 4, 2023, you bought and placed in service a used car for $15,000. You used it 80% for your business, and you choose to take a section 179 deduction for the car. The car isn’t qualified property for purposes of the special depreciation allowance.

Before applying the limit, you figure your maximum section 179 deduction to be $12,000. This is the cost of your qualifying property (up to the maximum $1,160,000 amount) multiplied by your business use ($15,000 × 80% (0.80)).

You then figure that your section 179 deduction for 2023 is limited to $9,760 (80% of $12,200). You then figure your unadjusted basis of $2,440 (($15,000 × 80% (0.80)) − $9,760) for determining your depreciation deduction. You have reached your maximum depreciation deduction for 2023. For 2024, you will use your unadjusted basis of $2,440 to figure your depreciation deduction.

If the depreciation deductions for your car are reduced under the passenger automobile limits (discussed earlier), you will have unrecovered basis in your car at the end of the recovery period. If you continue to use your car for business, you can deduct that unrecovered basis (subject to depreciation limits) after the recovery period ends.

This is your cost or other basis in the car reduced by any clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), alternative motor vehicle credit, electric vehicle credit, gas guzzler tax, and depreciation (including any special depreciation allowance , discussed earlier, unless you elect not to claim it) and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use.

For 5-year property, your recovery period is 6 calendar years. A part year's depreciation is allowed in the first calendar year, a full year's depreciation is allowed in each of the next 4 calendar years, and a part year's depreciation is allowed in the 6th calendar year.

Under MACRS, your recovery period is the same whether you use declining balance or straight line depreciation. You determine your unrecovered basis in the 7th year after you placed the car in service.

If you continue to use your car for business after the recovery period, you can claim a depreciation deduction in each succeeding tax year until you recover your basis in the car. The maximum amount you can deduct each year is determined by the date you placed the car in service and your business-use percentage. For example, no deduction is allowed for a year you use your car 100% for personal purposes.

In April 2017, you bought and placed in service a car you used exclusively in your business. The car cost $31,500. You didn’t claim a section 179 deduction or the special depreciation allowance for the car. You continued to use the car 100% in your business throughout the recovery period (2017 through 2022). For those years, you used the MACRS Depreciation Chart (200% DB method), the Maximum Depreciation Deduction for Cars Placed in Service Prior to 2018 table and Maximum Depreciation Deduction for Passenger Automobiles (Including Trucks and Vans) Acquired Before September 28, 2017, and Placed in Service During 2018–2023 table, earlier, for the applicable tax year to figure your depreciation deductions during the recovery period. Your depreciation deductions were subject to the depreciation limits, so you will have unrecovered basis at the end of the recovery period as shown in the following table.

At the end of 2022, you had an unrecovered basis in the car of $14,626 ($31,500 – $16,874). If you continued to use the car 100% for business in 2023 and later years, you can claim a depreciation deduction equal to the lesser of $1,875 or your remaining unrecovered basis.

If your business use of the car was less than 100% during any year, your depreciation deduction would be less than the maximum amount allowable for that year. However, in determining your unrecovered basis in the car, you would still reduce your original basis by the maximum amount allowable as if the business use had been 100%. For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $10,124 ($16,874 × 60% (0.60)), but you still would have to reduce your basis by $16,874 to determine your unrecovered basis.

Table 4-1. 2023 MACRS Depreciation Chart (Use To Figure Depreciation for 2023)

Car used 50% or less for business.

If you use your car 50% or less for qualified business use (defined earlier under Depreciation Deduction ) either in the year the car is placed in service or in a later year, special rules apply. The rules that apply in these two situations are explained in the following paragraphs. (For this purpose, “car” was defined earlier under Actual Car Expenses and includes certain trucks and vans.)

If you use your car 50% or less for qualified business use, the following rules apply.

You can’t take the section 179 deduction.

You can’t take the special depreciation allowance.

You must figure depreciation using the straight line method over a 5-year recovery period. You must continue to use the straight line method even if your percentage of business use increases to more than 50% in a later year.

Instead of making the computation yourself, you can use column (c) of Table 4-1 to find the percentage to use.

In May 2023, you bought and placed in service a car for $17,500. You used it 40% for your consulting business. Because you didn’t use the car more than 50% for business, you can’t take any section 179 deduction or special depreciation allowance, and you must use the straight line method over a 5-year recovery period to recover the cost of your car.

You deduct $700 in 2023. This is the lesser of:

$700 (($17,500 cost × 40% (0.40) business use) × 10% (0.10) recovery percentage (from column (c) of Table 4-1 )), or

$4,880 ($12,200 maximum limit × 40% (0.40) business use).

If you use your car more than 50% in qualified business use in the tax year it is placed in service but the business use drops to 50% or less in a later year, you can no longer use an accelerated depreciation method for that car.

For the year the business use drops to 50% or less and all later years in the recovery period, you must use the straight line depreciation method over a 5-year recovery period. In addition, for the year your business use drops to 50% or less, you must recapture (include in your gross income) any excess depreciation (discussed later). You also increase the adjusted basis of your car by the same amount.

In June 2020, you purchased a car for exclusive use in your business. You met the more-than-50%-use test for the first 3 years of the recovery period (2020 through 2022) but failed to meet it in the fourth year (2023). You determine your depreciation for 2023 using 20% (from column (c) of Table 4-1 ). You will also have to determine and include in your gross income any excess depreciation, discussed next.

You must include any excess depreciation in your gross income and add it to your car's adjusted basis for the first tax year in which you don’t use the car more than 50% in qualified business use. Use Form 4797, Sales of Business Property, to figure and report the excess depreciation in your gross income.

Excess depreciation is:

The amount of the depreciation deductions allowable for the car (including any section 179 deduction claimed and any special depreciation allowance claimed) for tax years in which you used the car more than 50% in qualified business use, minus

The amount of the depreciation deductions that would have been allowable for those years if you hadn’t used the car more than 50% in qualified business use for the year you placed it in service. This means the amount of depreciation figured using the straight line method.

In September 2019, you bought a car for $20,500 and placed it in service. You didn’t claim the section 179 deduction or the special depreciation allowance. You used the car exclusively in qualified business use for 2019, 2020, 2021, and 2022. For those years, you used the appropriate MACRS Depreciation Chart to figure depreciation deductions totaling $13,185 ($3,160 for 2019, $5,100 for 2020, $3,050 for 2021, and $1,875 for 2022) under the 200% DB method.

During 2023, you used the car 30% for business and 70% for personal purposes. Since you didn’t meet the more-than-50%-use test, you must switch from the 200% DB depreciation method to the straight line depreciation method for 2023, and include in gross income for 2023 your excess depreciation determined as follows.

In 2023, using Form 4797, you figure and report the $2,110 excess depreciation you must include in your gross income. Your adjusted basis in the car is also increased by $2,110. Your 2023 depreciation is $1,230 ($20,500 (unadjusted basis) × 30% (0.30) (business-use percentage) × 20% (0.20) (from column (c) of Table 4-1 on the line for Jan. 1–Sept. 30, 2019)). However, your depreciation deduction is limited to $563 ($1,875 x 30% (0.30) business use).

Leasing a Car

If you lease a car, truck, or van that you use in your business, you can use the standard mileage rate or actual expenses to figure your deductible expense. This section explains how to figure actual expenses for a leased car, truck, or van.

If you choose to use actual expenses, you can deduct the part of each lease payment that is for the use of the vehicle in your business. You can’t deduct any part of a lease payment that is for personal use of the vehicle, such as commuting.

You must spread any advance payments over the entire lease period. You can’t deduct any payments you make to buy a car, truck, or van even if the payments are called “lease payments.”

If you lease a car, truck, or van for 30 days or more, you may have to reduce your lease payment deduction by an “inclusion amount,” explained next.

Inclusion Amounts

If you lease a car, truck, or van that you use in your business for a lease term of 30 days or more, you may have to include an inclusion amount in your income for each tax year you lease the vehicle. To do this, you don’t add an amount to income. Instead, you reduce your deduction for your lease payment. (This reduction has an effect similar to the limit on the depreciation deduction you would have on the vehicle if you owned it.)

The inclusion amount is a percentage of part of the fair market value of the leased vehicle multiplied by the percentage of business and investment use of the vehicle for the tax year. It is prorated for the number of days of the lease term in the tax year.

The inclusion amount applies to each tax year that you lease the vehicle if the fair market value (defined next) when the lease began was more than the amounts shown in the following tables.

All vehicles are subject to a single inclusion amount threshold for passenger automobiles leased and put into service in 2023. You may have an inclusion amount for a passenger automobile if:

Passenger Automobiles (Including Trucks and Vans)

For years prior to 2018, see the inclusion tables below. You may have an inclusion amount for a passenger automobile if:

Cars (Except for Trucks and Vans)

Trucks and Vans

Fair market value is the price at which the property would change hands between a willing buyer and seller, neither having to buy or sell, and both having reasonable knowledge of all the necessary facts. Sales of similar property around the same date may be helpful in figuring the fair market value of the property.

Figure the fair market value on the first day of the lease term. If the capitalized cost of a car is specified in the lease agreement, use that amount as the fair market value.

Inclusion amounts for tax years 2018–2023 are listed in Appendices A-1 through A-6 for passenger vehicles (including trucks and vans). If the fair market value of the vehicle is $100,000 or less, use the appropriate appendix (depending on the year you first placed the vehicle in service) to determine the inclusion amount. If the fair market value is more than $100,000, see the revenue procedure(s) identified in the footnote of that year’s appendix for the inclusion amount.

For each tax year during which you lease the car for business, determine your inclusion amount by following these three steps.

Locate the appendix that applies to you. To find the inclusion amount, do the following.

Find the line that includes the fair market value of the car on the first day of the lease term.

Go across the line to the column for the tax year in which the car is used under the lease to find the dollar amount. For the last tax year of the lease, use the dollar amount for the preceding year.

Prorate the dollar amount from (1b) for the number of days of the lease term included in the tax year.

Multiply the prorated amount from (2) by the percentage of business and investment use for the tax year. This is your inclusion amount.

On January 17, 2023, you leased a car for 3 years and placed it in service for use in your business. The car had a fair market value of $62,500 on the first day of the lease term. You use the car 75% for business and 25% for personal purposes during each year of the lease. Assuming you continue to use the car 75% for business, you use Appendix A-6 to arrive at the following inclusion amounts for each year of the lease. For the last tax year of the lease, 2026, you use the amount for the preceding year.

2024 is a leap year and includes an extra calendar day, February 29, 2024.

For each year of the lease that you deduct lease payments, you must reduce your deduction by the inclusion amount figured for that year.

If you lease a car for business use and, in a later year, change it to personal use, follow the rules explained earlier under Figuring the inclusion amount . For the tax year in which you stop using the car for business, use the dollar amount for the previous tax year. Prorate the dollar amount for the number of days in the lease term that fall within the tax year.

On August 16, 2022, you leased a car with a fair market value of $64,500 for 3 years. You used the car exclusively in your data processing business. On November 6, 2023, you closed your business and went to work for a company where you aren’t required to use a car for business. Using Appendix A-5 , you figured your inclusion amount for 2022 and 2023 as shown in the following table and reduced your deductions for lease payments by those amounts.

If you lease a car for personal use and, in a later year, change it to business use, you must determine the car's fair market value on the date of conversion. Then figure the inclusion amount using the rules explained earlier under Figuring the inclusion amount . Use the fair market value on the date of conversion.

In March 2021, you leased a truck for 4 years for personal use. On June 1, 2023, you started working as a self-employed advertising consultant and started using the leased truck for business purposes. Your records show that your business use for June 1 through December 31 was 60%. To figure your inclusion amount for 2023, you obtained an appraisal from an independent car leasing company that showed the fair market value of your 2021 truck on June 1, 2023, was $62,650. Using Appendix A-6 , you figured your inclusion amount for 2023 as shown in the following table.

For information on reporting inclusion amounts, employees should see Car rentals under Completing Forms 2106 in chapter 6. Sole proprietors should see the Instructions for Schedule C (Form 1040), and farmers should see the Instructions for Schedule F (Form 1040).

Disposition of a Car

If you dispose of your car, you may have a taxable gain or a deductible loss. The portion of any gain that is due to depreciation (including any section 179 deduction, clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), and special depreciation allowance) that you claimed on the car will be treated as ordinary income. However, you may not have to recognize a gain or loss if you dispose of the car because of a casualty or theft.

This section gives some general information about dispositions of cars. For information on how to report the disposition of your car, see Pub. 544.

Like‐kind exchanges completed after December 31, 2017, are generally limited to exchanges of real property not held primarily for sale.

For a casualty or theft, a gain results when you receive insurance or other reimbursement that is more than your adjusted basis in your car. If you then spend all of the proceeds to acquire replacement property (a new car or repairs to the old car) within a specified period of time, you don’t recognize any gain. Your basis in the replacement property is its cost minus any gain that isn’t recognized. See Pub. 547 for more information.

When you trade in an old car for a new one, the transaction is considered a like-kind exchange. Generally, no gain or loss is recognized. (For exceptions, see chapter 1 of Pub. 544.) In a trade-in situation, your basis in the new property is generally your adjusted basis in the old property plus any additional amount you pay. (See Unadjusted basis , earlier.)

If you used the standard mileage rate for the business use of your car, depreciation was included in that rate. The rate of depreciation that was allowed in the standard mileage rate is shown in the Rate of Depreciation Allowed in Standard Mileage Rate table, later. You must reduce your basis in your car (but not below zero) by the amount of this depreciation.

If your basis is reduced to zero (but not below zero) through the use of the standard mileage rate, and you continue to use your car for business, no adjustment (reduction) to the standard mileage rate is necessary. Use the full standard mileage rate (65.5 cents ($0.655) per mile from January 1–December 31 for 2023) for business miles driven.

Rate of Depreciation Allowed in Standard Mileage Rate

In 2018, you bought and placed in service a car for exclusive use in your business. The car cost $25,500. From 2018 through 2023, you used the standard mileage rate to figure your car expense deduction. You drove your car 14,100 miles in 2018, 16,300 miles in 2019, 15,600 miles in 2020, 16,700 miles in 2021, 15,100 miles in 2022, and 14,900 miles in 2023. The depreciation portion of your car expense deduction is figured as follows.

If you deduct actual car expenses and you dispose of your car before the end of the recovery period (years 2 through 5), you are allowed a reduced depreciation deduction in the year of disposition.

Use the depreciation tables in Pub. 946 to figure the reduced depreciation deduction for a car disposed of in 2023.

The depreciation amounts computed using the depreciation tables in Pub. 946 for years 2 through 5 that you own your car are for a full year’s depreciation. Years 1 and 6 apply the half-year or mid-quarter convention to the computation for you. If you dispose of the vehicle in years 2 through 5 and the half-year convention applies, then the full year’s depreciation amount must be divided by 2. If the mid-quarter convention applies, multiply the full year’s depreciation by the percentage from the following table for the quarter that you disposed of the car.

If the car is subject to the Depreciation Limits , discussed earlier, reduce (but do not increase) the computed depreciation to this amount. See Sale or Other Disposition Before the Recovery Period Ends in chapter 4 of Pub. 946 for more information.

5. Recordkeeping

If you deduct travel, gift, or transportation expenses, you must be able to prove (substantiate) certain elements of expense. This chapter discusses the records you need to keep to prove these expenses.

How To Prove Expenses

Table 5-1 is a summary of records you need to prove each expense discussed in this publication. You must be able to prove the elements listed across the top portion of the chart. You prove them by having the information and receipts (where needed) for the expenses listed in the first column.

You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. You must generally prepare a written record for it to be considered adequate. This is because written evidence is more reliable than oral evidence alone. However, if you prepare a record on a computer, it is considered an adequate record.

What Are Adequate Records?

You should keep the proof you need in an account book, diary, log, statement of expense, trip sheets, or similar record. You should also keep documentary evidence that, together with your record, will support each element of an expense.

You must generally have documentary evidence such as receipts, canceled checks, or bills, to support your expenses.

Documentary evidence isn’t needed if any of the following conditions apply.

You have meals or lodging expenses while traveling away from home for which you account to your employer under an accountable plan, and you use a per diem allowance method that includes meals and/or lodging. ( Accountable plans and per diem allowances are discussed in chapter 6.)

Your expense, other than lodging, is less than $75.

You have a transportation expense for which a receipt isn’t readily available.

Documentary evidence will ordinarily be considered adequate if it shows the amount, date, place, and essential character of the expense.

For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information.

The name and location of the hotel.

The dates you stayed there.

Separate amounts for charges such as lodging, meals, and telephone calls.

A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information.

The name and location of the restaurant.

The number of people served.

The date and amount of the expense.

A canceled check, together with a bill from the payee, ordinarily establishes the cost. However, a canceled check by itself doesn’t prove a business expense without other evidence to show that it was for a business purpose.

You don‘t have to record information in your account book or other record that duplicates information shown on a receipt as long as your records and receipts complement each other in an orderly manner.

You don’t have to record amounts your employer pays directly for any ticket or other travel item. However, if you charge these items to your employer, through a credit card or otherwise, you must keep a record of the amounts you spend.

You should record the elements of an expense or of a business use at or near the time of the expense or use and support it with sufficient documentary evidence. A timely kept record has more value than a statement prepared later when there is generally a lack of accurate recall.

You don’t need to write down the elements of every expense on the day of the expense. If you maintain a log on a weekly basis that accounts for use during the week, the log is considered a timely kept record.

If you give your employer, client, or customer an expense account statement, it can also be considered a timely kept record. This is true if you copy it from your account book, diary, log, statement of expense, trip sheets, or similar record.

You must generally provide a written statement of the business purpose of an expense. However, the degree of proof varies according to the circumstances in each case. If the business purpose of an expense is clear from the surrounding circumstances, then you don’t need to give a written explanation.

If you are a sales representative who calls on customers on an established sales route, you don’t have to give a written explanation of the business purpose for traveling that route. You can satisfy the requirements by recording the length of the delivery route once, the date of each trip at or near the time of the trips, and the total miles you drove the car during the tax year. You could also establish the date of each trip with a receipt, record of delivery, or other documentary evidence.

You don’t need to put confidential information relating to an element of a deductible expense (such as the place, business purpose, or business relationship) in your account book, diary, or other record. However, you do have to record the information elsewhere at or near the time of the expense and have it available to fully prove that element of the expense.

What if I Have Incomplete Records?

If you don’t have complete records to prove an element of an expense, then you must prove the element with:

Your own written or oral statement containing specific information about the element, and

Other supporting evidence that is sufficient to establish the element.

If the element is the description of a gift, or the cost, time, place, or date of an expense, the supporting evidence must be either direct evidence or documentary evidence. Direct evidence can be written statements or the oral testimony of your guests or other witnesses setting forth detailed information about the element. Documentary evidence can be receipts, paid bills, or similar evidence.

If the element is either the business relationship of your guests or the business purpose of the amount spent, the supporting evidence can be circumstantial rather than direct. For example, the nature of your work, such as making deliveries, provides circumstantial evidence of the use of your car for business purposes. Invoices of deliveries establish when you used the car for business.

Table 5-1. How To Prove Certain Business Expenses

You can keep an adequate record for parts of a tax year and use that record to prove the amount of business or investment use for the entire year. You must demonstrate by other evidence that the periods for which an adequate record is kept are representative of the use throughout the tax year.

You use your car to visit the offices of clients, meet with suppliers and other subcontractors, and pick up and deliver items to clients. There is no other business use of the car, but you and your family use the car for personal purposes. You keep adequate records during the first week of each month that show that 75% of the use of the car is for business. Invoices and bills show that your business use continues at the same rate during the later weeks of each month. Your weekly records are representative of the use of the car each month and are sufficient evidence to support the percentage of business use for the year.

You can satisfy the substantiation requirements with other evidence if, because of the nature of the situation in which an expense is made, you can’t get a receipt. This applies if all the following are true.

You were unable to obtain evidence for an element of the expense or use that completely satisfies the requirements explained earlier under What Are Adequate Records .

You are unable to obtain evidence for an element that completely satisfies the two rules listed earlier under What if I Have Incomplete Records .

You have presented other evidence for the element that is the best proof possible under the circumstances.

If you can’t produce a receipt because of reasons beyond your control, you can prove a deduction by reconstructing your records or expenses. Reasons beyond your control include fire, flood, and other casualties.

Separating and Combining Expenses

This section explains when expenses must be kept separate and when expenses can be combined.

Each separate payment is generally considered a separate expense. For example, if you entertain a customer or client at dinner and then go to the theater, the dinner expense and the cost of the theater tickets are two separate expenses. You must record them separately in your records.

You can make one daily entry in your record for reasonable categories of expenses. Examples are taxi fares, telephone calls, or other incidental travel costs. Nonentertainment meals should be in a separate category. You can include tips for meal-related services with the costs of the meals.

Expenses of a similar nature occurring during the course of a single event are considered a single expense.

You can account for several uses of your car that can be considered part of a single use, such as a round trip or uninterrupted business use, with a single record. Minimal personal use, such as a stop for lunch on the way between two business stops, isn’t an interruption of business use.

You make deliveries at several different locations on a route that begins and ends at your employer's business premises and that includes a stop at the business premises between two deliveries. You can account for these using a single record of miles driven.

You don’t always have to record the name of each recipient of a gift. A general listing will be enough if it is evident that you aren’t trying to avoid the $25 annual limit on the amount you can deduct for gifts to any one person. For example, if you buy a large number of tickets to local high school basketball games and give one or two tickets to each of many customers, it is usually enough to record a general description of the recipients.

If you can prove the total cost of travel or entertainment but you can’t prove how much it costs for each person who participated in the event, you may have to allocate the total cost among you and your guests on a pro rata basis. To do so, you must establish the number of persons who participated in the event.

If your return is examined, you may have to provide additional information to the IRS. This information could be needed to clarify or to establish the accuracy or reliability of information contained in your records, statements, testimony, or documentary evidence before a deduction is allowed.

How Long To Keep Records and Receipts

You must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep records that support your deduction (or an item of income) for 3 years from the date you file the income tax return on which the deduction is claimed. A return filed early is considered filed on the due date. For a more complete explanation of how long to keep records, see Pub. 583, Starting a Business and Keeping Records.

You must keep records of the business use of your car for each year of the recovery period. See More-than-50%-use test in chapter 4 under Depreciation Deduction.

Employees who give their records and documentation to their employers and are reimbursed for their expenses generally don’t have to keep copies of this information. However, you may have to prove your expenses if any of the following conditions apply.

You claim deductions for expenses that are more than reimbursements.

Your expenses are reimbursed under a nonaccountable plan.

Your employer doesn’t use adequate accounting procedures to verify expense accounts.

You are related to your employer as defined under Per Diem and Car Allowances in chapter 6.

Table 5-2 and Table 5-3 are examples of worksheets that can be used for tracking business expenses.

Table 5-2. Daily Business Mileage and Expense Log

Table 5-3. Weekly Traveling Expense Record

6. How To Report

This chapter explains where and how to report the expenses discussed in this publication. It discusses reimbursements and how to treat them under accountable and nonaccountable plans. It also explains rules for independent contractors and clients, fee-basis officials, certain performing artists, Armed Forces reservists, and certain disabled employees. The chapter ends with illustrations of how to report travel, gift, and car expenses on Forms 2106.

Where To Report

This section provides general information on where to report the expenses discussed in this publication.

You must report your income and expenses on Schedule C (Form 1040) if you are a sole proprietor, or on Schedule F (Form 1040) if you are a farmer. You don’t use Form 2106.

If you claim car or truck expenses, you must provide certain information on the use of your vehicle. You provide this information on Schedule C (Form 1040) or Form 4562.

If you file Schedule C (Form 1040):

Report your travel expenses, except meals, on line 24a;

Report your deductible non-entertainment-related meals (actual cost or standard meal allowance) on line 24b;

Report your gift expenses and transportation expenses, other than car expenses, on line 27a; and

Report your car expenses on line 9. Complete Part IV of the form unless you have to file Form 4562 for depreciation or amortization.

If you file Schedule F (Form 1040), do the following.

Report your car expenses on line 10. Attach Form 4562 and provide information on the use of your car in Part V of Form 4562.

Report all other business expenses discussed in this publication on line 32. You can only include 50% of your non-entertainment-related meals on that line.

If you are both self-employed and an employee, you must keep separate records for each business activity. Report your business expenses for self-employment on Schedule C (Form 1040), or Schedule F (Form 1040), as discussed earlier. Report your business expenses for your work as an employee on Form 2106, as discussed next.

If you are an employee, you must generally complete Form 2106 to deduct your travel and transportation expenses.

You are an employee deducting expenses attributable to your job.

You weren’t reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 aren’t considered reimbursements).

If you claim car expenses, you use the standard mileage rate.

For more information on how to report your expenses on Form 2106, see Completing Form 2106 , later.

If you didn’t receive any reimbursements (or the reimbursements were all included in box 1 of your Form W-2), the only business expense you are claiming is for gifts, and the special rules discussed later don’t apply to you, don’t complete Form 2106.

If you received a Form W-2 and the “Statutory employee” box in box 13 was checked, report your income and expenses related to that income on Schedule C (Form 1040). Don’t complete Form 2106.

Statutory employees include full-time life insurance salespersons, certain agent or commission drivers, traveling salespersons, and certain homeworkers.

If your employer reimburses you for nondeductible personal expenses, such as for vacation trips, your employer must report the reimbursement as wage income in box 1 of your Form W-2. You can’t deduct personal expenses.

If you have travel or transportation expenses related to income-producing property, report your deductible expenses on the form appropriate for that activity.

For example, if you have rental real estate income and expenses, report your expenses on Schedule E (Form 1040), Supplemental Income and Loss. See Pub. 527, Residential Rental Property, for more information on the rental of real estate.

Vehicle Provided by Your Employer

If your employer provides you with a car, you may be able to deduct the actual expenses of operating that car for business purposes. The amount you can deduct depends on the amount that your employer included in your income and the business and personal miles you drove during the year. You can’t use the standard mileage rate.

Your employer can figure and report either the actual value of your personal use of the car or the value of the car as if you used it only for personal purposes (100% income inclusion). Your employer must separately state the amount if 100% of the annual lease value was included in your income. If you are unsure of the amount included on your Form W-2, ask your employer.

You may be able to deduct the value of the business use of an employer-provided car if your employer reported 100% of the value of the car in your income. On your 2023 Form W-2, the amount of the value will be included in box 1, Wages, tips, other compensation; and box 14, Other.

To claim your expenses, complete Form 2106, Part II, Sections A and C. Enter your actual expenses on line 23 of Section C and include the entire value of the employer-provided car on line 25. Complete the rest of the form.

If less than the full annual lease value of the car was included on your Form W-2, this means that your Form W-2 only includes the value of your personal use of the car. Don’t enter this value on your Form 2106 because it isn’t deductible.

If you paid any actual costs (that your employer didn’t provide or reimburse you for) to operate the car, you can deduct the business portion of those costs. Examples of costs that you may have are gas, oil, and repairs. Complete Form 2106, Part II, Sections A and C. Enter your actual costs on line 23 of Section C and leave line 25 blank. Complete the rest of the form.

Reimbursements

This section explains what to do when you receive an advance or are reimbursed for any of the employee business expenses discussed in this publication.

If you received an advance, allowance, or reimbursement for your expenses, how you report this amount and your expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan.

This section explains the two types of plans, how per diem and car allowances simplify proving the amount of your expenses, and the tax treatment of your reimbursements and expenses. It also covers rules for independent contractors.

You aren’t reimbursed or given an allowance for your expenses if you are paid a salary or commission with the understanding that you will pay your own expenses. In this situation, you have no reimbursement or allowance arrangement, and you don’t have to read this section on reimbursements. Instead, see Completing Form 2106 , later, for information on completing your tax return.

A reimbursement or other expense allowance arrangement is a system or plan that an employer uses to pay, substantiate, and recover the expenses, advances, reimbursements, and amounts charged to the employer for employee business expenses. Arrangements include per diem and car allowances.

A per diem allowance is a fixed amount of daily reimbursement your employer gives you for your lodging and M&IE when you are away from home on business. (The term “incidental expenses” is defined in chapter 1 under Standard Meal Allowance. ) A car allowance is an amount your employer gives you for the business use of your car.

Your employer should tell you what method of reimbursement is used and what records you must provide.

If you are an employer and you reimburse employee business expenses, how you treat this reimbursement on your employee's Form W-2 depends in part on whether you have an accountable plan. Reimbursements treated as paid under an accountable plan, as explained next, aren’t reported as pay. Reimbursements treated as paid under nonaccountable plans , as explained later, are reported as pay. See Pub. 15 (Circular E), Employer's Tax Guide, for information on employee pay.

Accountable Plans

To be an accountable plan, your employer's reimbursement or allowance arrangement must include all of the following rules.

Your expenses must have a business connection—that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer.

You must adequately account to your employer for these expenses within a reasonable period of time.

You must return any excess reimbursement or allowance within a reasonable period of time.

Adequate accounting and returning excess reimbursements are discussed later.

An excess reimbursement or allowance is any amount you are paid that is more than the business-related expenses that you adequately accounted for to your employer.

The definition of reasonable period of time depends on the facts and circumstances of your situation. However, regardless of the facts and circumstances of your situation, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time.

You receive an advance within 30 days of the time you have an expense.

You adequately account for your expenses within 60 days after they were paid or incurred.

You return any excess reimbursement within 120 days after the expense was paid or incurred.

You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement.

If you meet the three rules for accountable plans, your employer shouldn’t include any reimbursements in your income in box 1 of your Form W-2. If your expenses equal your reimbursements, you don’t complete Form 2106. You have no deduction since your expenses and reimbursements are equal.

Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules. All reimbursements that fail to meet all three rules for accountable plans are generally treated as having been reimbursed under a nonaccountable plan (discussed later).

If you are reimbursed under an accountable plan, but you fail to return, within a reasonable time, any amounts in excess of the substantiated amounts, the amounts paid in excess of the substantiated expenses are treated as paid under a nonaccountable plan. See Reasonable period of time , earlier, and Returning Excess Reimbursements , later.

You may be reimbursed under your employer's accountable plan for expenses related to that employer's business, some of which would be allowable as employee business expense deductions and some of which would not. The reimbursements you receive for the nondeductible expenses don’t meet rule (1) for accountable plans, and they are treated as paid under a nonaccountable plan.

Your employer's plan reimburses you for travel expenses while away from home on business and also for meals when you work late at the office, even though you aren’t away from home. The part of the arrangement that reimburses you for the nondeductible meals when you work late at the office is treated as paid under a nonaccountable plan.

One of the rules for an accountable plan is that you must adequately account to your employer for your expenses. You adequately account by giving your employer a statement of expense, an account book, a diary, or a similar record in which you entered each expense at or near the time you had it, along with documentary evidence (such as receipts) of your travel, mileage, and other employee business expenses. (See Table 5-1 in chapter 5 for details you need to enter in your record and documents you need to prove certain expenses.) A per diem or car allowance satisfies the adequate accounting requirement under certain conditions. See Per Diem and Car Allowances , later.

You must account for all amounts you received from your employer during the year as advances, reimbursements, or allowances. This includes amounts you charged to your employer by credit card or other method. You must give your employer the same type of records and supporting information that you would have to give to the IRS if the IRS questioned a deduction on your return. You must pay back the amount of any reimbursement or other expense allowance for which you don’t adequately account or that is more than the amount for which you accounted.

Per Diem and Car Allowances

If your employer reimburses you for your expenses using a per diem or a car allowance, you can generally use the allowance as proof for the amount of your expenses. A per diem or car allowance satisfies the adequate accounting requirements for the amount of your expenses only if all the following conditions apply.

Your employer reasonably limits payments of your expenses to those that are ordinary and necessary in the conduct of the trade or business.

The allowance is similar in form to and not more than the federal rate (defined later).

You prove the time (dates), place, and business purpose of your expenses to your employer (as explained in Table 5-1 ) within a reasonable period of time.

You aren’t related to your employer (as defined next). If you are related to your employer, you must be able to prove your expenses to the IRS even if you have already adequately accounted to your employer and returned any excess reimbursement.

You are related to your employer if:

Your employer is your brother or sister, half brother or half sister, spouse, ancestor, or lineal descendant;

Your employer is a corporation in which you own, directly or indirectly, more than 10% in value of the outstanding stock; or

Certain relationships (such as grantor, fiduciary, or beneficiary) exist between you, a trust, and your employer.

The federal rate can be figured using any one of the following methods.

For per diem amounts:

The regular federal per diem rate.

The high-low rate.

For car expenses:

A fixed and variable rate (FAVR).

The regular federal per diem rate is the highest amount that the federal government will pay to its employees for lodging and M&IE (or M&IE only) while they are traveling away from home in a particular area. The rates are different for different localities. Your employer should have these rates available. You can also find federal per diem rates at GSA.gov/travel/plan-book/per-diem-rates .

The standard meal allowance is the federal M&IE rate. For travel in 2023, the rate for most small localities in the United States is $59 per day. Most major cities and many other localities qualify for higher rates. You can find this information at GSA.gov/travel/plan-book/per-diem-rates .

You receive an allowance only for M&IE when your employer does one of the following.

Provides you with lodging (furnishes it in kind).

Reimburses you, based on your receipts, for the actual cost of your lodging.

Pays the hotel, motel, etc., directly for your lodging.

Doesn’t have a reasonable belief that you had (or will have) lodging expenses, such as when you stay with friends or relatives or sleep in the cab of your truck.

Figures the allowance on a basis similar to that used in figuring your compensation, such as number of hours worked or miles traveled.

This is a simplified method of figuring the federal per diem rate for travel within the continental United States. It eliminates the need to keep a current list of the per diem rates for each city.

Under the high-low method, the per diem amount for travel during January through September of 2023 is $297 (which includes $74 for M&IE) for certain high-cost locations. All other areas have a per diem amount of $204 (which includes $64 for M&IE). For more information, see Notice 2022-44, which can be found at IRS.gov/irb/2022-41_IRB#NOT-2022-44 .

Effective October 1, 2023, the per diem rate for certain high-cost locations increased to $309 (which includes $74 for M&IE). The rate for all other locations increased to $214 (which includes $64 for M&IE). For more information, see Notice 2023-68, which can be found at IRS.gov/irb/2023-41_IRB#NOT-2023-68 , and Revenue Procedure 2019-48 at IRS.gov/irb/2019-51_IRB#REV-PROC-2019-48 .

The standard meal allowance is for a full 24-hour day of travel. If you travel for part of a day, such as on the days you depart and return, you must prorate the full-day M&IE rate. This rule also applies if your employer uses the regular federal per diem rate or the high-low rate.

You can use either of the following methods to figure the federal M&IE for that day.

For the day you depart, add 3 / 4 of the standard meal allowance amount for that day.

For the day you return, add 3 / 4 of the standard meal allowance amount for the preceding day.

Method 2: Prorate the standard meal allowance using any method you consistently apply in accordance with reasonable business practice. For example, an employer can treat 2 full days of per diem (that includes M&IE) paid for travel away from home from 9 a.m. of one day to 5 p.m. of the next day as being no more than the federal rate. This is true even though a federal employee would be limited to a reimbursement of M&IE for only 1½ days of the federal M&IE rate.

This is a set rate per mile that you can use to figure your deductible car expenses. For 2023, the standard mileage rate for the cost of operating your car for business use is 65.5 cents ($0.655) per mile.

This is an allowance your employer may use to reimburse your car expenses. Under this method, your employer pays an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your variable operating costs (such as gas, oil, etc.) plus a flat amount to cover your fixed costs (such as depreciation (or lease payments), insurance, etc.). If your employer chooses to use this method, your employer will request the necessary records from you.

If your reimbursement is in the form of an allowance received under an accountable plan, the following facts affect your reporting.

Whether the allowance or your actual expenses were more than the federal rate.

If your allowance is less than or equal to the federal rate, the allowance won’t be included in box 1 of your Form W-2. You don’t need to report the related expenses or the allowance on your return if your expenses are equal to or less than the allowance.

However, if your actual expenses are more than your allowance, you can complete Form 2106. If you are using actual expenses, you must be able to prove to the IRS the total amount of your expenses and reimbursements for the entire year. If you are using the standard meal allowance or the standard mileage rate, you don’t have to prove that amount.

In April, a member of a reserve component of the Armed Forces takes a 2-day business trip to Denver. The federal rate for Denver is $278 ($199 lodging + $79 M&IE) per day. As required by their employer's accountable plan, they account for the time (dates), place, and business purpose of the trip. Their employer reimburses them $278 a day ($556 total) for living expenses. Their living expenses in Denver aren’t more than $278 a day.

Their employer doesn’t include any of the reimbursement on their Form W-2 and they don’t deduct the expenses on their return.

In June, a fee-basis local government official takes a 2-day business trip to Boston. Their employer uses the high-low method to reimburse employees. Because Boston is a high-cost area, they are given an advance of $297 (which includes $74 for M&IE) a day ($594 total) for their lodging and M&IE. Their actual expenses totaled $700.

Since their $700 of expenses are more than their $594 advance, they include the excess expenses when they itemize their deductions. They complete Form 2106 (showing all of their expenses and reimbursements). They must also allocate their reimbursement between their meals and other expenses as discussed later under Completing Form 2106 .

A fee-basis state government official drives 10,000 miles during 2023 for business. Under their employer's accountable plan, they account for the time (dates), place, and business purpose of each trip. Their employer pays them a mileage allowance of 40 cents ($0.40) a mile.

Because their $6,550 expense figured under the standard mileage rate (10,000 miles x 65.5 cents ($0.655) per mile) is more than their $4,000 reimbursement (10,000 miles × 40 cents ($0.40)), they itemize their deductions to claim the excess expense. They complete Form 2106 (showing all their expenses and reimbursements) and enter $2,550 ($6,550 − $4,000) as an itemized deduction.

If your allowance is more than the federal rate, your employer must include the allowance amount up to the federal rate under code L in box 12 of your Form W-2. This amount isn’t taxable. However, the excess allowance will be included in box 1 of your Form W-2. You must report this part of your allowance as if it were wage income.

If your actual expenses are less than or equal to the federal rate, you don’t complete Form 2106 or claim any of your expenses on your return.

However, if your actual expenses are more than the federal rate, you can complete Form 2106 and deduct those excess expenses. You must report on Form 2106 your reimbursements up to the federal rate (as shown under code L in box 12 of your Form W-2) and all your expenses. You should be able to prove these amounts to the IRS.

Sasha, a performing artist, lives and works in Austin. In July, the employer sent Sasha to Albuquerque for 4 days on business. The employer paid the hotel directly for Sasha’s lodging and reimbursed $80 a day ($320 total) for M&IE. Sasha’s actual meal expenses weren’t more than the federal rate for Albuquerque, which is $69 per day.

The employer included the $44 that was more than the federal rate (($80 − $69) × 4) in box 1 of Sasha’s Form W-2. The employer shows $276 ($69 a day × 4) under code L in box 12 of Form W-2. This amount isn’t included in income. Sasha doesn’t have to complete Form 2106; however, Sasha must include the $44 in gross income as wages (by reporting the total amount shown in box 1 of their Form W-2).

Another performing artist, Ari, also lives in Austin and works for the same employer as in Example 1 . In May, the employer sent Ari to San Diego for 4 days and paid the hotel directly for the hotel bill. The employer reimbursed Ari $75 a day for M&IE. The federal rate for San Diego is $74 a day.

Ari can prove that actual non-entertainment-related meal expenses totaled $380. The employer's accountable plan won’t pay more than $75 a day for travel to San Diego, so Ari doesn’t give the employer the records that prove that the amount actually spent was $380. However, Ari does account for the time (dates), place, and business purpose of the trip. This is Ari’s only business trip this year.

Ari was reimbursed $300 ($75 × 4 days), which is $4 more than the federal rate of $296 ($74 × 4 days). The employer includes the $4 as income on the employee’s Form W-2 in box 1. The employer also enters $296 under code L in box 12 of the employee’s Form W-2.

Ari completes Form 2106 to figure deductible expenses and enters the total of actual expenses for the year ($380) on Form 2106. Ari also enters the reimbursements that weren’t included in income ($296). Ari’s total deductible meals and beverages expense, before the 50% limit, is $96. Ari will include $48 as an itemized deduction.

Palmer, a fee-basis state government official, drives 10,000 miles during 2023 for business. Under the employer's accountable plan, Palmer gets reimbursed 70 cents ($0.70) a mile, which is more than the standard mileage rate. The total reimbursement is $7,000.

The employer must include the reimbursement amount up to the standard mileage rate, $6,550 (10,000 miles x 65.5 cents ($0.655) per mile), under code L in box 12 of the employee’s Form W-2. That amount isn’t taxable. The employer must also include $450 ($7,000 − $6,550) in box 1 of the employee's Form W-2. This is the reimbursement that is more than the standard mileage rate.

If the expenses are equal to or less than the standard mileage rate, Palmer wouldn’t complete Form 2106. If the expenses are more than the standard mileage rate, Palmer would complete Form 2106 and report total expenses and reimbursement (shown under code L in box 12 of their Form W-2). Palmer would then claim the excess expenses as an itemized deduction.

Returning Excess Reimbursements

Under an accountable plan, you are required to return any excess reimbursement or other expense allowances for your business expenses to the person paying the reimbursement or allowance. Excess reimbursement means any amount for which you didn’t adequately account within a reasonable period of time. For example, if you received a travel advance and you didn’t spend all the money on business-related expenses or you don’t have proof of all your expenses, you have an excess reimbursement.

Adequate accounting and reasonable period of time were discussed earlier in this chapter.

You receive a travel advance if your employer provides you with an expense allowance before you actually have the expense, and the allowance is reasonably expected to be no more than your expense. Under an accountable plan, you are required to adequately account to your employer for this advance and to return any excess within a reasonable period of time.

If you don’t adequately account for or don't return any excess advance within a reasonable period of time, the amount you don’t account for or return will be treated as having been paid under a nonaccountable plan (discussed later).

If you don’t prove that you actually traveled on each day for which you received a per diem or car allowance (proving the elements described in Table 5-1 ), you must return this unproven amount of the travel advance within a reasonable period of time. If you don’t do this, the unproven amount will be considered paid under a nonaccountable plan (discussed later).

If your employer's accountable plan pays you an allowance that is higher than the federal rate, you don’t have to return the difference between the two rates for the period you can prove business-related travel expenses. However, the difference will be reported as wages on your Form W-2. This excess amount is considered paid under a nonaccountable plan (discussed later).

Your employer sends you on a 5-day business trip to Phoenix in March 2023 and gives you a $400 ($80 × 5 days) advance to cover your M&IE. The federal per diem for M&IE for Phoenix is $69. Your trip lasts only 3 days. Under your employer's accountable plan, you must return the $160 ($80 × 2 days) advance for the 2 days you didn’t travel. For the 3 days you did travel, you don’t have to return the $33 difference between the allowance you received and the federal rate for Phoenix (($80 − $69) × 3 days). However, the $33 will be reported on your Form W-2 as wages.

Nonaccountable Plans

A nonaccountable plan is a reimbursement or expense allowance arrangement that doesn’t meet one or more of the three rules listed earlier under Accountable Plans .

In addition, even if your employer has an accountable plan, the following payments will be treated as being paid under a nonaccountable plan.

Excess reimbursements you fail to return to your employer.

Reimbursement of nondeductible expenses related to your employer's business. See Reimbursement of nondeductible expenses , earlier, under Accountable Plans.

If you aren’t sure if the reimbursement or expense allowance arrangement is an accountable or nonaccountable plan, ask your employer.

Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay. Your employer will report the total in box 1 of your Form W-2.

You must complete Form 2106 and itemize your deductions to deduct your expenses for travel, transportation, or non-entertainment-related meals. Your meal and entertainment expenses will be subject to the 50% Limit discussed in chapter 2.

Your employer gives you $1,000 a month ($12,000 total for the year) for your business expenses. You don’t have to provide any proof of your expenses to your employer, and you can keep any funds that you don’t spend.

You are a performing artist and are being reimbursed under a nonaccountable plan. Your employer will include the $12,000 on your Form W-2 as if it were wages. If you want to deduct your business expenses, you must complete Form 2106 and itemize your deductions.

You are paid $2,000 a month by your employer. On days that you travel away from home on business, your employer designates $50 a day of your salary as paid to reimburse your travel expenses. Because your employer would pay your monthly salary whether or not you were traveling away from home, the arrangement is a nonaccountable plan. No part of the $50 a day designated by your employer is treated as paid under an accountable plan.

Rules for Independent Contractors and Clients

This section provides rules for independent contractors who incur expenses on behalf of a client or customer. The rules cover the reporting and substantiation of certain expenses discussed in this publication, and they affect both independent contractors and their clients or customers.

You are considered an independent contractor if you are self-employed and you perform services for a customer or client.

Accounting to Your Client

If you received a reimbursement or an allowance for travel, or gift expenses that you incurred on behalf of a client, you should provide an adequate accounting of these expenses to your client. If you don’t account to your client for these expenses, you must include any reimbursements or allowances in income. You must keep adequate records of these expenses whether or not you account to your client for these expenses.

If you don’t separately account for and seek reimbursement for meal and entertainment expenses in connection with providing services for a client, you are subject to the 50% limit on those expenses. See 50% Limit in chapter 2.

As a self-employed person, you adequately account by reporting your actual expenses. You should follow the recordkeeping rules in chapter 5 .

For information on how to report expenses on your tax return, see Self-employed at the beginning of this chapter.

Required Records for Clients or Customers

If you are a client or customer, you generally don’t have to keep records to prove the reimbursements or allowances you give, in the course of your business, to an independent contractor for travel or gift expenses incurred on your behalf. However, you must keep records if:

You reimburse the contractor for entertainment expenses incurred on your behalf, and

The contractor adequately accounts to you for these expenses.

If the contractor adequately accounts to you for non-entertainment-related meal expenses, you (the client or customer) must keep records documenting each element of the expense, as explained in chapter 5 . Use your records as proof for a deduction on your tax return. If non-entertainment-related meal expenses are accounted for separately, you are subject to the 50% limit on meals. If the contractor adequately accounts to you for reimbursed amounts, you don’t have to report the amounts on an information return.

If the contractor doesn’t adequately account to you for allowances or reimbursements of non-entertainment-related meal expenses, you don’t have to keep records of these items. You aren’t subject to the 50% limit on meals in this case. You can deduct the reimbursements or allowances as payment for services if they are ordinary and necessary business expenses. However, you must file Form 1099-MISC to report amounts paid to the independent contractor if the total of the reimbursements and any other fees is $600 or more during the calendar year.

How To Use Per Diem Rate Tables

This section contains information about the per diem rate substantiation methods available and the choice of rates you must make for the last 3 months of the year.

The Two Substantiation Methods

IRS Notices list the localities that are treated under the high-low substantiation method as high-cost localities for all or part of the year. Notice 2022-44, available at IRS.gov/irb/2022-41_IRB#NOT-2022-44 , lists the high-cost localities that are eligible for $297 (which includes $74 for meals and incidental expenses (M&IE)) per diem, effective October 1, 2022. For travel on or after October 1, 2022, all other localities within the continental United States (CONUS) are eligible for $204 (which includes $64 for M&IE) per diem under the high-low method.

Notice 2023-68, available at IRS.gov/irb/2023-41_IRB#NOT-2023-68 , lists the high-cost localities that are eligible for $309 (which includes $74 for M&IE) per diem, effective October 1, 2023. For travel on or after October 1, 2023, the per diem for all other localities increased to $214 (which includes $64 for M&IE).

Regular federal per diem rates are published by the General Services Administration (GSA). Both tables include the separate rate for M&IE for each locality. The rates listed for FY2023 at GSA.gov/travel/plan-book/per-diem-rates are effective October 1, 2022, and those listed for FY2024 are effective October 1, 2023. The standard rate for all locations within CONUS not specifically listed for FY2023 is $157 ($98 for lodging and $59 for M&IE). For FY2024, this rate increases to $166 ($107 for lodging and $59 for M&IE).

Transition Rules

The transition period covers the last 3 months of the calendar year, from the time that new rates are effective (generally, October 1) through December 31. During this period, you may generally change to the new rates or finish out the year with the rates you had been using.

If you use the high-low substantiation method, when new rates become effective (generally, October 1), you can either continue with the rates you used for the first part of the year or change to the new rates. However, you must continue using the high-low method for the rest of the calendar year (through December 31). If you are an employer, you must use the same rates for all employees reimbursed under the high-low method during that calendar year.

The new rates and localities for the high-low method are included each year in a notice that is generally published in mid to late September. You can find the notice in the weekly Internal Revenue Bulletin (IRB) at IRS.gov/IRB , or visit IRS.gov and enter “Special Per Diem Rates” in the search box.

New CONUS per diem rates become effective on October 1 of each year and remain in effect through September 30 of the following year. Employees being reimbursed under the per diem rate method during the first 9 months of a year (January 1–September 30) must continue under the same method through the end of that calendar year (December 31). However, for travel by these employees from October 1 through December 31, you can choose to continue using the same per diem rates or use the new rates.

The new federal CONUS per diem rates are published each year, generally early in September. Go to GSA.gov/travel/plan-book/per-diem-rates .

Completing Form 2106

For tax years beginning after 2017, the Form 2106 will be used by Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses. Due to the suspension of miscellaneous itemized deductions subject to the 2% floor under section 67(a), employees who do not fit into one of the listed categories may not use Form 2106.

This section briefly describes how employees complete Forms 2106. Table 6-1 explains what the employer reports on Form W-2 and what the employee reports on Form 2106. The instructions for the forms have more information on completing them.

Table 6-1. Reporting Travel, Nonentertainment Meal, Gift, and Car Expenses and Reimbursements

If you used a car to perform your job as an employee, you may be able to deduct certain car expenses. These are generally figured on Form 2106, Part II, and then claimed on Form 2106, Part I, line 1, column A.

If you claim any deduction for the business use of a car, you must answer certain questions and provide information about the use of the car. The information relates to the following items.

Date placed in service.

Mileage (total, business, commuting, and other personal mileage).

Percentage of business use.

After-work use.

Use of other vehicles.

Whether you have evidence to support the deduction.

Whether or not the evidence is written.

If you claim a deduction based on the standard mileage rate instead of your actual expenses, you must complete Form 2106, Part II, Section B. The amount on line 22 (Section B) is carried to Form 2106, Part I, line 1. In addition, on Part I, line 2, you can deduct parking fees and tolls that apply to the business use of the car. See Standard Mileage Rate in chapter 4 for information on using this rate.

If you claim a deduction based on actual car expenses, you must complete Form 2106, Part II, Section C. In addition, unless you lease your car, you must complete Section D to show your depreciation deduction and any section 179 deduction you claim.

If you are still using a car that is fully depreciated, continue to complete Section C. Since you have no depreciation deduction, enter zero on line 28. In this case, don’t complete Section D.

If you claim car rental expenses on Form 2106, line 24a, you may have to reduce that expense by an inclusion amount , as described in chapter 4. If so, you can show your car expenses and any inclusion amount as follows.

Figure the inclusion amount without taking into account your business-use percentage for the tax year.

Report the inclusion amount from (1) on Form 2106, Part II, line 24b.

Report on line 24c the net amount of car rental expenses (total car rental expenses minus the inclusion amount figured in (1)).

Show your transportation expenses that didn’t involve overnight travel on Form 2106, line 2, column A. Also include on this line business expenses you have for parking fees and tolls. Don’t include expenses of operating your car or expenses of commuting between your home and work.

Show your other employee business expenses on Form 2106, lines 3 and 4, column A. Don’t include expenses for nonentertainment meals on those lines. Line 4 is for expenses such as gifts, educational expenses (tuition and books), office-in-the-home expenses, and trade and professional publications.

Show the full amount of your expenses for nonentertainment business-related meals on Form 2106, line 5, column B. Include meals while away from your tax home overnight and other business meals. Enter 50% of the line 8, column B, meal expenses on line 9, column B.

If you are subject to the Department of Transportation's “hours of service” limits (as explained earlier under Individuals subject to hours of service limits in chapter 2), use 80% instead of 50% for meals while away from your tax home.

Enter on Form 2106, line 7, the amounts your employer (or third party) reimbursed you that weren’t reported to you in box 1 of your Form W-2. This includes any amount reported under code L in box 12 of Form W-2.

If you were reimbursed under an accountable plan and want to deduct excess expenses that weren’t reimbursed, you may have to allocate your reimbursement. This is necessary when your employer pays your reimbursement in the following manner.

Pays you a single amount that covers non-entertainment-related meals and/or entertainment, as well as other business expenses.

Doesn’t clearly identify how much is for deductible non-entertainment-related meals.

Your employer paid you an expense allowance of $12,000 this year under an accountable plan. The $12,000 payment consisted of $5,000 for airfare and $7,000 for non-entertainment-related meals, and car expenses. Your employer didn’t clearly show how much of the $7,000 was for the cost of deductible non-entertainment-related meals. You actually spent $14,000 during the year ($5,500 for airfare, $4,500 for non-entertainment-related meals, and $4,000 for car expenses).

Since the airfare allowance was clearly identified, you know that $5,000 of the payment goes in column A, line 7, of Form 2106. To allocate the remaining $7,000, you use the worksheet from the Instructions for Form 2106. Your completed worksheet follows.

Reimbursement Allocation Worksheet (Keep for your records.)

If you are a government official paid on a fee basis, a performing artist, an Armed Forces reservist, or a disabled employee with impairment-related work expenses, see Special Rules , later.

Your employee business expenses may be subject to either of the limits described next. They are figured in the following order on the specified form.

Certain non-entertainment-related meal expenses are subject to a 50% limit. Generally, entertainment expenses are nondeductible if paid or incurred after December 2017. If you are an employee, you figure this limit on line 9 of Form 2106. (See 50% Limit in chapter 2.)

Limitations on itemized deductions are suspended for tax years beginning after 2017 and before tax year January 2026, per section 68(g).

Special Rules

This section discusses special rules that apply only to Armed Forces reservists, government officials who are paid on a fee basis, performing artists, and disabled employees with impairment-related work expenses. For tax years beginning after 2017, they are the only taxpayers who can use Form 2106.

Armed Forces Reservists Traveling More Than 100 Miles From Home

If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging and M&IE) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. See Per Diem and Car Allowances , earlier, for more information.

You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve; the Army National Guard of the United States; the Air National Guard of the United States; or the Reserve Corps of the Public Health Service.

If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106. Then include your expenses for reserve travel over 100 miles from home, up to the federal rate, from Form 2106, line 10, in the total on Schedule 1 (Form 1040), line 12.

You can’t deduct expenses of travel that doesn’t take you more than 100 miles from home as an adjustment to gross income.

Certain fee-basis officials can claim their employee business expenses on Form 2106.

Fee-basis officials are persons who are employed by a state or local government and who are paid in whole or in part on a fee basis. They can deduct their business expenses in performing services in that job as an adjustment to gross income rather than as a miscellaneous itemized deduction.

If you are a fee-basis official, include your employee business expenses from Form 2106, line 10, in the total on Schedule 1 (Form 1040), line 12.

Expenses of Certain Performing Artists

If you are a performing artist, you may qualify to deduct your employee business expenses as an adjustment to gross income. To qualify, you must meet all of the following requirements.

During the tax year, you perform services in the performing arts as an employee for at least two employers.

You receive at least $200 each from any two of these employers.

Your related performing-arts business expenses are more than 10% of your gross income from the performance of those services.

Your adjusted gross income isn’t more than $16,000 before deducting these business expenses.

If you are married, you must file a joint return unless you lived apart from your spouse at all times during the tax year. If you file a joint return, you must figure requirements (1), (2), and (3) separately for both you and your spouse. However, requirement (4) applies to your and your spouse's combined adjusted gross income.

If you meet all of the above requirements, you should first complete Form 2106. Then you include your performing-arts-related expenses from Form 2106, line 10, in the total on Schedule 1 (Form 1040), line 12.

If you don’t meet all of the above requirements, you don’t qualify to deduct your expenses as an adjustment to gross income.

If you are an employee with a physical or mental disability, your impairment-related work expenses aren’t subject to the 2%-of-adjusted-gross-income limit that applies to most other employee business expenses. After you complete Form 2106, enter your impairment-related work expenses from Form 2106, line 10, on Schedule A (Form 1040), line 16, and identify the type and amount of this expense on the line next to line 16.

Impairment-related work expenses are your allowable expenses for attendant care at your workplace and other expenses in connection with your workplace that are necessary for you to be able to work.

You are disabled if you have:

A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed; or

A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working.

You can deduct impairment-related expenses as business expenses if they are:

Necessary for you to do your work satisfactorily;

For goods and services not required or used, other than incidentally, in your personal activities; and

Not specifically covered under other income tax laws.

You are blind. You must use a reader to do your work. You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. The reader's services are only for your work. You can deduct your expenses for the reader as business expenses.

You are deaf. You must use a sign language interpreter during meetings while you are at work. The interpreter's services are used only for your work. You can deduct your expenses for the interpreter as business expenses.

How To Get Tax Help

If you have questions about a tax issue; need help preparing your tax return; or want to download free publications, forms, or instructions, go to IRS.gov to find resources that can help you right away.

After receiving all your wage and earnings statements (Forms W-2, W-2G, 1099-R, 1099-MISC, 1099-NEC, etc.); unemployment compensation statements (by mail or in a digital format) or other government payment statements (Form 1099-G); and interest, dividend, and retirement statements from banks and investment firms (Forms 1099), you have several options to choose from to prepare and file your tax return. You can prepare the tax return yourself, see if you qualify for free tax preparation, or hire a tax professional to prepare your return.

Your options for preparing and filing your return online or in your local community, if you qualify, include the following.

Free File. This program lets you prepare and file your federal individual income tax return for free using software or Free File Fillable Forms. However, state tax preparation may not be available through Free File. Go to IRS.gov/FreeFile to see if you qualify for free online federal tax preparation, e-filing, and direct deposit or payment options.

VITA. The Volunteer Income Tax Assistance (VITA) program offers free tax help to people with low-to-moderate incomes, persons with disabilities, and limited-English-speaking taxpayers who need help preparing their own tax returns. Go to IRS.gov/VITA , download the free IRS2Go app, or call 800-906-9887 for information on free tax return preparation.

TCE. The Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 years of age and older. TCE volunteers specialize in answering questions about pensions and retirement-related issues unique to seniors. Go to IRS.gov/TCE or download the free IRS2Go app for information on free tax return preparation.

MilTax. Members of the U.S. Armed Forces and qualified veterans may use MilTax, a free tax service offered by the Department of Defense through Military OneSource. For more information, go to MilitaryOneSource ( MilitaryOneSource.mil/MilTax ).

Also, the IRS offers Free Fillable Forms, which can be completed online and then e-filed regardless of income.

Go to IRS.gov/Tools for the following.

The Earned Income Tax Credit Assistant ( IRS.gov/EITCAssistant ) determines if you’re eligible for the earned income credit (EIC).

The Online EIN Application ( IRS.gov/EIN ) helps you get an employer identification number (EIN) at no cost.

The Tax Withholding Estimator ( IRS.gov/W4App ) makes it easier for you to estimate the federal income tax you want your employer to withhold from your paycheck. This is tax withholding. See how your withholding affects your refund, take-home pay, or tax due.

The First Time Homebuyer Credit Account Look-up ( IRS.gov/HomeBuyer ) tool provides information on your repayments and account balance.

The Sales Tax Deduction Calculator ( IRS.gov/SalesTax ) figures the amount you can claim if you itemize deductions on Schedule A (Form 1040).

Go to IRS.gov/Help : A variety of tools to help you get answers to some of the most common tax questions.

Go to IRS.gov/ITA : The Interactive Tax Assistant, a tool that will ask you questions and, based on your input, provide answers on a number of tax topics.

Go to IRS.gov/Forms : Find forms, instructions, and publications. You will find details on the most recent tax changes and interactive links to help you find answers to your questions.

You may also be able to access tax information in your e-filing software.

There are various types of tax return preparers, including enrolled agents, certified public accountants (CPAs), accountants, and many others who don’t have professional credentials. If you choose to have someone prepare your tax return, choose that preparer wisely. A paid tax preparer is:

Primarily responsible for the overall substantive accuracy of your return,

Required to sign the return, and

Required to include their preparer tax identification number (PTIN).

The Social Security Administration (SSA) offers online service at SSA.gov/employer for fast, free, and secure W-2 filing options to CPAs, accountants, enrolled agents, and individuals who process Form W-2, Wage and Tax Statement, and Form W-2c, Corrected Wage and Tax Statement.

Go to IRS.gov/SocialMedia to see the various social media tools the IRS uses to share the latest information on tax changes, scam alerts, initiatives, products, and services. At the IRS, privacy and security are our highest priority. We use these tools to share public information with you. Don’t post your social security number (SSN) or other confidential information on social media sites. Always protect your identity when using any social networking site.

The following IRS YouTube channels provide short, informative videos on various tax-related topics in English, Spanish, and ASL.

Youtube.com/irsvideos .

Youtube.com/irsvideosmultilingua .

Youtube.com/irsvideosASL .

The IRS Video portal ( IRSVideos.gov ) contains video and audio presentations for individuals, small businesses, and tax professionals.

You can find information on IRS.gov/MyLanguage if English isn’t your native language.

The IRS is committed to serving taxpayers with limited-English proficiency (LEP) by offering OPI services. The OPI Service is a federally funded program and is available at Taxpayer Assistance Centers (TACs), most IRS offices, and every VITA/TCE tax return site. The OPI Service is accessible in more than 350 languages.

Taxpayers who need information about accessibility services can call 833-690-0598. The Accessibility Helpline can answer questions related to current and future accessibility products and services available in alternative media formats (for example, braille, large print, audio, etc.). The Accessibility Helpline does not have access to your IRS account. For help with tax law, refunds, or account-related issues, go to IRS.gov/LetUsHelp .

Form 9000, Alternative Media Preference, or Form 9000(SP) allows you to elect to receive certain types of written correspondence in the following formats.

Standard Print.

Large Print.

Audio (MP3).

Plain Text File (TXT).

Braille Ready File (BRF).

Go to IRS.gov/DisasterRelief to review the available disaster tax relief.

Go to IRS.gov/Forms to view, download, or print all the forms, instructions, and publications you may need. Or, you can go to IRS.gov/OrderForms to place an order.

Download and view most tax publications and instructions (including the Instructions for Form 1040) on mobile devices as eBooks at IRS.gov/eBooks .

IRS eBooks have been tested using Apple's iBooks for iPad. Our eBooks haven’t been tested on other dedicated eBook readers, and eBook functionality may not operate as intended.

Go to IRS.gov/Account to securely access information about your federal tax account.

View the amount you owe and a breakdown by tax year.

See payment plan details or apply for a new payment plan.

Make a payment or view 5 years of payment history and any pending or scheduled payments.

Access your tax records, including key data from your most recent tax return, and transcripts.

View digital copies of select notices from the IRS.

Approve or reject authorization requests from tax professionals.

View your address on file or manage your communication preferences.

With an online account, you can access a variety of information to help you during the filing season. You can get a transcript, review your most recently filed tax return, and get your adjusted gross income. Create or access your online account at IRS.gov/Account .

This tool lets your tax professional submit an authorization request to access your individual taxpayer IRS online account. For more information, go to IRS.gov/TaxProAccount .

The safest and easiest way to receive a tax refund is to e-file and choose direct deposit, which securely and electronically transfers your refund directly into your financial account. Direct deposit also avoids the possibility that your check could be lost, stolen, destroyed, or returned undeliverable to the IRS. Eight in 10 taxpayers use direct deposit to receive their refunds. If you don’t have a bank account, go to IRS.gov/DirectDeposit for more information on where to find a bank or credit union that can open an account online.

Tax-related identity theft happens when someone steals your personal information to commit tax fraud. Your taxes can be affected if your SSN is used to file a fraudulent return or to claim a refund or credit.

The IRS doesn’t initiate contact with taxpayers by email, text messages (including shortened links), telephone calls, or social media channels to request or verify personal or financial information. This includes requests for personal identification numbers (PINs), passwords, or similar information for credit cards, banks, or other financial accounts.

Go to IRS.gov/IdentityTheft , the IRS Identity Theft Central webpage, for information on identity theft and data security protection for taxpayers, tax professionals, and businesses. If your SSN has been lost or stolen or you suspect you’re a victim of tax-related identity theft, you can learn what steps you should take.

Get an Identity Protection PIN (IP PIN). IP PINs are six-digit numbers assigned to taxpayers to help prevent the misuse of their SSNs on fraudulent federal income tax returns. When you have an IP PIN, it prevents someone else from filing a tax return with your SSN. To learn more, go to IRS.gov/IPPIN .

Go to IRS.gov/Refunds .

Download the official IRS2Go app to your mobile device to check your refund status.

Call the automated refund hotline at 800-829-1954.

Payments of U.S. tax must be remitted to the IRS in U.S. dollars. Digital assets are not accepted. Go to IRS.gov/Payments for information on how to make a payment using any of the following options.

IRS Direct Pay : Pay your individual tax bill or estimated tax payment directly from your checking or savings account at no cost to you.

Debit Card, Credit Card, or Digital Wallet : Choose an approved payment processor to pay online or by phone.

Electronic Funds Withdrawal : Schedule a payment when filing your federal taxes using tax return preparation software or through a tax professional.

Electronic Federal Tax Payment System : Best option for businesses. Enrollment is required.

Check or Money Order : Mail your payment to the address listed on the notice or instructions.

Cash : You may be able to pay your taxes with cash at a participating retail store.

Same-Day Wire : You may be able to do same-day wire from your financial institution. Contact your financial institution for availability, cost, and time frames.

Note. The IRS uses the latest encryption technology to ensure that the electronic payments you make online, by phone, or from a mobile device using the IRS2Go app are safe and secure. Paying electronically is quick, easy, and faster than mailing in a check or money order.

Go to IRS.gov/Payments for more information about your options.

Apply for an online payment agreement ( IRS.gov/OPA ) to meet your tax obligation in monthly installments if you can’t pay your taxes in full today. Once you complete the online process, you will receive immediate notification of whether your agreement has been approved.

Use the Offer in Compromise Pre-Qualifier to see if you can settle your tax debt for less than the full amount you owe. For more information on the Offer in Compromise program, go to IRS.gov/OIC .

Go to IRS.gov/Form1040X for information and updates.

Go to IRS.gov/WMAR to track the status of Form 1040-X amended returns.

Go to IRS.gov/Notices to find additional information about responding to an IRS notice or letter.

You can now upload responses to all notices and letters using the Document Upload Tool. For notices that require additional action, taxpayers will be redirected appropriately on IRS.gov to take further action. To learn more about the tool, go to IRS.gov/Upload .

You can use Schedule LEP (Form 1040), Request for Change in Language Preference, to state a preference to receive notices, letters, or other written communications from the IRS in an alternative language. You may not immediately receive written communications in the requested language. The IRS’s commitment to LEP taxpayers is part of a multi-year timeline that began providing translations in 2023. You will continue to receive communications, including notices and letters, in English until they are translated to your preferred language.

Keep in mind, many questions can be answered on IRS.gov without visiting a TAC. Go to IRS.gov/LetUsHelp for the topics people ask about most. If you still need help, TACs provide tax help when a tax issue can’t be handled online or by phone. All TACs now provide service by appointment, so you’ll know in advance that you can get the service you need without long wait times. Before you visit, go to IRS.gov/TACLocator to find the nearest TAC and to check hours, available services, and appointment options. Or, on the IRS2Go app, under the Stay Connected tab, choose the Contact Us option and click on “Local Offices.”

The Taxpayer Advocate Service (TAS) Is Here To Help You

TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. TAS strives to ensure that every taxpayer is treated fairly and that you know and understand your rights under the Taxpayer Bill of Rights .

The Taxpayer Bill of Rights describes 10 basic rights that all taxpayers have when dealing with the IRS. Go to TaxpayerAdvocate.IRS.gov to help you understand what these rights mean to you and how they apply. These are your rights. Know them. Use them.

TAS can help you resolve problems that you can’t resolve with the IRS. And their service is free. If you qualify for their assistance, you will be assigned to one advocate who will work with you throughout the process and will do everything possible to resolve your issue. TAS can help you if:

Your problem is causing financial difficulty for you, your family, or your business;

You face (or your business is facing) an immediate threat of adverse action; or

You’ve tried repeatedly to contact the IRS but no one has responded, or the IRS hasn’t responded by the date promised.

TAS has offices in every state, the District of Columbia, and Puerto Rico . To find your advocate’s number:

Go to TaxpayerAdvocate.IRS.gov/Contact-Us ;

Download Pub. 1546, The Taxpayer Advocate Service Is Your Voice at the IRS, available at IRS.gov/pub/irs-pdf/p1546.pdf ;

Call the IRS toll free at 800-TAX-FORM (800-829-3676) to order a copy of Pub. 1546;

Check your local directory; or

Call TAS toll free at 877-777-4778.

TAS works to resolve large-scale problems that affect many taxpayers. If you know of one of these broad issues, report it to TAS at IRS.gov/SAMS . Be sure to not include any personal taxpayer information.

LITCs are independent from the IRS and TAS. LITCs represent individuals whose income is below a certain level and who need to resolve tax problems with the IRS. LITCs can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court. In addition, LITCs can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Services are offered for free or a small fee. For more information or to find an LITC near you, go to the LITC page at TaxpayerAdvocate.IRS.gov/LITC or see IRS Pub. 4134, Low Income Taxpayer Clinic List , at IRS.gov/pub/irs-pdf/p4134.pdf .

Appendices A-1 through A-6 show the lease inclusion amounts that you may need to report if you first leased a passenger automobile (including a truck and van) in 2018 through 2023 for 30 days or more.

If any of these apply to you, use the appendix for the year you first leased the car. (See Leasing a Car in chapter 4.)

8 best travel budget apps for your next vacation

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Key takeaways

• These travel budget apps are built to help you track expenses, set budgets, plan trips and split costs across your travel group.
• Choosing the right travel budget app for you will depend on your travel purpose, who you’re traveling with and your individual expense tracking needs.
• For planning group travel budgets, the best apps are Batch app, Splitwise and TravelSpend.
• Work travel apps include Expensify and SAP Concur.
• To plan solo travel budgets use PocketGuard, Trabee Pocket, TravelSpend and Tripcoin.

We’re in the height of summer travel season, and that means you’ll likely spend more on booking hotels, airfare and other travel necessities. At the same time, more than 1 in 3 (36 percent)  people planning a summer vacation in 2024 are considering taking on debt to cover the costs , according to Bankrate’s Summer Travel Survey . Even if you’re using one of today’s best travel credit cards to offset some of the costs, it’s important to set a budget for your travel expenses.

Whether you’re traveling alone or with a group, tracking your vacation spending with one of the best travel budget apps can help you avoid overspending and even split expenses equally between your travel partners. Find out which of the top travel budget apps you should be using for your next trip.

Best travel budget apps

With so many great travel budget apps on the market, you might be wondering which one to get. It really comes down to your travel style and needs. Are you traveling solo or with a group? Do you need a simple budget tracker or do you want planning tools? There’s something out there for everyone, but here are the best options:

Work travel budget apps

Managing your expenses when you’re traveling for work can be challenging. Expensify lets you track your travel expenses easily. Instead of ransacking your luggage for that missing dinner receipt, just snap a picture of the receipt with the Smart Scan feature, and share it with your accounting team for reimbursement.

If you’re merely tracking expenses for tax purposes, Expensify offers several handy tools. The GPS calculator automatically tracks your eligible mileage for you, so you don’t have to enter it manually. This work travel budget app also lets you create expense reports by scanning receipts or entering time worked, for billing purposes.

Sign-up is super easy. All you have to do is provide your email address to set up an Expensify account. You can start using the app immediately, which is free for most users. A “Collect” account, which includes accounting and payroll tools, costs $5 per month. Meanwhile, a “Control” account costs $9 per month and allows for multiple approvers, setting expense policies and custom reporting tools.

If you use Expensify regularly for work travel, look into the Expensify Card, which simplifies the process of importing business transactions. You can also import card transactions into Expensify directly.

If you’re a seasoned business traveler, you may already be familiar with the Concur suite (and in some cases, you may be required by your employer to use it). If you aren’t, get ready to meet one of the most robust, full-featured business travel solutions available today.

Within the SAP Concur suite, you’ll find separate modules for managing travel plans and submitting reimbursement requests for travel-related expenses. Concur Expense’s ExpenseIt app for travel expenses makes it easy to take pictures of your paper receipts and automatically categorize them to submit as expense reports. Meanwhile, Concur Travel lets you book your own business travel or make arrangements with your company’s preselected airline carriers , hotels, and other providers.

SAP Concur offers travel management solutions for organizations of all sizes — from small businesses to enterprise leaders. Business owners and managers can try Concur Expense and Concur Travel for free; individual users who have access to these tools through their employer can download the iOS or Google Play app to get started.

Solo travel budget apps

Pocketguard.

PocketGuard markets itself as the “#1 budgeting app for college students and overspenders,” but it’s actually a great vacation budget planner as well. That’s because the app uses the “in my pocket” feature to calculate how much disposable income you have available. You can then allocate this towards your travel budget.

All you have to do is provide your income and spending information. PocketGuard will calculate your disposable income accordingly. If you’re one of the 36 percent of summer vacationers who are willing to go into debt to travel this summer, according to Bankrate, then PocketGuard might be able to help with that too. This impromptu travel budget app will recommend a strategy for paying off debt in the most efficient way. You can use PocketGuard to set financial goals, save money and plan for future travel as a reward.

Trabee Pocket

The Trabee Pocket app provides both travel budgeting and expense tracking in a user-friendly interface. Trabee lets you set a vacation budget and then enter your expenses to track how much you’re spending in different categories. The app also provides currency conversion, so you can get an accurate sense of your spending.

At the end of your trip, you can even export your expense data to a PDF or CSV file for future budgeting and tax purposes. Overall, this is a solid vacation budget planner app if you’re looking for a free option. Trabee is available on iOS and the Google Play store.

The great thing about Tripcoin is that you can use it without an internet connection, which is especially important if you’re traveling through remote areas. The app’s Dropbox integration also makes it possible to back up your data in case you lose your phone.

Tripcoin’s user-friendly interface makes it easy to set up a trip and break down your spending each day by expense category. You can find out how much you’re spending on transportation, meals, activities and other travel expenses, making it a great way to stay accountable and on top of your budget at each destination.

Tripcoin supports over 150 currencies, converging your spending automatically based on current exchange rates. This ensures accuracy in your budget tracking and ensures you don’t have to perform this tedious task yourself.

Group travel budget apps

If you’re traveling with a group, it’s not always practical for each person to pay for their own expenses. Pulling out multiple credit cards to cover the group dinner bill is possible, but booking group tours and even airfare can be a hassle when done individually.

That’s where Splitwise comes in. The app lets users track shared expenses and the balance owed by each person. This transparency can make it much easier to determine who owes what at the end of a group trip. Frequent traveler and UX Specialist, Christian Castillo has used Splitwise across multiple group vacations to split expenses evenly with friends.

“The app makes it easy to input expenses as they occur and I’m able to send it to the group that I’m traveling with all at once,” says Castillo. “So no miscommunication has been had because with ferry rides, dinners, and excursions, we all agree to split the cost evenly.”

He touts Splitwise’s ability to load expenses as you go and even scan receipts with the paid pro version of the app. One of the biggest advantages he shares is having everything on one platform.

“Splitwise connects to your Paypal, Venmo, or bank account where you can pay back your friends quickly. It doesn’t stop you from adding a gaggle of people. Create the group, add expenses — it’s all tracked in one area. You’re also able to remove people just as easily if one of your friends decided they did not want coffee that day, but everyone else did.” — Christian Castillo Frequent traveler and UX Specialist

The one downside Castillo shares about using the Splitwise app is the limited capability of the free version,

“One downfall about Splitwise is that you do get capped on how many expenses you can input in one day unless you have the pro version.”

Check out Splitwise’s “simplify debts” feature, which balances debts across group members to minimize the total number of payments needed to settle up. It doesn’t change the amount each person owes, but it does make it easier to pay everyone back across the group.

This one is for the planners. Planning bachelor or bachelorette parties are notoriously challenging on both budget and group logistics. But the Batch app simplifies things with budgeting and planning tools designed to make a variety of parties and vacations less stressful. Users can budget, plan and book all activities for a dinner party, group trip, birthday or bachelorette party. You can even add your friends to the app to communicate and make planning decisions easier, as well as divide up expenses in the app.

While Batch is primarily marketed around bachelorette parties, you can use it to book any type of group activity in participating cities. Although you can do just about all of your trip planning through this app, this one doesn’t handle payments. It only helps track group expenses through its Ledger feature, so you can see who owes what. The Batch app is free to use, though there is a processing fee when you book events.

TravelSpend

In my own experience, one of the best travel budget apps is TravelSpend . It’s simple to use, automatically converts spending to your home currency and lets you add friends so you can track expenses together. Plus it gives you a breakdown of which categories you’re doing most of your spending in. I recently used it to track expenses on a trip to Toronto, and it helped me stay within my budget.

It took no time at all to enter my spending as it occurred and it was immediately deducted from my set budget for the trip so I could see how much was left to spend at a glance. It was also nice to see what categories I did most of my spending in which would come in handy for those using a rotating category credit card .

You can also export your spending to a csv or excel file to integrate it with your other budgeting methods. With the premium version (which costs $4.99 per month) you get added functionality such as:

• Creating custom categories
• Attaching GPS locations to your costs
• Adding income
• Creating your own exchange rate
• Seeing and settling debts

Even without the added features of the premium version, using TravelSpend for free is powerful on its own. The primary drawback for me is that even though you can track shared expenses, there are no payment integrations within the app. So you’ll have to switch over to Venmo, Paypal or Zelle once it’s time to settle up, and then switch back to TravelSpend to mark the debts as paid.

The bottom line

With the summer travel season on the upswing, having a travel budget app is more important than ever. Sticking to a budget at home can be challenging in itself, but once you add the thrill of a vacation, budgeting can quickly snowball if you don’t have the right tools or apps to help you reign it in. By utilizing one of the best travel budget apps, you can stay on budget, cut down on unnecessary expenses and plan your travels more efficiently .

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Everything You Need to Know About the Business Travel Tax Deduction

Justin is an IRS Enrolled Agent, allowing him to represent taxpayers before the IRS. He loves helping freelancers and small business owners save on taxes. He is also an attorney and works part-time with the Keeper Tax team.

You don’t have to fly first class and stay at a fancy hotel to claim travel expense tax deductions. Conferences, worksite visits, and even a change of scenery can (sometimes) qualify as business travel.

What counts as business travel?

The IRS does have a few simple guidelines for determining what counts as business travel. Your trip has to be:

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

What counts as "mostly business"?

The IRS will measure your time away in days. If you spend more days doing business activities than not, your trip is considered "mostly business". Your travel days are counted as work days.

Special rules for traveling abroad

If you are traveling abroad for business purposes, you trip counts as " entirely for business " as long as you spend less than 25% of your time on personal activities (like vacationing). Your travel days count as work days.

So say you you head off to Zurich for nine days. You've got a seven-day run of conference talks, client meetings, and the travel it takes to get you there. You then tack on two days skiing on the nearby slopes.

Good news: Your trip still counts as "entirely for business." That's because two out of nine days is less than 25%.

What is an “ordinary and necessary” expense?

“Ordinary and necessary” means that the trip:

• Makes sense given your industry, and
• Was taken for the purpose of carrying out business activities

If you have a choice between two conferences — one in your hometown, and one in London — the British one wouldn’t be an ordinary and necessary expense.

What is your tax home?

A taxpayer can deduct travel expenses anytime you are traveling away from home but depending on where you work the IRS definition of “home” can get complicated.

Your tax home is often — but not always — where you live with your family (what the IRS calls your "family home"). When it comes to defining it, there are two factors to consider:

• What's your main place of business, and
• How large is your tax home

What's your main place of business?

If your main place of business is somewhere other than your family home, your tax home will be the former — where you work, not where your family lives.

For example, say you:

• Live with your family in Chicago, but
• Work in Milwaukee during the week (where you stay in hotels and eat in restaurants)

Then your tax home is Milwaukee. That's your main place of business, even if you travel back to your family home every weekend.

How large is your tax home?

In most cases, your tax home is the entire city or general area where your main place of business is located.

The “entire city” is easy to define but “general area” gets a bit tricker. For example, if you live in a rural area, then your general area may span several counties during a regular work week.

Rules for business travel

Want to check if your trip is tax-deductible? Make sure it follows these rules set by the IRS.

1. Your trip should take you away from your home base

A good rule of thumb is 100 miles. That’s about a two hour drive, or any kind of plane ride. To be able to claim all the possible travel deductions, your trip should require you to sleep somewhere that isn’t your home.

2. You should be working regular hours

In general, that means eight hours a day of work-related activity.

It’s fine to take personal time in the evenings, and you can still take weekends off. But you can’t take a half-hour call from Disneyland and call it a business trip.

Here's an example. Let’s say you’re a real estate agent living in Chicago. You travel to an industry conference in Las Vegas. You go to the conference during the day, go out in the evenings, and then stay the weekend. That’s a business trip!

3. The trip should last less than a year

Once you’ve been somewhere for over a year, you’re essentially living there. However, traveling for six months at a time is fine!

For example, say you’re a freelancer on Upwork, living in Seattle. You go down to stay with your sister in San Diego for the winter to expand your client network, and you work regular hours while you’re there. That counts as business travel.

What about digital nomads?

With the rise of remote-first workplaces, many freelancers choose to take their work with them as they travel the globe. There are a couple of requirements these expats have to meet if they want to write off travel costs.

Requirement #1: A tax home

Digital nomads have to be able to claim a particular foreign city as a tax home if they want to write off any travel expenses. You don't have to be there all the time — but it should be your professional home base when you're abroad.

For example, say you've rent a room or a studio apartment in Prague for the year. You regularly call clients and finish projects from there. You still travel a lot, for both work and play. But Prague is your tax home, so you can write off travel expenses.

Requirement #2: Some work-related reason for traveling

As long as you've got a tax home and some work-related reason for traveling, these excursion count as business trips. Plausible reasons include meeting with local clients, or attending a local conference and then extending your stay.

However, if you’re a freelance software developer working from Thailand because you like the weather, that unfortunately doesn't count as business travel.

The travel expenses you can write off

As a rule of thumb, all travel-related expenses on a business trip are tax-deductible. You can also claim meals while traveling, but be careful with entertainment expenses (like going out for drinks!).

Here are some common travel-related write-offs you can take.

🛫 All transportation

Any transportation costs are a travel tax deduction. This includes traveling by airplane, train, bus, or car. Baggage fees are deductible, and so are Uber rides to and from the airport.

Just remember: if a client is comping your airfare, or if you booked your ticket with frequent flier miles, then it isn't deductible since your cost was $0.

If you rent a car to go on a business trip, that rental is tax-deductible. If you drive your own vehicle, you can either take actual costs or use the standard mileage deduction. There's more info on that in our guide to deducting car expenses .

Hotels, motels, Airbnb stays, sublets on Craigslist, even reimbursing a friend for crashing on their couch: all of these are tax-deductible lodging expenses.

🥡 Meals while traveling

If your trip has you staying overnight — or even crashing somewhere for a few hours before you can head back — you can write off food expenses. Grabbing a burger alone or a coffee at your airport terminal counts! Even groceries and takeout are tax-deductible.

One important thing to keep in mind: You can usually deduct 50% of your meal costs. For 2021 and 2022, meals you get at restaurants are 100% tax-deductible. Go to the grocery store, though, and you’re limited to the usual 50%.

{upsell_block}

🌐 Wi-Fi and communications

Wi-Fi — on a plane or at your hotel — is completely deductible when you’re traveling for work. This also goes for other communication expenses, like hotspots and international calls.

If you need to ship things as part of your trip — think conference booth materials or extra clothes — those expenses are also tax-deductible.

👔 Dry cleaning

Need to look your best on the trip? You can write off related expenses, like laundry charges.

{write_off_block}

Travel expenses you can't deduct

Some travel costs may seem like no-brainers, but they're not actually tax-deductible. Here are a couple of common ones to watch our for.

The cost of bringing your child or spouse

If you bring your child or spouse on a business trip, your travel expense deductions get a little trickier. In general, the cost of bring other people on a business trip is considered personal expense — which means it's not deductible.

You can only deduct travel expenses if your child or spouse:

• Is an employee,
• Has a bona fide business purpose for traveling with you, and
• Would otherwise be allowed to deduct the travel expense on their own

Some hotel bill charges

Staying in a hotel may be required for travel purposes. That's why the room charge and taxes are deductible.

Some additional charges, though, won't qualify. Here are some examples of fees that aren't tax-deductible:

• Gym or fitness center fees
• Movie rental fees
• Game rental fees

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Where to claim travel expenses when filing your taxes

If you are self-employed, you will claim all your income tax deduction on the Schedule C. This is part of the Form 1040 that self-employed people complete ever year.

What happens if your business deductions are disallowed?

If the IRS challenges your business deduction and they are disallowed, there are potential penalties. This can happen if:

• The deduction was not legitimate and shouldn't have been claimed in the first place, or
• The deduction was legitimate, but you don't have the documentation to support it

When does the penalty come into play?

The 20% penalty is not automatic. It only applies if it allowed you to pay substantially less taxes than you normally would. In most cases, the IRS considers “substantially less” to mean you paid at least 10% less.

In practice, you would only reach this 10% threshold if the IRS disqualified a significant number of your travel deductions.

How much is the penalty?

The penalty is normally 20% of the difference between what you should have paid and what you actually paid. You also have to make up the original difference.

In total, this means you will be paying 120% of your original tax obligation: your original obligation, plus 20% penalty.

Justin W. Jones, EA, JD

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• Business Taxes

7 Rules You Should Know About Deducting Business Travel Expenses

• What Is Your "Tax Home"?

Charges on Your Hotel Bill

The 50% rule for meals, the cost of bringing a spouse, friend or employee.

• Using Per Diems To Calculate Employee Travel Costs

Combined Business/Personal Trips

International business travel.

• The Cost of a Cruise (Within Limits)

Frequently Asked Questions (FAQs)

Helde Benser / Getty Images

The IRS has a specific definition for business travel when it comes to determining whether these expenses are tax deductible. The agency says business travel is travel that takes you away from your tax home and is "substantially longer than an ordinary day's work." It requires that you sleep or rest while you're away from home, and that you do so. The travel must be "temporary." This means it can't last a year or more.

Key Takeaways

• You can deduct expenses that take you away from your tax home for a period of time that would require you to spend the night.
• Your tax home is the city or area where your regular place of business is located.
• You’re limited to 50% of the cost of your meals.
• Your trip must be entirely business-related for costs to be deductible, but special rules apply if you travel outside the U.S.

What Is Your "Tax Home"?

Your tax home is a concept set by the IRS to help determine whether a trip is tax deductible. It's defined by the IRS as the entire city or general area where your regular place of business is located. It's not necessarily the area where you live. 

Your tax home can be used to determine whether your business travel expenses are deductible after you've determined where it's located. You can probably count your expenses during travel as business deductions if you have to leave your tax home overnight or if you otherwise need time to rest and sleep while you're away.

Check with a tax professional to make sure you're accurately identifying the location of your tax home.

Charges for your room and associated tax are deductible, as are laundry expenses and charges for phone calls or for use of a fax machine. Tips are deductible as well. But additional personal charges, such as gym fees or fees for movies or games aren't deductible.

You can deduct the cost of meals while you're traveling, but entertainment expenses are no longer deductible and you can't deduct "lavish or extravagant" meals. 

Meal costs are deductible at 50%. The 50% limit also applies to taxes and tips. You can use either your actual costs or a standard meal allowance to take a meal cost deduction, as long as it doesn't exceed the 50% limit.

The cost of bringing a spouse, child, or anyone else along on a business trip is considered a personal expense and isn't deductible. But you may be able to deduct travel expenses for the individual if:

• The person is an employee
• They have a bona fide business purpose for traveling with you
• They would otherwise be allowed to deduct travel expenses

You may be able to deduct the cost of a companion's travel if you can prove that the other person is employed by the business and is performing substantial business-related tasks while on the trip. This may include taking minutes at meetings or meeting with business clients.

Using Per Diems To Calculate Employee Travel Costs 

The term "per diem" means "per day." Per diems are amounts that are considered reasonable for daily meals and miscellaneous expenses while traveling. 

Per diem rates are set for U.S. and overseas travel, and the rates differ depending on the area. They're higher in larger U.S. cities than for sections of the country outside larger metropolitan areas. Companies can set their own per diem rates, but most businesses use the rates set by the U.S. government.

Per diem reimbursements aren't taxable unless they're greater than the maximum rate set by the General Service Administration. The excess is taxable to the employee.

If you don't spend all your time on business activities during an international trip, you can only deduct the business portion of getting to and from the destination. You must allocate costs between business and personal activities.

Your trip must be entirely business-related for you to take deductions for travel costs if you remain in the U.S., but some "incidental" personal time is okay. It would be incidental to the main purpose of your trip if you travel to Dallas for business and you spend an evening with family in the area while you're there. 

But attempting to turn a personal trip into a business trip won't work unless the trip is substantially for business purposes. The IRS indicates that “the scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip."

The rules are different if part or all of your trip takes you outside the U.S. Your international travel may be considered business-related if you were outside the U.S. for more than a week and less than 25% of the time was spent on personal activities. 

You can deduct the costs of your entire trip if it takes you outside the U.S. and you spend the entire time on business activities, but you must have "substantial control" over the itinerary. An employee traveling with you wouldn't have control over the trip, but you would as the business owner would.

 The trip may be considered entirely for business if you spend less than 25% of the time on personal activities if your trip takes you outside the U.S. for more than a week.

You can only deduct the business portion of getting to and from the destination if you don't spend all your time on business activities during an international trip. You must allocate costs between your business and personal activities.

The Cost of a Cruise (Within Limits) 

The cost of a cruise may be deductible up to the specified limit determined by the IRS, which is $2,000 per year as of 2022.  You must be able to show that the cruise was directly related to a business event, such as a business meeting or board of directors meeting.

The IRS imposes specific additional strict requirements for deducting cruise travel as a business expense.

How do you write off business travel expenses?

Business travel expenses are entered on Schedule C if you're self-employed . The schedule is filed along with your Form 1040 tax return. It lists all your business income, then you can subtract the cost of your business travel and other business deductions you qualify for to arrive at your taxable income.

What are standard business travel expenses?

Standard business travel expenses include lodging, food, transportation costs , shipping of baggage and/or work items, laundry and dry cleaning, communication costs, and tips. But numerous rules apply so check with a tax professional before you claim them.

The Bottom Line

These tax deduction regulations are complicated, and there are many qualifications and exceptions. Consult with your tax and legal professionals before taking actions that could affect your business. 

IRS. " Topic No. 511: Business Travel Expenses ."

IRS. " Publication 463 (2021), Travel, Gift, and Car Expenses ."

IRS. " Here’s What Taxpayers Need To Know About Business-Related Travel Deductions ."

Travel Budget Calculator

Share it with your family and friends, your ultimate guide to smart travel planning.

Planning a trip can be exhilarating, but it often comes with the stress of managing finances. Fear not! With the Travel Budget Calculator, you can embark on your dream journey with confidence. In this guide, we’ll delve deep into the intricacies of budgeting for travel, empowering you to make informed decisions and maximize your experiences.

Understanding the Travel Budget Calculator

Embarking on a journey starts with meticulous planning, and the Travel Budget Calculator serves as your trusty companion. This tool revolutionizes the way you approach travel expenses, offering a comprehensive overview of your financial landscape. By inputting essential details such as number of nights, duration, accommodation preferences, and activity interests, the calculator generates a personalized budget tailored to your preferences and constraints.

Vacation Budget Planner is the ultimate tool for travel budgeting! Easily estimate your trip expenses and budget your journey with precision using our user-friendly Travel Budget Calculator. Whether you’re planning a weekend getaway or a month-long adventure, our tool helps you plan every aspect of your trip, from accommodation to transportation and meals.

Simply input your desired budget and our calculator will provide you with a detailed breakdown of estimated expenses, including flights, hotels, meals, and activities. Planning a trip for 4 days with a budget of $2000? No problem! Our tool helps you allocate your budget efficiently to make the most out of your travel experience.

With features like the Trip Expense Calculator and Vacation Budget Estimator, you can plan your itinerary with confidence, knowing exactly how much you’ll spend. Plus, our tool caters to every budget, whether you’re a backpacker on a shoestring budget or a luxury traveler looking for premium experiences.

Say goodbye to guesswork and hello to stress-free travel planning! Try our Travel Budget Planner today and make your dream trip a reality.

Benefits of Using the Travel Budget Calculator

Planning your itinerary can be overwhelming, but the Travel Budget Calculator simplifies the process. Here’s why incorporating this tool into your travel planning arsenal is a game-changer:

• Efficiency in Planning: Say goodbye to tedious spreadsheets and guesswork. The Travel Budget Calculator streamlines the planning process, providing instant insights into your projected expenses. With a few clicks, you can fine-tune your budget and allocate resources efficiently, ensuring a hassle-free travel experience.
• Financial Transparency: Transparency is key to effective budgeting, and the Travel Budget Calculator offers just that. By breaking down expenses across various categories such as transportation, accommodation, dining, and activities, you gain a clear understanding of where your money is allocated. This transparency empowers you to make informed decisions and prioritize experiences that matter most to you.
• Flexibility and Customization : No two travelers are alike, and the Travel Budget Calculator recognizes that. Whether you’re a budget-conscious backpacker or a luxury seeker, this tool adapts to your preferences and constraints. Adjust parameters such as accommodation standards, dining preferences, and activity intensity to tailor your budget to your unique travel style.

Travel Budget Calculator: Your Key to Financial Freedom

In conclusion, the Travel Budget Calculator empowers you to embark on unforgettable journeys without compromising your financial stability. By leveraging its capabilities and implementing savvy budgeting strategies, you’ll unlock a world of possibilities and create cherished memories that last a lifetime. So, what are you waiting for? Start planning your next adventure today and let the Travel Budget Calculator be your guiding light.

FAQs About Travel Budget Calculator

Below are some basic questions that arise while using a travel budget calculator.

Q. How does the Travel Budget Calculator work?

A. Calculating a travel budget isn’t rocket science; it’s just simple math. As we know, if we have exact numbers in front of us, decision-making becomes much easier. A Travel Budget Calculator simply provides us with all the expense numbers.

Q. Is the Travel Budget Calculator suitable for all types of travelers?

A. Absolutely! Whether you’re a budget-conscious backpacker, a luxury seeker, or somewhere in between, the Travel Budget Calculator adapts to your preferences and constraints. Simply adjust the parameters to align with your unique travel style and embark on your adventure with confidence.

Q. Can I trust the accuracy of the Travel Budget Calculator?

A. Yes, the Travel Budget Calculator is designed to provide accurate and reliable estimates based on the information provided. However, it’s essential to factor in unforeseen expenses and fluctuations in prices to ensure comprehensive budget planning.

Q. Can I save my budgeting preferences for future use?

A. Unfortunately, the Travel Budget Calculator does not currently offer a save feature but you can download it. However, you can easily recreate your budgeting preferences each time you plan a trip by inputting the relevant details into the calculator.

Q. How frequently should I update my travel budget?

A. It’s advisable to review and update your travel budget regularly, especially as your trip approaches and circumstances change. Factors such as fluctuating exchange rates, last-minute bookings, and unexpected expenses can impact your budget, so staying proactive is key to financial planning success.

How to Make a Travel Budget in 5 Easy Steps (Free Planner)

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Creating a travel budget may seem like a hassle, but it’ll actually make your vacation more enjoyable. Knowing that you’ve already planned out how you’re going to pay for everything will help you relax and have a good time.

• Money Management

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Many people enjoy traveling the world, exploring new places, or just relaxing in a tranquil environment.

Taking a vacation is a great way to reduce stress and improve productivity, but traveling can be costly. Making a travel budget will make a big difference while planning your next getaway.

Those who love to travel should incorporate it as a line item in their monthly budgets. Each month, set aside a certain amount for travel in its own separate account.

Earmark that money specifically as a vacation budget so that it can be spent guilt-free. Money that is put toward trip expenses can simply be reimbursed from the travel account.

With that said, if there is outstanding debt that is difficult to pay off, planning an immediate vacation may not be a good idea. In this case, the priority should be to set up an emergency fund that includes three-to-six months’ worth of living expenses.

Why Is Budgeting for a Vacation Important?

While it is good to get into the habit of setting aside vacation funds every month, it is also important to create a budget for each individual trip. This will help determine how long it will take to build up enough money in the vacation account to pay for that trip. It will also allow for logistics to be planned out, while staying on budget.

Scheduling and budgeting for vacations can be very enjoyable. Researching hotel accommodations, restaurants, and free things to do helps to build up anticipation. It can be fun for the whole family to spend time together, figuring out the different parts of an upcoming trip.

How to Budget for A Vacation in 5 Simple Steps

When it comes time to map out those vacation expenses, a few key steps will help lead to success and worry-free traveling. Begin by drafting a well-rounded vacation budget, focusing on expenses in the following five main categories. Once these are figured out, the rest of the details will fall into place.

1. Choose a destination and preferred date

Start by picking a destination and nailing down travel dates. Remember that some locations are more expensive to visit than others. The time of year can also make a difference in pricing. Traveling done at peak tourist times usually costs more than off-season trips.

Be flexible

Being flexible is one of the easiest ways to save when budgeting for a vacation. Check out multiple travel destinations and compare prices before settling on options for lodging and airfare. Since these are two of the largest expenses in any travel budget, keeping them in check will go a long way toward helping to keep the overall cost down.

Be willing to look at alternative accommodations or stay at a place that is a little farther away from the tourist areas. Remember that most vacation time is spent outside the hotel room – so there is no reason to put a large chunk of the budget toward nice accommodations that will be used only for sleep.

Also, be flexible when choosing a travel date. Many travel search engines have a “flexible dates” option that can be used to research the lowest prices for airfare and lodging. Plan around these dates for added savings in the travel budget.

Consider the season

The time of year can really impact a travel budget. A lot of people have begun to plan weddings around their honeymoons, and not vise versa. For example, if the goal is to travel to Italy without spending a fortune or facing large crowds of tourists – while still enjoying nice weather – get married in early autumn, which is known as the shoulder season. It’s a great time of year to travel, because the weather is still nice, but the crowds have thinned out. Most people with children travel during the summer. Once the kids are back in school, prices for airfare and accommodations tend to drop, allowing people with more flexibility to travel cheaper.

Related: Make Money Renting Your Home with Airbnb While You’re on Vacation

2. Make a list of your major expenses (use a travel budget worksheet)

When drafting a travel budget worksheet, plan for the biggest expenses, including transportation, accommodations, and food, first. Getting those out of the way will greatly aid in putting together the overall vacation budget.

Research cheap travel deals (transportation)

Transportation costs for trips that are taken close to home will not be very high. But when airfare comes into the picture, the transportation line item will increase dramatically. Research multiple airlines for cheap travel deals, and consider taking connecting flights to cut down on the cost. If it’s feasible, check out the price of flights leaving from airports in nearby cities.

Flights on airlines to and from major airport hubs are usually lower in cost. For example, American Airlines and Southwest Airlines are both headquartered in Dallas. Flights on those airlines tend to be the cheapest travel to and from that area.

Research accommodations

Another large expense in any travel budget is lodging. There is a wide range of options to consider when it comes to picking out a place to stay, including hostels, hotels, motels, bed and breakfasts, or apartments. Or, if a trip includes camping, those accommodations can include cabins and tents.

Rather than being brand-loyal to a particular hotel, utilize travel sites like Hotels.com to compare costs at different chains. After all, most travel time is spent sightseeing and exploring, not inside the room.

The closer accommodations are to major attractions, the more expensive they will be. Consider staying somewhere off the beaten path to save money.

When traveling with a group of people, split the cost of accommodations. For example, rent a house or condo with multiple rooms and divide the costs. If your destination is more remote, consider renting an RV. For as low as $175 per night, you can comfortably sleep 10 adults and still come in under $20 per person per day.

Budget for food

One of the trickiest line items in a vacation budget is food. To save some money in this area, choose a place to stay that has a kitchen – or at least a refrigerator and microwave. Eat some meals there, and then splurge a few times by going out to eat at local restaurants.

Another great way to save money on food is to stay in a bed and breakfast or a hotel that includes breakfast. Some chains like Homewood Suites or DoubleTree offer both a kitchen area and a hot breakfast, which helps in saving money . Drinks bought while eating out can quickly add to a bill, so buy wine or beer for the room to keep that travel budget in check.

When budgeting for meals, try going out for lunch instead of dinner. Lunch is usually cheaper than dinner, and many of the same options are offered for less. It is also usually not as tempting to order pricey alcoholic beverages during lunch.

Related: How to Find Cheap Gas Nearby (When You’re On the Go)

3. Make a list of smaller expenses

Once the larger expenses are planned out, figure out the extras, like sightseeing, entertainment, and gifts.

Research potential vacation activities and local places to visit. Go online to get an idea of the associated costs, and budget accordingly.

Don’t forget to plan for any necessary vaccines if traveling abroad, as well as gifts to take back home. Build a buffer into the budget to account for any surprise expenses. It’s always best to plan for more, and then spend less.

4. Determine the monthly savings

Once a rough vacation budget has been established, it’s time to figure out how to pay for it. Take the total amount and divide it by the number of months left until the trip. For example, if the vacation date is in nine months and the cost of the trip is approximately $2,700, $300 must be set aside every month.

If that amount seems too large, there are two options: adjust the timeline or make some extra money.

If necessary, push the trip out by a few months until enough money can be saved, or figure out how to bring in some extra income. There are many different ways to make money on the side, and help to reach that savings goal.

5. Vacation budgeting doesn’t end there

Those travel budgets won’t do much good if they aren’t followed. It is important to track costs and stay on top of spending while on vacation. Don’t stress out over every penny, but don’t go overboard, either. It wouldn’t be fun to see some nasty surprises on the bank or credit card statement later.

One of the easiest ways to track expenditures while traveling is with a budgeting tool like Personal Capital. Alternatively, keep on top of spending with an Excel spreadsheet or even with a pen and paper. Whatever the method, keep it updated and check it regularly.

Bonus Tip: Draft an itinerary

While it’s not necessary to create an itinerary when budgeting for a vacation, it really helps stay on track. The best way to do this is by using an Excel spreadsheet. Make a rough outline with a separate entry for each day of the vacation. Fill in all of the travel information and any scheduled activities like sightseeing tours.

Make a separate column to the side and list out all potential vacation activities. Group together any events that are in the same area of town and write down approximately how long each one would take. Now slot them in under the different day headers for either the morning or afternoon.

Try to group together activities or sightseeing that will occur in the same part of town. Food and restaurant options can be added in after the schedule is roughed out.

Itineraries are meant to be flexible, not restrictive. Move things around to find the right balance. Note the associated cost of each entry on the list.

Add all of the expenses together at the bottom of the spreadsheet to estimate the total travel budget. Remember that it’s not necessary to follow the itinerary word for word. Use it as a planning tool and focus on enjoying the trip.

Creating a Travel Budget Is Well Worth the Time

Even though it may seem like creating a travel budget can be a hassle, in the long run, it will make vacations far more enjoyable.

Having a vacation budget means not stressing about money after the trip. It allows for advanced planning and time to save up enough money. Budgeting for a vacation means that it will be easy to relax and have a good time, knowing that everything is in the budget and ready to be paid for.

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Travel Budget Worksheet

Are you planning a major trip? Will you be able to stay within your budget? Rather than just spending without a plan and then dealing with the debt for the next few years, use our travel budget template to list your travel expenses. It will help you estimate your total travel costs and see if you will be able to take your trip without going over budget.

License : Private Use (not for distribution or resale)

Authors: Jon Wittwer and Jim Wittwer

Description

This travel budget template makes it easy to enter your travel expenses for your next trip. The top section allows you to set a total budget, and as you enter your travel costs you can quickly see where the money is going, how much extra you'll have, or how much you'll need to add to your budget.

The worksheet is set up to let you enter a quantity and unit cost for each item. For example, for lodging you can enter the number of nights you will be staying and the cost per night. If you will be driving rather than flying, you can enter the total miles and the cost per mile. Remember to include both fuel and wear as part of the cost (see the link below for what the IRS uses as the standard mileage rate - $0.56/mile in 2014).

Additional Resources

• Be sure to check out our Travel Itinerary and Packing List templates.
• IRS Publication showing Standard Mileage Rates at irs.gov - You might consider using the standard mileage rate if you are estimating the cost of driving.
• Tips for Creating a Budget for Travel at wikihow.com - This article is actually a really good resource to help you remember what to consider when budgeting for a trip.

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How to Budget for a Trip: The Easiest Travel Budgeting Method (+ Tips!)

Here’s a silly secret: I love budgeting travel… and I also think that most guides to creating a travel budget make it entirely too complicated.

I initially wrote this guide on how to budget for a trip almost 7 years ago, when we were prepping for what we were then calling a 6 month round the world trip (spoiler: depending on your definition of “trip”, it never actually ended).

50+ countries and the better part of a decade later, I’m still using the exact same, simple formula for calculating our budget while traveling–even if our definition of “on a budget” has changed over the years.

Planning to hit the road soon and wondering how much money you need for your trip?

Whether you’re headed off on a 2-week Europe trip or you’re planning to live out of a backpack for years like we did, our simple method for budgeting travel expenses has you covered.

Here’s the travel budget strategy that we swear by to this day!

Table of Contents

Our Formula for Creating a Travel Budget

Why we like this travel budgeting system, example of how to budget for a trip, tips for travel budgeting, planning a trip.

Some links in this post may be affiliate links. If you make a purchase through one of these links, we may earn a small commission at no extra cost to you. Please see our disclosure policy for more detail.

Here’s our incredible simple calculation for travel expenses:

(Money Saved – Major Expenses) / Number of Days Traveling = D aily Budget

That’s it–simple, easy to remember, and allows you to easily translate your savings from a pile of money into an actual travel budget.

Some long term travelers prefer to divide by the number of weeks instead of the number of days, on the premise that some days you may blow a large amount, and then have cheaper days to make up for it.

While that is 100% true and Jeremy and I definitely balance expensive days with inexpensive ones, I still prefer to think in terms of days.

In my experience, smaller numbers tend to be more easily tracked, and are less overwhelming as a result.

How to Define Major Travel Expenses

“Major expenses” can be somewhat of an ambiguous term, but I tend to use this for pricey plane tickets, travel insurance, and large monthly bills that you’re still responsible for during your trip (say, a car payment or health insurance). 

If you’re headed to any destinations that require a visa, be sure to include those costs as well!

For shorter trips, I also like to include lodging and certain cheaper transportation costs (night trains, budget airline flights, rental cars) here, but for long-term travel, that’s obviously not practical.

The point of the major expenses category is simply to remove the money that is allocated for specific expenses from play before determining how much you have to spend.

This is to avoid either a) running around feeling like you have more money than you do and overspending or b) anxiously fretting about the upcoming expense (like a plane ticket home) and saying no to things that you want to do because you’re needlessly stressed about not having enough money.

Personally, we’re much more likely to do the second.

Looking back on almost 7 years of travel, I can now definitively say that there have been more experiences than we’ve said no to when we should have jumped at the opportunity than times we splurged on an experience that wasn’t worth deducting from our calculated travel budget.

Luckily, thanks to this travel budgeting system, those experiences have been few and far between.

For us, this method of creating a travel budget works perfectly.

Thanks to careful tracking, we have never overspent on a trip, and we’ve also never worried much about money during our travels.

The worst that will happen is that we have a couple of pricey days in a row and follow it up with a day of inexpensive hiking or laying on the beach to make up for it (hardly a tragedy).

While I tend to track our daily expenses via mental estimates, I will write out cash expenses daily and credit card/more easily tracked expenses a couple of times a week–yes, even 7 years later.

It may seem like a drag, but 10 minutes of work can relieve a lot of stress and fear of the unknown that can come with just letting your money slip to the back of your mind.

(At least, it will be in the back of your mind until you start panicking over the thought of where your checking account balance might be when trying to fall asleep at night!).

Let’s say that a couple traveling is traveling to Paris from the USA for one week, and wants to calculate their travel budget.

In the interest of not searching too deeply for a pretend trip, I’ll say they buy the first flights they search for don’t stress about that too much. They’re also cautious and want travel insurance for their trip.

Our pretend couple has a $4000 travel budget, in total.

Major Travel Expenses for Our Mock Paris Trip

Round-Trip Flights to Paris: $2000

Travel Insurance : $150 

Hotel Room, $130/night for 7 nights: $910

($4000 total budget – $3060 major expenses) / 7 days = $134.28/day to spend, or $67.14/per person, per day.

I would round those down to $134 or $67, both for the ease of math and to build in a slightly conservative slant to the budget.

This would need to cover activities/tours, souvenirs/shopping, transportation while in Paris, and food/drinks.

That’s not only doable but completely comfortable in Paris, as long as our pretend couple is not hoping for luxury travel.

Know what’s worth it to you.

If you’re a major foodie, skimping on dining probably isn’t going to work for you–and if you’re a SCUBA lover, suggesting you limit dives on a beach trip may sound miserable.

Whatever your priorities are, focus on those and skimp on other areas, instead–even if other travelers consider the things you skip to be must-see sights.

Check in on your budget regularly.

Even if you don’t check in daily, be sure to track your budget at least every few days.

This will help keep you from blowing off course in either direction and also relieve any anxiety you have about not knowing the status of your budget.

Remember that traveling on a budget doesn’t mean having less fun!

Some of our favorite travel experiences cost little to nothing.

Browsing local markets, enjoying a beach day, going for a hike, wandering aimlessly through cities, sampling street food, and more all make for wonderful and incredibly memorable travel days.

Travel budgeting can be daunting when you get started, but once you get used to it, it enhances, rather than detracts from your experiences.

Not only are there wonderful travel experiences to be had at all budgets, but knowing where you are in your trip financially is much less stressful than constantly worrying that you’re over your travel budget… without having the concrete data to confirm either way.

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About Kate Storm

In May 2016, I left my suburban life in the USA and became a full-time traveler. Since then, I have visited 50+ countries on 5 continents and lived in Portugal, developing a special love of traveling in Europe (especially Italy) along the way. Today, along with my husband Jeremy and dog Ranger, I’m working toward my eventual goal of splitting my life between Europe and the USA.

11 thoughts on “How to Budget for a Trip: The Easiest Travel Budgeting Method (+ Tips!)”

Excellent post. I was checking continuously this blog and I am impressed!

Extremely useful information specifically the last part :) I care for such info a lot. I was looking for this particular information for a long time. Thank you and good luck.

Thank you! Appreciate you stopping by! :-)

bookmarked!!, I love your site!

Another small thing to consider would be to convert your daily budget amount to local currency.

Great point, thanks for stopping by! :-)

This is by far the best travel blog I have come across. Thank you!!!

So happy to hear that, DeElla!

Great info!

Good info. Thanks we will be traveling Italy for 28 days. The last 7 we are staying with friends. We don’t want to rent a car but use trains between towns and subway/buses in the cities. How do I budget for that? Are there month long passes for each? Excluding airfare we have $7000 food/transportation/entrance fees. Does that sound doable? We are flying into Rome, then Florence and take day trips from there, then ending up in Ugento. Any recommendations?

Thanks, Brenda!

You can definitely get around Italy without a car, that’s not a problem at all. $7000 for for 28 days on the ground also sounds reasonable (I’m assuming you’re traveling as a couple).

Trenitalia does have a monthly pass of sorts for trains, similar to the Eurail pass but for Italy only. However, I wouldn’t necessarily recommend it without knowing your schedule. Most likely, booking each leg individually is fine.

For short distances in rural areas that you travel by bus, you won’t need online tickets or anything like that. Same for any “local” trains you take, like the slow train between Florence and Bologna. You can buy those tickets step by step as you go, as the prices are set.

Where the prices get higher and you’ll need to budget in advance is for the high-speed train routes around Italy, like from Florence to Lecce, for example. Those trains have dynamic pricing, so if you can book your tickets in advance, you’ll both spend less and be able to budget more easily.

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