Is Your Vacation Tax-Deductible? Experts Weigh In

Traveling has surged in popularity recently. The Sunday following Thanksgiving 2023 marked the largest single travel day in U.S. aviation history, with TSA screening over 2.9 million passengers on November 26.

If you’re among those accumulating frequent flyer miles at lightning speed, you might be wondering how to offset some of those expenses. Can you legally deduct your trip? If you’re self-employed—like an entrepreneur, freelancer, consultant, or run an online business—and you worked during your travels, there's a strong possibility you can.

Here’s what you need to do to earn the IRS’s approval.

Meet these four criteria

To qualify, your trip needs to have a business objective, which could involve activities like client meetings, attending or speaking at conferences, conducting research and development, or holding board or shareholder meetings. The activities should aim to generate revenue.

“Don’t assume you can take a personal trip, discuss business for an hour, and then deduct the entire trip cost. The primary intent must be business,” warns Caitlynn Eldridge, founder and CEO of Eldridge CPA.

The second and third criteria state that the trip must be both ‘ordinary and necessary,’ as per IRS guidelines on business travel expenses. An ‘ordinary’ expense is one that is common in your industry regarding amount, frequency, and purpose, while ‘necessary’ means it contributes to profit or business growth,” explains Tom Wheelwright, a CPA and author of Tax-Free Wealth (BZK Press, 2018).

Finally, all expenses must be properly documented. To qualify for travel deductions, Wheelwright emphasizes that you need to spend over half your business day on work and keep thorough records. “For instance, if you work four and a half hours daily, those expenses can be deductible. Documentation should include receipts and a detailed log of your expenses,” he adds.

On your receipts, note the name of the client you dined with for verification. “Retain emailed confirmations and receipts from hotel bookings or conference ticket purchases that show the dates, times, and event names, along with travel receipts like gas or flight costs,” advises Ben Watson, founder of Fiscal Fluency, a personal finance and business coaching firm.

For 2024, the IRS mileage reimbursement rate is set at 67 cents for employees or self-employed individuals traveling for work, an increase from 65.5 cents in 2023.

Additionally, you must be away from home overnight—according to Wheelwright, the IRS mandates an overnight stay for the trip to qualify as business travel.

Domestic travel versus international travel

There’s a significant distinction in how you compute deductions for trips taken within the U.S. compared to those abroad. Wheelwright explains, “In the U.S., it’s an all-or-nothing approach: if you spent more than 50 percent of your time on business, all expenses are deductible; if it’s 50 percent or less, none are.”

For international business trips, deductions operate differently. Wheelwright clarifies that for trips to foreign countries, the deduction is proportional. “For instance, if you spent 40 percent of your time on business in Italy, then 40 percent of that is deductible,” he states.

Follow the guidelines

The trip must be genuinely for business. “You can’t just do a bit of work while lounging on the beach and label it a business trip,” warns Watson. However, if you turn it into a “bleisure trip” by adding a few days at the beach to an already planned business trip, you might still be able to write off some lodging costs. Just remember, if you extend your trip for leisure, you can only deduct expenses directly tied to work on the days you conducted business. If visiting multiple cities, ensure each has a valid business purpose.

You do need to engage in work. If attending a conference, ensure you actively participate—not just showing up for one or two sessions. If you only attend a few business-related events, the trip could be deemed personal with only “incidental” business activities, Watson notes. Keep a detailed log of your activities; a sparse record could lead to issues. “You want to maintain your ability to deduct costs for transportation, lodging, meals, and more,” he emphasizes.

If it’s a business trip you’ve organized, ensure it includes client meetings or other work-related activities. “To provide proof of these events, it’s beneficial to schedule calendar appointments in advance and keep receipts for when you file your taxes and claim deductions. Remember, the main aim of this trip should be for work,” advises Riley Adams, CPA and founder of WealthUp, a financial literacy platform.

Avoid misinterpreting what ‘ordinary and necessary’ means. “If you can perform the same business tasks at a budget hotel as you would at the Four Seasons, justifying the higher expenses during an audit will be difficult,” warns Watson.

Choose accommodations similar to what you typically use for business travel to ensure your expenses are deemed ‘ordinary.’ Wheelwright clarifies that if you normally stay at five-star hotels, then the Four Seasons fits that category. However, if you usually opt for places like the Comfort Inn and suddenly switch to a luxury hotel, it might raise concerns with the IRS. He notes that whether it’s a hotel or vacation rental, the standard of quality and cost should align with your usual business travel.

When traveling with non-business companions, like a spouse or family, you can only deduct the lodging costs you would have incurred if traveling alone. For instance, if a single room costs $150 per night, but you paid $200 for a double room, you can only deduct the $150 rate.

What expenses are deductible?

While personal meals are not deductible, you can deduct half the cost of food expenses related to business. Meals and entertainment for your family aren’t deductible unless they are actively involved in the business, and you can demonstrate that their expenses are both ordinary and necessary.

Travel expenses are only deductible on the days the business-related events take place. “For instance, taxi rides to meetings, train fares to conferences, or flights to events are deductible,” notes Adams. “Lodging expenses, similar to travel costs, are deductible only for the days when business activities occur.”

Also, if your company provides your plane ticket or you’re flying for free using frequent flyer miles, your cost is effectively zero, meaning you cannot deduct it.

There are a few aspects you might not realize. For instance, if you need to ship your luggage, that cost is deductible; you can also deduct tips for services, like the gratuity you give to a waiter during a client meal.

Be strategic

CPA Greg O’Brien recommends scheduling your ‘vacation’ days between business days. “For example, if a business owner takes a seven-day trip to Florida, spending five days meeting clients or prospects and two days enjoying the beach, it can still qualify as a deductible business trip. The key is to place the ‘vacation’ days in the middle of the workdays,” he explains.

By positioning the vacation days centrally, the travel days to and from remain classified as business-related, rather than personal.

Watson adds another tip: “Expenses for laundry, dry cleaning, and shoe shining are perfectly legitimate if incurred soon after returning home.”