Employees’ Guide to Travel Expenses

When you travel as part of your job, employers generally pay for the travel expenses. They may be covered at the time of the expense by providing an allowance, an employee credit card, or a prepaid card. However, some businesses may have you pay the expenses and reimburse you after.

IRS rules on travel expenses

Most business travel expenses are deductible if you travel outside your tax home. To claim travel expenses, you must be traveling outside of the area of your tax home for longer than a work day. Additionally, the trip must be long enough to necessitate rest in order to work on your trip.

What’s considered a tax home?

Your tax home is your main place of business or work, not necessarily where you live. A tax home usually encompasses the whole city or area where you work. Keep in mind  you can’t  claim travel from your residence to  your permanent place of work.

If you meet the requirements to claim travel expenses, you should also remember that these expenses need to be ordinary and necessary. You cannot claim any extravagant expenses or personal expenses.

Taxability of travel expenses depends on the length of stay 

You will be taxed on any travel expenses your employer covers, if:

• You’re in a temporary location for longer than a year
• Expect to be in a location longer than a year, or 
• Will be in the temporary location for an indefinite period of time

Note: If you expect to be in a location for less than a year and then find out you will be there for over a year, any travel expenses your employer covered up to the time you were informed that you would be in the temporary location for over a year are not taxable, but any travel allowance or reimbursements after that are taxable.

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What are travel expenses?

Once you find that you can claim travel expenses, here are some expenses the IRS allows:

• The cost of travel by bus, car, train, or plane from your home to your business destination.
• Transportation costs to get from a train station or airport to your hotel or from your hotel to your work or meeting location.
• The shipping of baggage and display/sample material from your permanent workplace to your temporary workplace
• Laundry and dry cleaning
• Tips for services related to acceptable expenses
• Lodging and meals (not for entertainment purposes)
• Business calls during your trip, as well as business communication via other devices
• Other similar and necessary expenses, such as renting a computer or transportation to a meal.

Claiming mileage and use of car

You can claim the use of your car at your business destination by using the standard mileage rate or actual expenses, along with parking fees and business-related tolls.

However, if you use a rental car, you can only deduct the portion of the car used for business purposes. 

The easiest way to track your mileage is to use a mileage tracking app such as Driversnote. The app can automatically track your mileage and allows you to easily categorize your trips.

Rates for travel expenses

For many eligible expenses, you will just save your receipts. Then, you can claim 100% of the expense that’s not reimbursed as long as it’s reasonable and ordinary. 

Additionally, for car expenses, you can use actual expenses or the standard mileage rate. You can ask what your employer would prefer. With either method, you should keep track of business-related tolls and parking fees. If you use the standard rate, note that the IRS standard mileage rate for business travel in 2025 is 70 cents per mile.

If you’re given a travel allowance, you will still want to carefully track your expenses to show proof if needed. It’s very important to have your travel expenses covered since, due to the Tax Cut and Jobs Act, unreimbursed employee expenses will not be tax deductible until 2026.

Are travel reimbursements taxable?

Most reimbursements for ordinary and necessary travel expenses for temporary travel are not taxable. 

However, if the work at the temporary location is expected to last longer than a year or for an indefinite period of time, the reimbursement is taxable. Also, travel reimbursements for workers who don’t have a tax home are taxable. This could apply to workers, such as construction workers, who constantly change work locations and don’t have a primary location.

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