What is considered a business expense on a business trip?

Question

Scenario:  I own my own business (LLC).  There is a business-related conference that I wish to attend that requires travel.  I assume airfare, cabs, hotel and conference tickets are all obvious expenses that I can use my American Express Business card on.  But what about meals?  Can I expense meals?  What are other things can and cannot be expensed?

user4127 · Accepted Answer

The IRS Guidance pertaining to the subject.  In general the best I can say is your business expense may be deductible.  But it depends on the circumstances and what it is you want to deduct.

Travel

Taxpayers who travel away from home on business may deduct related
  expenses, including the cost of reaching their destination, the cost
  of lodging and meals and other ordinary and necessary expenses.
  Taxpayers are considered “traveling away from home” if their duties
  require them to be away from home substantially longer than an
  ordinary day’s work and they need to sleep or rest to meet the demands
  of their work. The actual cost of meals and incidental expenses may be
  deducted or the taxpayer may use a standard meal allowance and reduced
  record keeping requirements. Regardless of the method used, meal
  deductions are generally limited to 50 percent as stated earlier. 
  Only actual costs for lodging may be claimed as an expense and
  receipts must be kept for documentation. Expenses must be reasonable
  and appropriate; deductions for extravagant expenses are not
  allowable. More information is available in Publication 463, Travel,
  Entertainment, Gift, and Car Expenses.

Entertainment

Expenses for entertaining clients, customers or employees may be
  deducted if they are both ordinary and necessary and meet one of the
  following tests:
  
  Directly-related test: The main purpose of the entertainment activity is the conduct of business, business was actually conducted
  during the activity and the taxpayer had more than a general
  expectation of getting income or some other specific business benefit
  at some future time.
  Associated test: The entertainment was associated with the active conduct of the taxpayer’s trade or business and occurred directly
  before or after a substantial business discussion.
  
  Publication 463 provides more extensive explanation of these tests as
  well as other limitations and requirements for deducting entertainment
  expenses.

Gifts

Taxpayers may deduct some or all of the cost of gifts given in the
  course of their trade or business. In general, the deduction is
  limited to $25 for gifts given directly or indirectly to any one
  person during the tax year. More discussion of the rules and
  limitations can be found in Publication 463.

If your LLC reimburses you for expenses outside of this guidance it should be treated as Income for tax purposes.

Edit for Meal Expenses:

Amount of standard meal allowance.   The standard meal allowance is
  the federal M&IE rate. For travel in 2010, the rate for most small
  localities in the United States is $46 a day.

Source IRS P463

Alternately you could reimburse at a per diem rate

Alvi · Answer

The IRS clearly states that for businesses to claim deduction on trips, the travel’s primary purpose should be for business. You can claim mileage, travel costs, per diems under tax deductions. The standard allowable rate of mileage and per diem also varies from state to state and the IRS updates the rate annually. To know exactly how much can you save on tax deductions, you can use a per diem calculator.

Answered by Alvi on August 28, 2021

Acccumulation · Answer

The general principle is that expenses that would have been incurred without the job are not deductible. If you wouldn't have otherwise gone to the city, then the plane tickets are deductible. For lodging, you do normally have housing expenses, but hotels tend to be more expensive, plus you probably still have to pay rent/mortgage at your residence, so the hotel is an additional expense rather than a replacement of a regular expense. Meals are where it gets complicated, as you would have had to eat anyway, but meals on the road tend to be more expensive, so while the entire cost isn't an additional expense, some of it is. The IRS has settled on letting you deduct some of the cost of meals, with the cap being 50%.
There's been some discussion on a further point in the comments, and I think it should be put in an answer: Technically, you can charge anything you want to the business card, you just have to consider anything you charge that isn't deductible to be income. However, it's still legitimate to ask what is deductible in deciding what to charge, in that it is a good idea to keep the accounts separate, as the accounting gets messy otherwise. And if you have a credit card that's labelled as being a business card that's being used for personal expenses, that can raise red flags.

What is considered a business expense on a business trip?

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