According to the Internal Revenue Service, tax-deductible expenses are ‘ordinary, necessary, and reasonable’ costs that enable businesses to earn income. These expenses are subtracted from the company’s revenue to lessen tax liability.
Similarly, you can avail of tax deductions for expenses incurred while on business-related pursuits—whether you are employed or self-employed.
Know the answer to the question, “Can you deduct hotel expenses for work?” and more as you read on.
Tax Home
As an employed or self-employed individual, you have a ‘tax home.’ It is the area where most of your work takes place, not your permanent home address. You can file for a change of tax home when you relocate for a job or venture.
You are allowed to deduct hotel and travel expenses if these are incurred in areas away from your tax home. Also, you should prove that your trip duration is long, and your destination is far to justify the need to sleep or rest in a hotel or similar establishment.
It is important to note that your transport expenses within your tax home are not tax-deductible. However, if you ride a taxi to the airport for a business trip abroad, you may acquire receipts for proof. Secure documents for travel expenses substantiation.
Essential Work Travel
Section 162 of the Internal Revenue Code determines business-related travel and entertainment as a general and administrative expense that is tax-deductible.
Your travels should also meet the general business expense requirements, meaning your travels must be reasonable and appropriate for its purpose.
Extravagant or lavish travels will be questionable. However, you may negotiate for deductions if you have proper documentation proving the necessity of extra expenses.
Can I Claim Tax Deduction For Reimbursed Hotel Expenses?
If you are employed and your company reimburses your hotel expenses, you will not get a tax deduction. Also, if you are receiving a per diem allowance for meals and accommodation, you will not be able to include it on your tax-deductible items. The company will avail of tax deductions for providing employee benefits.
Can you deduct hotel expenses for work? There are two answers:
1) No—if your company refunds your expended money; and
2) Yes—if you paid for it and did not get any reimbursement.
Remember, you can only claim the exact amount of money you spent. A company annually sets a reasonable amount of expenses for accommodation, meals, and incidentals. This amount serves a reference for tax exemptions, not the actual amount for claims.
Other Tax-Deductible Expenses
IRS provides a comprehensive list of items as a reference for deducting foreign business expenses. Other tax-deductible expenses are:
- Transportation, such as air, rail, and bus fares
- Car rentals
- Shipping and baggage charges
- Meals
- Communications
- Dry cleaning and laundry
- Computer rental fees
Conclusion
Can you deduct hotel expenses for work? Without reimbursement, definitely.
Whether you are self-employed or employed, it is ideal to familiarize yourself with the ground rules on tax set by the IRS. If you have any doubts about claims, you may consult a professional to help you out.