What are business trip expenses?
Most of the costs during corporate travel events are considered business expenses, which means they are usually tax deductible. Following the company’s business expense policy, the employee can spend with a corporate credit card, or pay out-of-pocket and claim reimbursement afterwards.
Typical business travel expenses
Travel for business purposes is not one-size fits all. But there are some generally accepted categories of costs that can help inform your expenses policy.
Transportation costs include the journey there and back, such as airfares, private shuttles, taxis or public transportation like buses. This cost, as well as accommodation, is likely to make up the biggest portion of your spending. For example, in New York, 20% of all travel is business-related and therefore reimbursable.
Alongside main transportation, employees are able to expense any smaller journeys that are typically taken by taxi. For example, a taxi journey from a hotel to a conference center is also likely to be an eligible expense.
Moreover, the IRS has a standard mileage rate for those who drive themselves there and back on business trips. This is slightly more complicated, as you can't just expense the daily commute- it has to qualify as a temporary place of work. In some instances, tolls and parking fees are also included.
For many employees, going on a business trip means having an overnight stay. And given the far distance between major hubs in the US, business travel often spans several days. Therefore, the cost of accommodation often makes up the bulk of costs in a business trip.
Some businesses have an agreement with hotel chains and brands. The guarantees a standard experience worldwide, and businesses may also get access to discounted corporate rates for a high volume of stays. However, sometimes other lodging options like Airbnb are preferred.
Non-entertainment related meals are able to be expensed. This means your employees breakfast and dinner, for example, but not a meal out trying to charm a potential new client.
Instead of keeping track of every single meal, some companies prefer to offer a standard meal allowance instead, which can sometimes simplify things for tax purposes. Between December 2020 and January 2023, 100% of these meals are deductible, but in normal times, only 50% of this cost may be contributed to reducing your corporate tax bill.
How to streamline business trip expenses
For large corporations, consolidating business travel expenses is a no-brainer. In fact, even small business owners who want to take advantage of tax deductible work trip expenses should try to streamline the process.
Keeping track of expenses can be a nightmare for employees, and the receipt reconciliation process can be one of the most frustrating parts of the job for the finance department.
Therefore, automating the expense management process can provide more control, and simplifies the experience for both employee and financial controller. For example, many automation solutions allow employees to snap a photo of their receipts and upload immediately to an app. These solutions are often both iOS and Android compatible.
This enables businesses to better prepare for tax season and audits without putting extra pressure on the finance team, with an electronic paper trail to track all business trip spending. With worldwide business trip expenses expected to exceed $1.7 billion in 2022, the finance department needs all the control they can get.
Furthermore, there are regulatory notes that you can add into your business travel policy to help employees keep the best interests of the company in mind.
For example, having a preferred airline group can allow your company to maximize air miles and points. Airlines such as Norwegian Air even offer video conferencing onboard, as they tailor flying experiences towards business travelers.
In business travel news, business trips and spending is expected to continue increasing over the coming years. The industry is forecasted to grow by 15% over the next 7 years, largely fueled by the return of in-person conferences and networking events.
Therefore, a comprehensive streamlined business trip policy is one of the most effective ways to manage travel expenses and the overall financial health of your corporation.