No one wants to pay more tax than necessary, so take advantage of these CRA-approved business travel tax deductions. The key is making sure the expenses are reasonable, directly connected to earning business income, and supported by proper records.
Out of Town Transportation Costs
If you travel outside your usual place of business to earn business or professional income, you may generally deduct eligible transportation costs. This can include airfare, train fare, bus fare, taxi or ride-share costs, and rental vehicle expenses, provided the trip is business-related and the costs are reasonable.
What you cannot do is claim the personal portion of a rental vehicle as a business expense. For example, if you rent a car for a business convention but continue using it for personal errands or vacation time afterward, only the business-use portion is deductible.
Personal side trips should be separated from business travel. For example, if your business is based in Montreal and you attend a business convention in Vancouver, the eligible business portion of the travel may be deductible. If you add a personal side trip to Toronto with no business purpose, the extra cost related to that side trip should not be claimed as a business expense.
If you use your own vehicle for business travel, you may deduct the business-use portion of eligible motor vehicle expenses. This can include fuel, insurance, repairs and maintenance, licence and registration fees, leasing costs or loan interest within CRA limits, and capital cost allowance if applicable. You must keep a mileage log showing total kilometres driven and business kilometres driven. Traffic tickets, parking fines, and other penalties are not deductible.
Out of Town Lodging
Accommodation costs for business travel are generally deductible when they are reasonable and incurred to earn business income. If you extend a trip for personal reasons, only the business-related portion of the lodging should be claimed. For example, if you attend a two-day conference and then stay two extra days for sightseeing, the personal portion of the hotel stay should be excluded from your business deduction. Keep conference agendas, meeting notes, booking records, and receipts to support the business purpose of the trip.
Meals and Entertainment While Travelling
Meals and entertainment expenses are treated differently from many other travel costs. In most cases, the CRA limits the deductible amount for meals, beverages, and entertainment to 50 percent of the lesser of the amount paid and a reasonable amount. This rule commonly applies to client meals, meals during business travel, and entertainment connected to earning business income.
Employee Travel Expenses
Employees may be able to deduct certain employment travel expenses only when specific CRA conditions are met. In many cases, the employer must complete Form T2200, Declaration of Conditions of Employment, confirming that the employee was required to pay those expenses as part of their job. Employees should not assume that unreimbursed travel expenses are automatically deductible.
For business owners and self-employed individuals, travel expenses are typically claimed as business expenses when they are incurred to earn income and are properly supported.
Surprising things you can deduct
Some business travel costs are often overlooked. Depending on the circumstances, deductible expenses may include hotel internet charges, reasonable tips, baggage fees, business-related cancellation fees, parking for business travel, and fees for changing a business flight or hotel booking. These expenses should be supported by receipts and must relate to the business purpose of the trip.
If a spouse, friend, or family member travels with you but is not involved in the business purpose of the trip, their costs are personal and should not be deducted. If another person is travelling for a legitimate business reason, such as an employee attending the same conference or meeting, their eligible business-related costs may be deductible.
Hold onto your receipts
When travelling for business, you may be able to deduct eligible transportation, lodging, meals, and certain entertainment expenses. However, these costs must be reasonable, properly documented, and connected to earning business income. Personal living costs and personal portions of a trip should not be claimed.
What Records Should You Keep?
Strong documentation is the best protection if the CRA reviews your travel expense claims. Keep copies of airline tickets, hotel invoices, rental car agreements, taxi or ride-share receipts, restaurant receipts, event registrations, and proof of payment. For meals and entertainment, it is also helpful to note who attended, the business relationship, and the purpose of the meeting.
For vehicle expenses, keep a mileage log that records the date, destination, purpose, and number of kilometres driven for each business trip. If a trip includes both business and personal activities, document how you separated the deductible business portion from the personal portion.
Final reminder
After recording your business travel expenses, keep your receipts and supporting documents in a secure location. The CRA generally requires taxpayers to keep required records and supporting documents for six years from the end of the last tax year they relate to. This includes receipts, invoices, travel itineraries, mileage logs, conference registrations, and notes showing the business purpose of the trip.
E&E Professional Accountants has years of experience in assisting businesses with their accounting needs. We are founded and managed by an experienced corporate auditor and a former CRA tax auditor. Feel free to contact us for assistance with all your accounting and bookkeeping needs.