- Lawmakers explored the idea of a travel tax credit to boost tourism during the coronavirus pandemic, but it was never passed.
- Some business owners and independent contractors can deduct certain travel expenses if they're related to their business.
- Be sure to consult with a tax professional before deducting travel expenses to ensure you're following the tax code.
Shortly after health officials declared a global pandemic in early 2020, tourism industries around the world ground to a near halt. That summer, legislators tossed around the idea of offering a travel tax credit to encourage Americans to get out and about, boosting the domestic travel industry.
The American Tax Rebate and Incentive Program (TRIP) Act, also known as the Explore America Tax Credit, would've provided Americans with thousands of dollars in travel tax credits, but it didn't have enough support to pass.[1, 2]
Here's what you need to know about the TRIP Act, including what it would've provided, how likely it is to pass at some point in the future and what other travel-related tax breaks are available.
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What was the TRIP Act?
The TRIP Act, introduced to the senate by Sen. Martha McSalley (R-Ari.), would've offered a travel tax credit worth up to $4,000 per filer—or $8,000 for married couples who file jointly—and an additional $500 per child 16 and younger.
The credit was designed to be available in 2020 and 2021. Eligible expenses would've included costs for trips within the U.S. but at least 50 miles from the taxpayer's home, such as:
Food and beverages
Conferences and business meetings
But while it would've been nice for Americans to essentially get a discounted or even free vacation, there wasn't enough support in either house of Congress to pass it. Since the proposed bill stalled, it hasn't been picked up again and likely won't be in the future.
"At this point, due to inflation, I doubt that any more stimulus initiatives, even for tourism, will be forthcoming," says Sallie Mullins Thompson, a certified public accountant (CPA).
Meet the Expert
After working at IBM for 20 years, Thompson became a CPA in 2002. She also earned her Certified Financial Planner designation in 2011.
Are there other travel tax credits?
There are no travel tax credits included in the U.S. tax code. However, certain taxpayers may be able to deduct some of their travel-related expenses. More specifically, business owners and independent contractors—that includes gig workers, side hustlers and startup founders—can deduct travel expenses that are ordinary and necessary for their business.
Some of the expenses you may be able to deduct include:
Travel by plane, train, bus or car
Taxi fares to and from the airport or train station and your hotel and to and from your hotel and the work location
Shipping costs for baggage, as well as samples and display materials
Rental car costs or mileage if you're driving your own vehicle
Dry cleaning and laundry
Business calls during your trip
Tips related to any of these services
Other ordinary and necessary expenses related to your business travel
That said, things can get murky if you're mixing business and pleasure on your trip. The IRS states that if your trip isn't strictly for business purposes, you can only deduct the portion of your expenses that are related to business.
For example, if you pay $300 for a rental car for three days and spend one of those days sightseeing, you can only deduct $200 of your cost.
Can employees deduct travel expenses for business travel?
While business owners and independent contractors can deduct certain travel-related costs when filing tax returns, that tax break isn't available to employees.
"If the employer reimburses the employee as part of an expense account, the employer gets the deduction on its business tax return," says Thompson. "The employee cannot take any deduction since it was taken by the business, plus the employee was made whole via the reimbursement."
But even if your employer doesn't reimburse you, the Tax Cuts and Jobs Act of 2017 eliminated the deduction for unreimbursed travel expenses incurred by employees.
How to know if a travel expense is deductible
If you own your own business or you're an independent contractor, read the IRS guide on business travel expenses to determine whether a trip qualifies for reimbursement and which of your expenses are eligible and which aren't. And remember, if your trip isn't strictly for business purposes, you'll need to make sure you don't include personal travel expenses in your tax return.
"Keep all receipts," says Thompson, "In addition, a journal of dates and times, activities and business purposes should be maintained for each business-related trip."
If you're uncertain about whether you should deduct certain expenses or need help with separating personal and business trip costs, it may be a good idea to hire a tax professional who can guide you through the process or take it off your hands.