Guide to business travel expense reimbursement: Definition, management, and best practices

Travel expense reimbursement refers to the process of repaying employees for business travel expenses. These can include accommodations, transportation, meals, and other miscellaneous costs. An efficient travel reimbursement process ensures employees aren't financially burdened by work-related travel, allowing them to focus on their actual job responsibilities.

In this guide, we go over all things travel reimbursement, including expense reports, common business expense categories, tax regulations, and tools and strategies to help improve your company’s travel expense reimbursement process.

What is travel expense reimbursement?

Travel expense reimbursement is the process by which companies pay back their employees for the charges they incur while traveling for business. These charges, typically categorized as T&E expenses, include airfare, hotel rooms, rental cars, rideshares, meals, client entertainment, and other travel arrangements.

Companies reimburse travel expenses for compliance with labor laws, tax advantages (business expenses are usually deductible), and employee satisfaction. Without reimbursement, employees face personal financial burdens for work duties, leading to resentment and potential turnover.

Reimbursement for travel expenses promotes fairness, enables necessary business travel, and prevents employees from declining assignments due to cost concerns. Most companies establish spending limits and approval processes to balance business travel benefits with cost control.

Because travel-related expenses are often variable and most are incurred during the trip, it can be hard to pay for them up front. As a result, many businesses use traditional expense management software that requires employees to use their own funds for purchases and submit their expenses for reimbursement post-trip.

12 common travel expenses

Most travel expenses will likely fall into the same business expense category, but it’s useful to see some specific examples of common travel expenses. Here’s a granular list of travel expenses to help you better understand what they are and why you should reimburse them:

1. Per diem

Per diem is a Latin phrase that means “by the day.” Businesses use per diem allowances as a cost control measure for employees on multi-day trips.

The employee can submit a flat-rate line item on their expense report that includes all their out-of-pocket expenses up to an approved amount. Most companies don’t allow meal expenses if they offer a per diem.

2. Plane tickets

When an employee needs to pay for their flight to meet a client or attend a conference, it counts as a reimbursable travel expense. Employees who want to upgrade to business or first class typically need to pay the difference out of pocket.

3. Rental cars

Rental cars are generally regarded as a reimbursable travel expense. Some reimbursement policies put a per diem rate on rental car fees to keep costs down.

If the employee wants to upgrade and get a luxury sedan or SUV, they have to pay the difference out of pocket. To be more cost-efficient, they could also opt for a rideshare or public transit.

4. Taxis, public transit, and rideshares

Employees can be reimbursed for taxi and public transit expenses, provided the trips are business-related. These are generally less expensive options than rental cars. The key is that employees need to collect receipts and note the business purpose, date, and destination.

Apps like Uber and Lyft have created new transportation options for business travelers. They’re particularly useful for trade shows and conferences where employees only commute from the airport to the hotel or conference center and back. In congested urban areas such as New York and Los Angeles, ridesharing is often a more efficient option than renting a car.

5. Mileage

If your employees use their personal vehicles for business travel, your travel expense reimbursement policy should include a section on mileage reimbursement. This common employee travel expense can be tricky to calculate depending on the method you use, so it might require some special attention.

6. Lodging

Sending an employee to another state or country without setting up lodging is a recipe for disaster. Hotels, motels, and lodges can be booked up front on the company credit card or paid for by the employee and submitted on an expense report for reimbursement. Watch for room service charges and movie rentals—they often slip through the review process.

7. Meals

You have a few options when it comes to handling reimbursements for business travel meals. We already mentioned the per diem option. Another choice is to simply have the employee keep a receipt for the meal and submit it as a separate line item on their expense report. Gratuities may or may not be included, depending on your corporate travel policy.

8. Client entertainment

Wining and dining clients or customers is fairly common for many businesses. Your team may need to take a prospect out to a baseball game or a fancy dinner to close the deal. But be careful: This category could easily be abused if you’re not scrutinizing your expenses carefully.

9. Business supplies, equipment, and shipping

Business supplies and equipment could include a TV or monitor for presentations, pens and clipboards for clients to fill out forms, signage for a trade show booth, or the shipping costs to get it all there. This is a broad category that’s different for every business. If a traveling employee needs supplies or equipment to do their job, it’s normally a reimbursable expense.

10. Communications expenses

It’s important to stay connected while on the road. Business communications costs include cell phone plans, faxes, and wi-fi costs your team incurs while traveling.

11. Parking and tolls

Business-related parking at airports, hotels, and client locations is typically reimbursable, along with highway tolls during work travel. However, daily commuting, parking at the regular office, and personal errands during business trips usually aren't covered.

12. Conference fees and registration

Conference registration fees are generally reimbursable travel expenses when attendance serves a legitimate business purpose, such as professional development, networking, or industry research. This includes workshops, seminars, and trade shows.

You'll find a more comprehensive list of allowable travel expenses in IRS Publication 463.

Challenges of travel expense reimbursement

Travel costs can be difficult to control when spending is left in the hands of employees and only realized weeks later. Here are a few of the key challenges in reimbursing travel:

• Keeping receipts organized: Employees need to submit valid, original receipts to be reimbursed for their travel expenses. But collecting and organizing documentation isn’t their primary focus on a business trip. Missing receipts can lead to problems down the road.
• Timing: Travel reimbursement generally happens monthly or quarterly, so business travelers must pay their credit card balances on time. If the bill comes due before the reimbursement amount is processed, they’re under pressure to cover it out of pocket.
• Incorrect or lack of categorization: When travel expenses aren’t categorized correctly, the time it takes your finance team to fix them can add up quickly. This is where manual travel reimbursement workflows can lead to wasted time and potential tax problems.

Although the challenges seem overwhelming, much of this can be avoided using real-time expense management software, which we’ll discuss in more detail below.

How do travel expense reports work?

Let’s walk through a typical business trip to show how the travel expense reporting process comes to life.

Let’s say a company sends its marketing lead to an out-of-state conference. They’ve already booked and paid for the airfare, car rental, and other transportation costs. When the employee lands, they go to the rent-a-car company, swipe their credit card, and drive away with a car.

During their time away, they need to keep track of all their receipts for meals and incidentals. The final receipts will come when they return the car and check out of the hotel.

Once they get home, in order to submit their expense report, they need to make sure they’ve collected and organized all their receipts, that everything is itemized, and that each expense serves a business purpose (in this case, gathering conference learnings to bring back to the team).

The problem with expense reports

When the employee is the primary payer of travel costs during a business trip, the company is counting on them to be organized enough to list every expense on an expense report and provide proof of purchase receipts to back those entries up. The expense can’t be submitted and reimbursed if they lose a receipt.

Let’s assume the employee does everything right and submits a thorough, organized expense report for reimbursement. That reimbursement request needs to go through an approval process that could take some time. Depending on the company's reimbursement policy, the actual reimbursement will come a few weeks or even months after that.

The employee experience with expense reports is only one side of the equation. Their job is to make sure their expense report is accurate and well-organized. The company’s responsibility is to double-check that against its reimbursement policy, which takes time and resources.

This manual review of expense reports is another inefficiency in the expense approval process. Without a defined process—or, better yet, automation tools—reimbursing travel can be highly inefficient.

Processing expense reports for travel reimbursements

Managing travel expenses efficiently helps keep your business finances organized while getting employees reimbursed quickly. A clear process benefits everyone involved and minimizes headaches for both travelers and finance teams.

Here's what expense report processing looks like step by step:

• Collect receipts during travel: The employee saves all receipts for meals, transportation, lodging, and other business expenses as they occur
• Submit expense report within deadline: They complete their expense report within the company's specified timeframe, typically 30–60 days after travel
• Include required documentation: They attach receipts, travel authorization forms, and any additional supporting documents
• Get manager approval: The employee submits the expense report to their direct supervisor for initial review and approval
• Finance team review: The finance department verifies expenses against company policy and checks for completeness
• Final approval and processing: Once approved, the finance department processes expenses for reimbursement through payroll or direct deposit

Following this structured approach makes for timely reimbursements while maintaining proper financial controls.

Tips for faster reimbursement

The best way to accelerate reimbursement for travel expenses is to follow the company's expense reimbursement policy. Here are a few tips to help make things go more smoothly:

• Encourage employees to submit reports promptly after returning from travel rather than waiting until month-end
• Promote corporate credit card usage to simplify the reconciliation process
• Train staff to keep receipts organized during travel and provide clear guidance on documentation requirements
• Set up pre-approval processes for large expenses to avoid delays during review
• Maintain updated preferred vendor lists to streamline verification steps for hotels and airlines.

Implementing these strategies consistently will help you process reimbursements more quickly while reducing back-and-forth communication with traveling employees.

IRS rules for travel expense reimbursement

Regardless of your internal expense policy, the IRS has determined what constitutes eligible travel expense deductions. Legal precedents in some states also require companies to reimburse employees for business-related travel expenses. The job of the expense auditor is to know about both.

Let's take a closer look at some of the rules the IRS imposes on reimbursement for travel expenses:

What is a tax home?

When processing business travel deductions, the IRS has a specific definition for "tax home" that might surprise your employees. An employee's tax home isn't necessarily where they live, but rather the general area where their main place of business is located.

For employees working at your company offices, their tax home is typically where their assigned office is located. For those who work remotely or from multiple locations, the tax home becomes the area where they earn the majority of their income.

This distinction matters because the IRS requires that employee travel takes them away from their tax home to qualify for business travel deductions. You can't approve expenses for traveling within an employee's tax home area, even if the trip is business-related.

For example, if an employee's office is in downtown Chicago, that's their tax home. A business trip to Milwaukee would qualify for travel deductions, but a meeting across town in Chicago wouldn't. The IRS considers the entire metropolitan area around an employee's regular workplace as part of their tax home.

Tax write-offs for travel expenses

Your expense policy should allow reimbursement only for employee travel expenses that you can then write off as a deductible business expense on your taxes. There are several of these, and each expense deducted will need an associated receipt to protect your company in the event of an IRS audit. These are a few of the acceptable categories related to business travel:

• Travel expenses: This category includes airfare, tolls, taxes, and lodging. The IRS requires that the travel destination be away from the employee’s normal work location and that the trip be longer than one business day.
• Business entertainment: The meal cost of a client dinner is only deductible up to 50%. But catering an office party or event can be 100% tax-deductible. Be careful in this category—it’s the one IRS auditors look at most closely.
• Auto expenses: This category is most often used for business use of a personal vehicle. Businesses should also deduct rental cars here, not in the travel expense category above.
• Office supplies: When office supplies are required for a business trip, the costs are deductible in this category
• Office furniture: Buying or renting a folding table and chairs for a presentation while traveling counts in the office furniture category. Make sure your employees know this if they request authorization to make such a purchase.
• Advertising and marketing: This might not seem like an expense that an employee would submit, but business cards and signage count as deductible business expenses
• Education: Sending an employee on a trip to take classes or attend an accredited seminar can produce multiple deductible expenses. Separate them carefully. The class fees go into the education category, not travel expenses.

Proper categorization and documentation of these travel-related expenses will maximize your business deductions while ensuring compliance with IRS requirements and audit protection.

Documentation and recordkeeping

The IRS expects comprehensive documentation for all business travel expenses. Each travel expense needs proper substantiation through receipts, detailed logs, and clear evidence of business purpose.

Mileage logs require the date, starting location, ending location, total miles, and business purpose for each trip. Business purpose documentation should be specific. "Sales trip to Chicago" provides much better information than simply "travel."

Create a filing system that works for your team, whether digital folders or physical files. Many finance teams scan receipts immediately and store them in cloud-based systems with clear naming conventions.

Poor recordkeeping creates significant risks for your business. Without proper documentation, you'll lose valuable deductions and face potential penalties during audits.

Are travel reimbursements taxable?

Travel reimbursements can be tax-free when they follow IRS accountable plan rules. Under these rules, employees must provide receipts and return excess advances within a reasonable timeframe. Business travel expenses such as flights, hotels, and meals are typically non-taxable when properly documented.

Exceptions include company-provided transportation for commuting and certain relocation expenses, which may have different tax implications depending on the circumstances. If you're ever in doubt, consult a tax professional to make sure you remain compliant with IRS rules.

Travel expense reimbursement best practices

To overcome the challenges covered above, you can follow some best practices. Some will require manual effort, while others can be implemented by adding new tools to your tech stack.

Here’s what we recommend to manage your travel and reimbursement policies effectively:

1. Research reimbursement laws in your state: Your reimbursement policy must align with state and municipal requirements. Check local laws to verify this.
2. Update your expense and reimbursement policy: Too much spending freedom and minimal cozy controls make an expense and reimbursement policy inefficient
3. Make a list of deductible expense categories: Use IRS rules or ask your accountant which business expenses are deductible and which are not
4. Eliminate cash purchases: Take cash purchases off the table entirely. The IRS might deny them as deductions, and there’s too much room for expense fraud.
5. Implement real-time expense tracking and spend controls: Real-time expense tracking makes it easier to correct errors and control spending quickly
6. Issue corporate charge cards for employee travel: This puts spending and cost control in the hands of the company, not the employee. It will increase your bottom line.

Implementing these best practices will streamline your travel expense process, reduce fraud risk, and ensure compliance while making reimbursements faster and more accurate for everyone.

How Ramp eliminates the headaches of travel expense reimbursement

Managing business travel expenses shouldn't feel like herding cats, but for many finance teams, that's exactly what it becomes. Between chasing down receipts, manually reviewing expense reports, and processing reimbursements weeks after trips end, the traditional approach to travel expense management drains valuable time and creates frustration for both employees and finance teams.

Ramp transforms this chaos into a streamlined process through intelligent automation and real-time controls. With Ramp's corporate cards, employees can book travel and pay for expenses directly, eliminating the need for out-of-pocket spending and reimbursement requests altogether.

The platform automatically captures and categorizes transactions as they happen, matching receipts to charges without manual intervention. This means your team spends zero time hunting down missing documentation or reconciling credit card statements.

For expenses that do require reimbursement, Ramp's mobile app lets employees snap photos of receipts on the go, automatically extracting merchant details, amounts, and expense categories using advanced OCR technology. The system flags policy violations in real-time, prompting employees to add missing information or correct miscategorized expenses before submission. This proactive approach prevents the back-and-forth that typically delays reimbursements by days or weeks.

Perhaps most importantly, Ramp's automated approval workflows route expenses to the right managers based on predetermined rules, accelerating the review process while maintaining proper controls. Finance teams can set spending limits by category, merchant, or employee, ensuring compliance without manual oversight.

The result? Employees get reimbursed faster, finance teams reclaim hours each week, and your company gains complete visibility into travel spending patterns that help you negotiate better rates and find cost-saving opportunities.

Travel expense reimbursement doesn't have to be painful

Managing travel expense reimbursements can be time-consuming and complicated no matter how capable your accounting team is. Fortunately, Ramp’s modern expense management platform handles the most time-consuming parts of the process for you.

Try an interactive demo and see why more than 40,000 businesses choose Ramp to simplify their financial operations.