What are incidental expenses?
Incidental expenses are small, unbudgeted expenses that may result from business-related travel or activities. They’re also known as incidentals or incidental costs.
Monitoring incidentals can help you track and recoup expenses. Learn more about how incidental expenses work and when you may come across them.
Key takeaways
- Incidental expenses are minor expenses incurred when conducting business or traveling for work.
- They include things like fees and tips associated with transportation, lodging and dining.
- Businesses might be able to deduct incidental expenses, but most individuals can’t.
Examples of incidental expenses
Typically, incidental expenses are the additional costs that come with meals, hotel lodging and travel while you’re doing business. According to federal guidance, they include things like fees and gratuities paid to hotel staff, drivers, baggage carriers and porters.
Compared with typical business and travel expenses, incidental expenses tend to be smaller amounts of money. They may be paid for and reimbursed differently from other business expenses.
Reimbursement for incidental expenses
Whether you get reimbursed for business-related incidental expenses—and how—depends on company policy. So it can be useful to know upfront what your company policy is.
Some employers provide a business credit card for employees to use when traveling for work. Other employers may ask you to pay incidental expenses out of pocket and will reimburse you later.
You may need to collect and turn in all your receipts or log your expenses in a spreadsheet or app. Some employers may also set per diem rates to help cover costs.
What’s a per diem rate for incidentals?
A per diem rate is a daily allowance given to employees to cover business-related travel expenses like lodging and rentals as well as meals and incidental expenses. Amounts may be based on federal per diem reimbursement rates established for each state by the U.S. General Services Administration, though private employers may choose to pay more or less than the federal rate.
In 2023, the standard federal lodging per diem rate is $96, and the standard meals and incidental expenses—or M&IE—reimbursement rates range from $59 to $79, depending on the state.
Are incidental expenses tax deductible?
Businesses may be able to deduct incidental costs. But there may be limits on how much they can deduct. In general, the deducted amount can’t exceed the federal per diem rate, which varies by region.
Most individuals can’t deduct incidental expenses, even if their employer doesn’t reimburse them.
Incidental expenses FAQ
Have more questions about how incidental expenses work? Check out these frequently asked questions.
Do you need receipts for incidental expenses?
Some companies ask you to provide receipts for incidental expenses, and some don’t. You can check your company’s policy to find out whether you need to keep your receipts.
What are incidental expenses at a hotel?
Incidental hotel charges are costs associated with hotel services and amenities that fall outside your room rate. That might include things like room service and dry cleaning.
Incidental expenses in a nutshell
Incidental costs are typically small expenses, but they can add up. So knowing where you might encounter them and how your company handles them can be helpful when you’re traveling for business.
And if you’re on the road a lot, you could also consider how a travel credit card could help you earn rewards on related purchases—whether you’re traveling for business or pleasure.
