The complete guide to travel expense reimbursement for businesses

Travel expense reimbursement is the process by which companies repay employees for approved out-of-pocket costs incurred during business travel. These expenses commonly cover airfare, hotels, meals, ground transportation, and other costs directly related to conducting business away from the employee's regular workplace. The fundamental purpose is ensuring employees aren't personally liable for expenses required to perform their job duties.

For reimbursements to work smoothly, expenses need to align with your corporate travel policy and meet IRS requirements. Well-defined reimbursement guidelines create consistency and clarity for both employees and managers, reducing confusion about what qualifies for reimbursement and how the process works.

Knowing exactly what qualifies for expense reimbursement helps eliminate confusion and makes expense reporting easier. Here are some of the most common types of reimbursable travel expenses.

Airfare

Airfare is one of the largest travel expense categories and typically receives full reimbursement when booked for business purposes. This includes domestic and international flights, baggage fees, and seat upgrades when there are legitimate business needs. Companies can establish guidelines around booking timing, preferred airlines, or fare class restrictions to control costs. Some organizations require approval for premium seating or specific routing, while others allow employees to make reasonable booking decisions within established limits.

Ground transportation

Ground transportation covers how employees get around during business trips, from airport transfers to local travel between business meetings. This category includes taxi fares, rideshare services, rental cars, public transportation, and parking expenses.

Accommodations

Hotel and lodging expenses typically qualify for full reimbursement when they're necessary for business travel. This includes room rates, taxes, and other amenities like internet access when it’s necessary for work purposes. In many cases, companies establish per-night limits or require employees to book accommodations within specific price ranges. Extended stay discounts, corporate rates, and advance booking requirements are often included in policies.

Meals

Meal expenses during business travel can be reimbursed either through actual cost reimbursement or per diem. This includes breakfast, lunch, dinner, and reasonable tips when employees are traveling away from home. Companies can set their own daily meal limits or use IRS per diem rates to establish reimbursement amounts. Some organizations distinguish between solo meals and client entertainment, with different approval requirements for each category.

Client entertainment

Client entertainment expenses have business purposes and often require additional documentation and approval. These expenses include client meals, entertainment venues, and hospitality expenses that support business relationships. Many companies will require pre-approval for client entertainment and detailed documentation that includes attendee names, business purposes, and relationship context.

Business supplies

Business supplies purchased during travel can qualify for reimbursement when they're necessary. This includes presentation materials, office supplies, or equipment needed for specific business functions. To qualify for reimbursement, these expenses should be directly related to business needs and the supplies should be unavailable through normal channels. Documentation should clearly explain why the supplies were necessary.

Conference fees

Conference registration fees, workshop costs, and professional development expenses during business travel typically qualify for reimbursement. In many cases, companies establish processes for approving educational expenses in advance, such as requirements for post-conference reporting.

Communication costs

Communication expenses include phone calls, internet access, and other connectivity costs necessary for conducting business while traveling. Reasonable communication costs typically receive approval, though companies may set limits on international calling or premium internet services. Documentation should show business necessity and duration of use.

Other incidental expenses

Incidental expenses include various small costs that arise during business travel, such as tips, baggage handling, or dry cleaning. While individually small, these expenses can accumulate over longer trips. Companies often set daily limits for incidental expenses or require employees to itemize costs above certain thresholds. Clear policies help employees understand what qualifies as reasonable incidental expenses versus personal costs.

Well-structured travel expense policies create predictable financial processes that benefit both employees and management. They establish spending boundaries, define approval workflows, and provide clear documentation standards that support accurate financial reporting and tax compliance.

Prevents confusion and disputes

Clear policies eliminate confusion around what expenses qualify for reimbursement and how the approval process works. When employees understand spending limits, documentation requirements, and submission procedures before they travel, they can make decisions that align with company expectations. This clarity reduces back-and-forth communication between employees and managers about expense eligibility.

Defined policies also protect managers from having to make subjective judgment calls about expense approval. When guidelines clearly outline acceptable spending categories and limits, approval decisions are straightforward rather than discretionary choices that can create inconsistency.

Reduces fraud and errors

Travel expense policies create controls that help prevent both intentional fraud and unintentional errors. When employees know exactly what documentation is required and how expenses should be categorized, they're more likely to submit accurate, complete expense reports.

Clear spending limits and approval requirements make it harder for fraudulent expenses to go undetected. Policies that require receipts, business justifications, and manager approval create multiple checkpoints that catch questionable expenses before reimbursement occurs. Consistent policy application also makes it easier to spot unusual spending patterns or expenses that don't align with typical business travel needs.

Ensures compliance with tax regulations

Travel expense policies help businesses maintain compliance with IRS regulations that govern business deductions and employee reimbursements. IRS regulations require businesses to maintain detailed records that show the business purpose, amount, and participants for travel expenses. Well-designed policies build these documentation requirements into the expense submission process, making compliance automatic.

Tax-compliant policies also help distinguish between reimbursable business expenses and taxable employee benefits. When policies clearly define what qualifies for reimbursement and require appropriate documentation, they support accurate tax reporting and reduce audit risks.

Enhances employee satisfaction and retention

Transparent expense policies help create a positive environment for employees by eliminating uncertainty around travel reimbursements. When employees know they'll be quickly reimbursed for legitimate business expenses, they'll likely be more willing to travel for work and less likely to experience financial stress from paying for business expenses. Clear policies also prevent employees from feeling penalized for business travel expenses that weren't their choice. When reimbursement guidelines are fair and consistently applied, employees can focus on business objectives rather than worrying about personal financial impact from work-related travel.

Considering the implications of IRS requirements for business travel expense reimbursements can help you create policies that protect your company and employees from tax complications. The IRS has established specific rules that determine how reimbursements can be tax deductible, and that starts with what the IRS calls an “accountable plan”. There are three core requirements to this plan that your reimbursement policy must meet to avoid treating payments as taxable income to employees.

The most fundamental requirement is that expenses must have a legitimate business connection. Travel expenses should directly relate to conducting business activities away from an employee's regular workplace. According to the IRS, being "away from home" means traveling past a typical workday and far enough that employees need sleep or rest to handle their work responsibilities.

In addition to having a valid business purpose, employees need to provide proper documentation within a reasonable timeframe, typically within 60 days of incurring the expense. This means recording essential details like when and where the expense occurred, its business purpose, and the exact amount spent.

Finally, there's an important safeguard built into the system. Employees must return any excess reimbursement within a reasonable period, usually 120 days after the expense. This requirement helps maintain a clear distinction between legitimate business reimbursements and what might otherwise be considered additional compensation.

Per diem rules

​​Per diem allowances offer a simplified approach to meal and incidental expense reimbursements. These fixed daily allowances eliminate the need for detailed meal receipt tracking while providing predictable expense budgeting and remaining in compliance with IRS regulations.

The General Services Administration (GSA) sets federal per diem rates annually, establishing maximum amounts that qualify for tax-free treatment under accountable plans. For fiscal year 2025, the standard continental United States rate includes specific amounts for meals and incidental expenses that vary by location. Knowing the per diem requirements helps you structure allowances that remain tax-compliant while meeting employee needs.

Per diem payments that stay within federal rate limits don't require individual meal receipts, though you still need documentation showing travel dates, destinations, and business purposes. When per diem payments exceed federal rates, the excess amount becomes taxable income to employees and subject to payroll tax withholding. Some companies choose to "gross up" these payments to cover additional tax burden, though this increases total costs and creates additional payroll tax obligations.

Mileage reimbursements

Business mileage reimbursement policies need to follow specific IRS guidelines to distinguish between legitimate business expenses and personal transportation costs, and as a result, be tax deductible. The IRS publishes an annual standard mileage rate that reflects average vehicle operating costs including fuel, maintenance, insurance, and depreciation. Employees must maintain records showing the date, destination, business purpose, and mileage for each business trip to qualify for tax-free treatment.

The standard mileage rate method offers administrative simplicity and consistent application across different vehicle types and operating costs. Companies can also choose to reimburse based on actual vehicle expenses, though this approach requires significantly more documentation and calculation to maintain compliance.

Mileage reimbursements that exceed the standard rate become taxable income, while reimbursements below the standard rate remain fully tax-free. Using the IRS standard rate can eliminate disputes about reasonable amounts while maintaining straightforward compliance procedures.

Regular commuting between home and an employee's primary workplace doesn't qualify for business mileage reimbursement, regardless of distance or work-related activities during the commute. Business mileage begins when employees travel from their regular workplace to other business locations or directly from home to temporary work sites.

Creating a reimbursement process allows employees to understand exactly what they need to do during and after a trip while giving your finance team consistent workflows to manage. These five steps can help create an effective travel expense reimbursement program.

1. Create an expense report

Expense reports serve as the formal documentation that includes all relevant travel expenses and business justifications. Employees should compile their travel expenses into a structured format that includes dates, amounts, business purposes, and expense categories. Clear requirements for expense reports prevent incomplete submissions that slow down reimbursement payments.

2. Attach documentation

Proper documentation explains the business purpose of expenses and ensures compliance with IRS requirements for tax deductible reimbursements. Documentation can include receipts, invoices, and other supporting materials that validate their expense claims. Receipt requirements often include all expenses over a certain threshold, typically $25 or $75 depending on your policy. For smaller expenses like tips or parking meters where receipts aren't available, employees should document these costs with explanations of the business purpose.

3. Submit the expense report

Establishing requirements for when an expense report needs to be submitted helps establish expectations among employees while giving your finance team predictable timelines for processing reimbursements. Companies can establish monthly or bi-weekly submission deadlines that follow payroll cycles or accounting periods.

Be sure that your submission process is straightforward and accessible. Online submission options allow employees to submit reports from anywhere while providing them with confirmation and the ability to track reimbursement status.

4. Receive approval

The approval process verifies that expenses follow company policies before reimbursement, and these processes should include both thorough review and reasonable processing times. Companies can establish expense approval hierarchies based on expense amounts, employee levels, or corporate travel budgets. Automated routing can direct expense reports to the appropriate managers while flagging unusual expenses for additional review. This approach maintains oversight without creating bottlenecks for routine expenses.

As a part of your reimbursement policy, establish approval criteria that are clearly defined and consistently applied. Managers need guidelines about what constitutes reasonable expenses, acceptable business purposes, and when to request additional documentation.

5. Get reimbursement

The final step to this process reimburses employees through your established method. Processing times should be predictable and communicated clearly so employees know when to anticipate payments. Payment methods vary among companies, from direct deposit to reimbursement checks. Direct deposit often offers the fastest processing and lowest administrative costs.

Similar to the submission deadlines, align your reimbursement schedules with payroll cycles or accounts payable runs. Many companies process expense reimbursements weekly or bi-weekly, providing reasonable payment timing without requiring daily processing.

Simply creating a travel reimbursement policy is the first step to establishing an effective reimbursement process. Follow these best practices to create a program that benefits both your employees and business.

Establish clear reimbursement policies

Clear policies ensure your employees know which expenses qualify for reimbursement and how the reimbursement process works. Your policy should specify spending limits, eligible expense categories, documentation requirements, and approval procedures in language that's easy to understand. Make sure to explicitly list common non-reimbursable expenses such as personal entertainment, clothing purchases, gym fees, personal phone calls, mini-bar charges, or expenses for accompanying family members. This prevents misunderstandings and rejected expense reports when employees assume all travel-related costs are covered.

When it's helpful, include specific examples that relate to your business operations in your policy. For instance, if your team travels to see clients frequently, explain how client entertainment expenses should be handled differently from solo meals.

Automate expense reporting

Manually completing and submitting expense reports is error-prone and a drain on productivity. According to the Global Business Travel Association (GBTA), it takes employees an average of 20 minutes to complete one expense report, with nearly 20% containing errors that require an additional 18 minutes to correct.

Expense management software can automate these manual processes through features like mobile receipt capture with optical character recognition (OCR), automatic data entry and categorization using AI, and streamlined approval workflows. Automated expense reporting can enforce policy compliance in real-time, rejecting non-compliant transactions before they occur and maintaining comprehensive digital documentation for compliance purposes.

Freeing up your employees from manual expense reporting can improve productivity across your business. Finance teams can redirect time from manual expense reconciliation to cost-saving initiatives, while managers spend less time reviewing expenses and more time on tasks that help your business grow.

Set submission deadlines

Predictable submission deadlines create reliable reimbursement timing for your finance team while helping employees understand when expense reports need to be submitted. Bi-weeky or monthly deadlines that align with accounting close periods or payroll cycles can be the most efficient options.

Clearly communicating deadlines and any changes due to holidays or other scheduling conflicts keeps employees and finance teams aligned. Additionally, establish late submission policies that balance accountability with fairness. Some companies require manager approval for late submissions, while others may delay reimbursement until the next processing cycle. Whatever approach you choose, apply it consistently.

Expense management automation can help manage submission deadlines by sending automatic reminders to employees and flagging overdue reports. This helps to reduce the burden on finance teams while helping employees stay current with their expense reports.

Regularly audit and update policies

Periodic auditing your policies can help identify where your program could be more effective or compliant. As a part of this process, review expense patterns to spot trends that might indicate policy gaps or opportunities for improvement. Audits should examine both compliance and efficiency, so consider if employees are following documentation requirements and if spending limits are appropriate for travel costs. When you make changes, explain the business reasons behind updates and if necessary, provide training to help employees learn the new requirements.

Provide employee training

When you hire new personnel, switch your reimbursement processes, or implement a new travel management software, provide your employees with training so they can comply with the travel reimbursement requirements. Training helps your employees stay current with policy changes and new expense management tools. Provide hands-on training sessions that allow employees to practice using new platforms before they need them for actual expense reporting.

Beyond hands-on training, make training resources and policy requirements easily accessible. Written guides and video tutorials can help employees find answers when they need them without requiring manager intervention.

Retaining expense documentation helps to protect your business during audits and support accurate financial reporting. Requirements for how long you must keep expense records vary between the IRS and state regulations, and integrating these timelines into your retention policies can help you avoid compliance issues.

In most cases, the IRS mandates that companies keep expense records for a minimum of three years following the filing date of their original tax return, or two years after paying the associated tax liability, whichever is later. This three-year rule applies to most business expense records, including travel receipts, expense reports, and supporting documentation.

However, certain situations can make it important to extend your retention period. If you underreported income by more than 25%, the IRS can audit your business for up to six years later. In cases of fraudulent returns or failure to file returns, there's no statute of limitations for an audit of your business, so indefinite retention may be necessary.

State requirements can vary from federal guidelines and in some cases, states may have longer retention periods. Some states require businesses to maintain certain expense records for up to seven years, while others align with federal three-year requirements. Companies operating in multiple states should follow the longest retention period required by any jurisdiction where they do business.

Expense documentation can serve other purposes besides tax compliance, and those other purposes may require longer retention. Employment law disputes, insurance claims, and contract audits can require historical expense records that extend beyond tax retention periods. Having a seven-year retention policy can allow your business to meet various legal and business requirements.

To simplify meeting these requirements, consider digital storage solutions that make long-term document retention more practical and cost-effective. The best expense management software can automatically archive expense records and maintain searchable databases that make retrieval simple when necessary.

Employees can make mistakes on expense reports, leading to them being rejected. These are common mistakes that can delay the reimbursement process and frustrate employees who need timely payment for business expenses.

Missing or inadequate receipts

One of the most common reasons an expense report is rejected is that it doesn’t have sufficient or the right receipt documentation. Blurry photos, partial receipts that don't show complete transaction details, or expense claims without any supporting documentation at all can all be reasons why an expense report is rejected.

Proper receipts should clearly display the vendor name, transaction date, itemized charges, and total amount. Keep in mind that credit card statements alone don't provide sufficient detail for expense approval, particularly for meals where you need to show what was purchased and for what business purpose. While some expenses like parking meters or small tips may not generate receipts, employees should document these situations with written explanations that include the amount, date, location, and business justification.

Incorrect expense categorization

Miscategorizing expenses can slow down the approval process, and in some cases, cause an expense report to be rejected. Common categorization mistakes include listing client entertainment as regular meals, categorizing personal items as business supplies, or mixing different expense types within single line items.

Training employees on proper expense categories or implementing software that automates expense categorization can reduce or completely eliminate these errors. Giving employees examples of how different expenses should be classified helps them avoid mistakes when submitting an expense report. Expense management software can automatically categorize expenses based on merchant information and purchase details.

Exceeding approved spending limits

Expenses that exceed budgets will often be automatically rejected or require additional approvals that slow down processing. This includes exceeding per diem allowances, choosing accommodations above approved rates, or making purchases without proper pre-authorization.

Making sure employees are aware of spending limits, along with corporate credit cards for employees with embedded expense policies, can prevent these rejections. Employees need to know the daily meal allowances, hotel rate limits, and approval requirements for expenses above certain thresholds before they travel.

Managing employee spending during business travel means providing necessary flexibility while maintaining financial controls. When employees understand your spending guidelines and have the tools that support compliant decisions, they're more likely to stay within policy limits while traveling.

While clear communication can help ensure employees follow expense guidelines, expense management software can prevent policy violations before they happen. With the right solution, your business can issue corporate cards to employees with spending control embedded into each card. These spend limits ensure that employee expenses are limited to what your expense guidelines allow, ensuring that when employees return from trips, all expenses are in compliance.

Brex corporate credit cards provide built-in controls that allow you to embed customized spending limits based on employee roles, trip duration, expense categories, or nearly any other parameter. This gives employees clear boundaries while maintaining the flexibility they need to pay for expenses while traveling. When employees attempt purchases that exceed these limits, the transaction can be declined in real-time, preventing policy violations.

Brex's real-time budgets allow you to monitor and control employee spending across departments, teams, and individuals. This allows finance teams to track spending against budgets in real-time and make adjustments while employees are traveling. Managers can see how their travel spending affects overall departmental budgets and make informed decisions about spending without waiting for month-end reports.

The Brex platform also allows for temporary limit adjustments when business situations require additional spending. Managers can approve higher limits for specific trips or circumstances without permanently changing employee spending permissions, maintaining control while accommodating legitimate business needs.

As employees travel and spend, Brex can automatically generate receipts or employees can simply upload a photo of their receipts, ensuring that every expense follows guidelines and has complete and accurate documentation. Brex then maintains these records so you can be sure you’re following the documentation requirements for your business.

B2B travel software can allow your reimbursement process to become an efficient, automated workflow. The right platform eliminates manual data entry, speeds up approval processes, and provides the transparency employees need to track their reimbursement status throughout the entire process.

Brex's travel and expense management software streamlines the reimbursement process for employees, from expense capture through final payment. Before an employee leaves for travel, Brex starts the reimbursement process by automatically capturing data when employees book compliant travel using personal payment methods. Then, once your employees spend while traveling, the Brex mobile app allows them to immediately capture expense receipts with OCR technology that automatically extracts vendor names, amounts, dates, and other key details. The software then automatically generates expense reports, eliminating manual data entry and reducing errors.

The platform's AI-powered categorization automatically assigns expenses to appropriate categories and flags potential policy violations before submission. Brex AI automatically reviews and approves expenses that are in compliance while flagging anomalous activity for manual review. For expenses that need manual review, Brex's customizable approval workflows ensure approvals match your organization structure. Once a reimbursement request is approved, integration with Brex’s accounting automation software and business banking accounts enables direct deposit reimbursements to be processed in days rather than weeks.

Business travel expense reimbursements are crucial if your employees are traveling, and an effective process can impact employee satisfaction, financial compliance, and administrative efficiency. Clear reimbursement guidelines protect employees from bearing personal financial responsibility for business activities while providing companies with the controls needed to manage travel spending responsibly.

Successful reimbursement programs need automated processes, consistent documentation standards, and real-time visibility into spending patterns. For businesses looking to create a program that works for their business, expense management software can transform traditional reimbursement challenges into financial advantages.

Brex's spend management software addresses every aspect of reimbursements, from automated receipt capture and AI-powered categorization to customizable approval workflows and direct deposit processing. The platform's integration capabilities eliminate data silos between travel booking, expense reporting, and accounting interfaces, creating seamless workflows that benefit both employees and finance teams.

Before Triage Staffing, a staffing agency, switched to Brex, employees booked travel through a local travel agency and covered expenses with a traditional corporate credit card. “Our employees would mistakenly book out-of-policy travel, which led to occasional surprise bills,” said Natalie Dircks, Senior Accountant at Triage Staffing. “Those overages would really add up and, with our old corporate credit card, we had no real insight into the total cost until after those dollars were spent.”

The all-in-one solution that Brex offered allowed the business to streamline its travel booking processes and expense management, which has allowed the accounting team to spend nearly 50% less time managing expenses. “With Brex, we knew that we could empower employees with better visibility into their Brex card spend and real-time access to the policy data they need,” Natalie said. “Now, Triage employees do all their booking through Brex travel with safeguards to ensure compliance. Plus, our managers and department heads can easily create budgets and spend limits in Brex. It’s a one-stop solution across the board.”

Sign up for Brex today to accelerate travel expense reimbursements and build a travel policy that employees actually follow.