The guide to incidental expenses for business and travel

Incidental expenses are small, ancillary costs that arise during business operations or travel but fall outside primary expense categories. These minor outlays typically support main activities without being central to them. A business trip's core costs include airfare and lodging, while tips to hotel staff and baggage fees represent incidentals.

The term carries different meanings across contexts. In general accounting, incidental expenses catch miscellaneous small purchases that don't fit standard categories. For corporate travel policies, particularly federal per diem guidelines, the definition narrows to specific items like gratuities and fees for service personnel. Tax authorities focus on documentation and business purpose when determining deductibility of these costs.

Common synonyms include “incidentals,” “sundry expenses,” and “out-of-pocket costs.” These terms often appear interchangeably in expense reports and accounting systems. Related concepts include miscellaneous expenses, which form a broader category, and petty cash expenditures, which specifically involve small cash transactions. Some organizations group incidentals under “travel and entertainment” or create dedicated general ledger codes for better tracking.

The challenge with incidental expenses lies in their nature, individually immaterial but collectively significant. A single $2 tip barely registers, but hundreds of such transactions across an organization create material variances in budgets and require systematic approaches to tracking, approval, and reimbursement.

Incidental expenses take many forms, from cash tips to service fees that support business activities. The following examples illustrate common incidentals that travelers and businesses encounter regularly, each presenting unique tracking and reimbursement considerations.

Tips to porters and bellhops

These gratuities compensate service staff who handle luggage at airports, train stations, and hotels. Standard tips range from $1 to $5 per bag, depending on location and service level. Business travelers encounter these costs frequently, making them a regular line item in travel expense reports. Companies typically reimburse these through per diem allowances or actual expense reimbursement, though policies vary on documentation requirements since receipts are rarely provided.

Tips for hotel housekeeping

Daily gratuities left for housekeeping staff represent a common incidental expense during multi-day hotel stays. The standard practice involves leaving $2 to $5 per night, though amounts vary by hotel category and location. These cash tips pose tracking challenges since they lack receipts, requiring travelers to maintain logs or rely on per diem coverage. Some companies include housekeeping tips in their standard per diem rates, while others require itemization on expense reports.

Gratuities to shipboard or concierge staff

Cruise travelers and hotel guests often tip concierge staff for restaurant reservations, ticket bookings, or local recommendations. Shipboard gratuities may be automatically added to passenger accounts or given as cash. These services generate incidental costs ranging from $5 for simple assistance to $20 or more for complex arrangements. A corporate card policy typically cover reasonable concierge tips related to business activities but excludes personal services.

Skycap and baggage-handling tips

Curbside check-in services and porter assistance at airports create regular incidental expenses for frequent travelers. Tips generally run $2 to $3 per bag, with higher amounts for oversized items or exceptional service. These differ from airline baggage fees, which appear as separate travel costs. The cash nature of these transactions requires careful documentation, particularly when multiple trips occur within a reporting period.

ATM withdrawal fees while traveling

Bank charges for using out-of-network ATMs accumulate quickly during travel, especially internationally. Fees range from $2 to $5 per transaction domestically, with foreign ATMs often charging additional amounts. Some employers reimburse these fees as incidentals while others expect employees to plan cash needs to minimize charges. Corporate cards may waive certain fees, reducing this expense category.

Currency conversion or foreign transaction fees

International travel generates percentage-based fees on credit card purchases and currency exchanges. These charges typically range from 1% to 3% of transaction amounts, creating variable incidental costs. While some corporate cards waive foreign transaction fees, currency conversion at airports or hotels often includes unfavorable rates plus service charges. Proper coding of these expenses ensures accurate international travel cost analysis.

Office supplies purchased on the road

Business travelers occasionally buy pens, notebooks, folders, or USB drives while away from the office. These purchases usually fall below $20 but support immediate business needs. Companies can handle these differently. Some include them in per diem coverage, others require receipts for reimbursement, and many set dollar thresholds below which documentation is simplified.

Hotel business-center charges (printing/faxing)

Hotels charge for business center services like printing presentations, copying documents, or sending faxes. Rates vary widely, from $0.25 per page to several dollars for specialty services. These legitimate business expenses require itemized hotel bills for reimbursement. Modern travelers increasingly avoid these costs by using mobile printing services or digital alternatives, but situations still arise requiring on-site document services.

Small expenses create big problems when ignored. A year of untracked incidentals can mean thousands in lost deductions for businesses or hundreds in budget overruns for individuals. The discipline of monitoring these costs delivers benefits far exceeding the dollar amounts involved, affecting everything from tax compliance to financial forecasting accuracy.

Businesses face significant stakes in tracking incidental expenses. Accurate documentation supports tax deductions, satisfies audit requirements, and enables cost control across departments. Without proper tracking, companies lose legitimate deductions and face compliance risks during IRS examinations.

Financial reporting accuracy depends on complete expense capture. Incidentals affect departmental budgets, project costing, and profitability analysis. When employees fail to report small expenses, budget variances appear without explanation. Systematic tracking eliminates these mysteries and improves forecasting precision. The best expense management software can flag unusual patterns and enforce policy compliance automatically.

Tracking incidental expenses requires choosing the right method for your situation and maintaining consistency. Whether you use paper receipts or sophisticated software, the goal is to capture complete information at the time of purchase to support reimbursement claims and tax deductions.

Manual methods

Paper logs and spreadsheet templates remain popular for tracking incidentals, particularly among small businesses and infrequent travelers. A simple notebook or printed expense form captures date, vendor, amount, business purpose, and receipt status. Excel templates add calculation features and can generate summary reports for expense submissions.

Manual tracking offers flexibility and requires no technical setup. Travelers can adapt forms to specific needs and maintain records without internet access. The approach works fine for cash transactions where digital records don't exist. However, manual methods suffer from delayed data entry, transcription errors, and lost receipts. Reconciling paper records to credit card statements becomes time-consuming, and sharing information requires physical transfer or scanning. Without automated policy checks, non-reimbursable expenses may go unnoticed until review.

Digital solutions

Modern expense management platforms eliminate most manual tracking challenges. Corporate cards from providers like Brex automatically capture transaction details, eliminating data entry for card purchases. When travelers make purchases, the system records merchant information, amounts, and timestamps instantly. Mobile apps complement this by enabling photo capture of receipts immediately after purchase, with optical character recognition extracting key information for expenses paid in cash or with personal cards.

These platforms excel at policy enforcement and reporting through intelligent automation. The software assigns expenses to proper general ledger accounts based on merchant codes and spending patterns, reducing miscategorization errors that plague manual systems. Built-in policy rules flag out-of-compliance purchases the moment they occur, prompting explanations while details remain fresh in travelers' minds. Real-time expense feeds give managers visibility into spending patterns as they develop, not weeks later during expense report reviews.

Integration capabilities transform how businesses handle expense data. Direct connections to accounting software eliminate duplicate entry and ensure consistency between expense reports and financial records. For audit purposes, digital archives preserve receipt images alongside complete approval workflows, creating searchable records that satisfy IRS documentation requirements. This systematic approach to incidental expense management reduces processing time while improving accuracy and compliance across the organization.

Tax treatment of incidental expenses depends on proper documentation and a legitimate business purpose. Both individuals and businesses must navigate specific IRS rules to claim deductions while avoiding common pitfalls that trigger audits or disallowed expenses.

Personal tax considerations

Individual taxpayers face strict limitations on deducting incidental expenses. Business owners and self-employed professionals can deduct ordinary and necessary incidentals related to their trade, but employees lost the ability to claim unreimbursed work expenses in the 2018 tax reform. This change makes employer reimbursement policies incredibly important for workers who incur business-related incidentals.

Deductible incidentals must meet IRS standards for business expenses. The expense must be ordinary within your industry and necessary for operations. A freelance consultant can deduct ATM fees incurred while traveling to client sites, but not fees from personal vacation withdrawals. Documentation requirements include receipts for expenses over $75, though contemporaneous logs showing date, amount, place, and business purpose satisfy requirements for smaller amounts. The IRS accepts credit card statements as receipt substitutes when itemized bills are unavailable. Mixed-use trips require allocation between personal and business portions, with only business percentages qualifying for deduction.

Business tax considerations

Companies deduct incidental expenses as ordinary business costs, but must establish clear policies and maintain proper documentation. The IRS scrutinizes expense reimbursements to ensure they qualify as accountable plans rather than disguised compensation. Accountable plans require business connection, substantiation within a reasonable time, and return of excess advances. Similar documentation standards apply to vehicle expenses tracked through a mileage reimbursement calculator.

Per diem allowances simplify incidental expense handling by eliminating receipt requirements below federal rates. Companies can adopt GSA rates or establish their own reasonable allowances. However, amounts exceeding federal rates require actual receipts or become taxable income to employees. Documentation must still establish business purpose and travel dates even when using per diem methods.

Common filing mistakes include inadequate business purpose descriptions, missing documentation for cash tips, and inconsistent expense categorization. Lumping all incidentals into “miscellaneous” prevents proper analysis and raises audit flags. Companies should establish specific general ledger accounts for different incidental types and train employees on consistent coding. Regular reviews catch documentation gaps before year-end filing.

Receipt requirements for incidental expenses vary by amount, expense type, and applicable regulations. The $75 threshold serves as a general benchmark for IRS documentation, but employer policies and specific circumstances often demand more stringent record-keeping. Smart travelers keep receipts for everything, regardless of amount.

Federal regulations require receipts for lodging expenses of any amount and for other authorized expenses exceeding $75. This rule applies to both IRS requirements and federal travel reimbursements. Below this threshold, contemporaneous written records can substitute for receipts if they document date, amount, place, and business purpose. Credit card statements provide acceptable documentation for many incidentals when detailed receipts prove unavailable.

Cash tips present unique challenges since service providers rarely offer receipts. The IRS accepts written logs maintained at or near the time of expense as adequate documentation for cash gratuities. Digital expense apps now include features for logging cash expenses immediately, creating timestamped records that satisfy audit requirements. Some companies issue tip tracking cards or require daily expense logs to capture these costs systematically.

Employer policies frequently exceed IRS minimums. Many organizations require receipts for all expenses, regardless of amount, to maintain consistency and prevent abuse. Others set lower thresholds like $25 for receipt requirements. International travel often triggers stricter documentation rules due to currency conversion and varying business practices. Travelers should review company policies before a trip abroad to avoid reimbursement delays.

Technology like digital receipt capture has simplified compliance significantly. Mobile expense apps allow immediate photo capture, reducing lost receipt problems. Email receipts from hotels and airlines integrate automatically with expense systems. For incidentals charged to hotel folios, the itemized bill satisfies receipt requirements even for small amounts like business center printing or internet fees.

Both business travelers and companies can take steps to manage incidental expenses proactively. These strategies reduce administrative burden while ensuring proper documentation and cost control.

Plan and budget ahead

Anticipate that incidentals will occur on every trip. If you're a business owner or manager, build a small buffer into travel budgets for these costs. If you're an employee traveling, check whether your employer provides a per diem or a guideline for daily incidentals, and plan your personal spending accordingly. Setting expectations in advance prevents surprise overruns.

Set clear policies

Companies should define what counts as an incidental expense and the limits for each trip. For example, a policy might specify that tips up to a certain percent are reimbursable, or that the company will not cover in-room movies. Communicate these rules to employees before they travel. Clear guidelines help travelers make wise choices on the road and reduce confusion when filing expense reports.

Track expenses diligently

It's easy to lose track of small cash outlays like tips. Travelers should log each incidental purchase by keeping receipts, snapping photos of expense receipts, or using expense tracking software. This ensures nothing is forgotten when it's time to settle expenses. From the company side, requiring an itemized expense report for incidentals encourages honesty and accuracy. Some companies simplify this by issuing corporate cards that automatically record each transaction.

Use per diem and limits

When possible, set per diem rates or spending limits to control incidental costs. A per diem gives employees flexibility on how to spend the allowance while capping the total reimbursable amount. This approach can protect the company from excessive expense claims and also gives the traveler clarity on what their spending cap is.

Leverage rewards or tools

If you travel frequently, consider using a business travel credit card or loyalty programs that reward incidental spending. Some credit cards offer points or cashback on travel-related purchases, which can offset the sting of baggage fees or hotel incidentals. Companies might invest in expense management software that flags unusual incidental expenses and automates reimbursement. The right tools can streamline tracking and prevent small costs from falling through the cracks.

Incidental expenses demand attention despite their small individual amounts. Proper tracking, clear policies, and consistent documentation transform these minor costs from administrative headaches into manageable business expenses. Whether you're filing personal tax returns or managing corporate travel budgets, the principles remain constant.

Modern expense management platforms like Brex address the specific challenges of tracking incidentals through integrated solutions. Brex's corporate cards automatically capture every transaction with detailed merchant data, eliminating manual entry errors common with cash tips and small purchases. The mobile app's receipt capture feature allows travelers to photograph receipts immediately, with OCR technology extracting amounts and vendors while maintaining IRS-compliant digital archives. Real-time expense feeds mean managers see spending as it happens, not weeks later during expense report reviews.

Brex's platform goes further by combining spend management software with startup banking, creating seamless workflows from payment to reimbursement. Policy controls built into the system flag non-compliant expenses instantly, while automated categorization ensures incidentals map to correct general ledger accounts. Brex’s integration with major accounting softwares like QuickBooks and Xero eliminates duplicate data entry and reduces month-end close times.

For businesses serious about controlling incidental expenses while reducing administrative burden, schedule a demo of Brex's expense management software to see how modern tools transform this persistent challenge into a solved problem.