Incidentals are the small, routine costs that come with business travel: tips for a bellhop, a few dollars left for hotel housekeeping, a gratuity for a shuttle driver or porter. The IRS defines them narrowly and caps the standard per diem allowance for them at $5 per day inside the continental United States. Even so, incidentals show up in three places that matter to most people: the hold a hotel puts on your credit card at check-in, the way your employer reimburses you for a trip, and what you can deduct on your taxes.
The IRS Definition
The IRS treats incidental expenses as fees and tips given to porters, baggage carriers, bellhops, hotel housekeepers, stewards on ships, and hotel staff in foreign countries.1Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses That is essentially the entire list. If the charge is a gratuity for someone who handled your luggage, cleaned your room, or performed a similar personal service during travel, it is an incidental.
The surprises are on the exclusion side. Laundry, dry cleaning, pressing of clothing, phone calls, and lodging taxes are all explicitly outside the incidental category.2Internal Revenue Service. Instructions for Schedule C (Form 1040) (2025) Room service falls under meals, not incidentals. Many corporate travel policies use “incidentals” loosely to include Wi-Fi, laundry, and similar charges, and that mismatch between everyday usage and the tax definition catches people at reimbursement time.
Hotel Incidental Charges and the Credit Card Hold
Outside of tax work, the word usually comes up at a hotel front desk. The hold a hotel places on your card at check-in is an incidental authorization. It covers charges you might rack up beyond the room rate: minibar purchases, room service, on-demand movies, parking, or damage.
Amounts vary. Budget hotels commonly authorize $25 to $50 per night, while upscale and resort properties can hold $100 to $200 per night on top of the room charge. The hold reduces your available credit but is not a real charge. You only pay for what you use. After checkout, holds typically drop off within three to seven days, depending on your card network and issuing bank. On a debit card, that same amount is frozen in your checking account until it clears, which is why paying incidentals on a credit card is easier on your cash flow.
How Per Diem Rates Handle Incidentals
The federal government bundles incidentals with meals into a single daily allowance called the M&IE rate (Meals and Incidental Expenses). The General Services Administration sets these rates each fiscal year, and many private employers adopt the same framework.
Whatever the total M&IE rate at a given CONUS location, the incidental slice is fixed at $5 per day.3U.S. General Services Administration. M&IE Breakdowns The rest of the daily allowance covers breakfast, lunch, and dinner. For fiscal year 2026, which runs from October 1, 2025 through September 30, 2026, the standard CONUS M&IE rate is $68 per day, with higher tiers of $74, $80, $86, and $92 in more expensive locations.4Federal Register. Maximum Per Diem Reimbursement Rates for the Continental United States (CONUS)
Travel outside the continental U.S. works differently. Instead of a flat $5, the incidental portion scales with the total M&IE rate. At the lowest OCONUS tiers, the incidental piece can be as little as $1 per day; at the highest, it can reach $53 or more.3U.S. General Services Administration. M&IE Breakdowns
The Incidental-Expenses-Only Method
If your meals are covered separately on a given travel day, say a conference feeds you lunch or a client picks up dinner, the IRS lets you claim a flat $5 per day for incidentals alone. That $5 rate applies to any travel location, foreign or domestic.5Internal Revenue Service. 2025-2026 Special Per Diem Rates You cannot use this method on a day you also claim the standard meal allowance. It is one or the other.
Deducting Incidentals on Your Taxes
When Your Employer Reimburses You
The cleanest path is an employer’s accountable plan. When reimbursement requires you to substantiate the expense and return any excess, the payment is excluded from your gross income entirely. It does not appear on your W-2 and is exempt from income tax withholding and payroll taxes.6eCFR. 26 CFR 1.62-2 – Reimbursements and Other Expense Allowance Arrangements The employer, in turn, deducts the payment as a business expense.
If the reimbursement arrangement is not accountable, meaning no substantiation is required or you can keep the excess, the payments are treated as taxable wages. That distinction is worth confirming with your payroll department.
W-2 Employees Without Reimbursement
If your employer does not reimburse incidentals, the news for most W-2 employees is bad. The Tax Cuts and Jobs Act suspended the miscellaneous itemized deduction for unreimbursed employee business expenses starting in 2018. The One Big Beautiful Bill Act made that elimination permanent from 2026 onward. For most W-2 employees, unreimbursed incidentals are simply not deductible on a federal return.
A narrow set of workers can still claim these expenses on Form 2106: Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses.7Internal Revenue Service. Instructions for Form 2106 Everyone else is better off negotiating a reimbursement arrangement than counting on a tax deduction that no longer exists.
Self-Employed Filers
Schedule C filers have none of these restrictions. Ordinary and necessary incidental expenses are deductible directly against business income. You can also use the $5 per day incidental-expenses-only method instead of tracking every individual tip, provided you did not pay for meals that day and are not also claiming the standard meal allowance.2Internal Revenue Service. Instructions for Schedule C (Form 1040) (2025) For frequent-travel freelancers, the flat rate saves real bookkeeping time on genuinely small dollars.
What You Need to Keep
Federal rules require documentary evidence, such as a receipt, for any business expense of $75 or more, with a narrow exception for transportation charges where a receipt is not readily available. Expenses under $75 still need to be logged, but you do not need a physical receipt for each.8Internal Revenue Service. Revenue Ruling 2003-106 Almost every individual incidental falls below that line, so a simple log with the date, amount, location, and business purpose is enough.
The broader substantiation rules under Section 274 still apply: you need to establish the amount, the time and place of travel, the business purpose, and, if relevant, the business relationship of anyone receiving a benefit.9Office of the Law Revision Counsel. 26 U.S. Code 274 – Disallowance of Certain Entertainment, Etc., Expenses A short note in an expense app at the end of each travel day covers it.
When your employer pays a flat per diem at the GSA rate, no one has to track individual incidental receipts. The per diem itself satisfies the substantiation requirement for the covered expenses. Recordkeeping only becomes a real chore when you are claiming actual costs above the per diem or working outside a per diem arrangement.