Barbara Schreihans, CEO and Founder of Your Tax Coach.
Imagine this: While on a business trip, you have the opportunity to lounge on a beautiful beach and soak up the sun with a cocktail in hand. This sounds like the perfect summer scene, right?
But perhaps you’re looking to recover some of your business-related travel expenses. If you’re a business owner traveling this summer for work, you might be wondering whether any of the costs associated with your trip can be written off.
Before diving into how one may be able to legally write off a business trip, let’s cover some basics. Know this: A business write-off refers to legitimate expenses incurred while running a business that can be deducted from your taxable income, thus lowering your tax bill. The IRS allows you to deduct certain expenses related to your business while traveling away from home as long as the intent for being away from home is for business. But the travel expenses must be ordinary, reasonable and necessary.
What qualifies as business-related travel?
If you’re traveling within the U.S. and your trip is spent taking part in business-related activities, it can be considered a business trip. Therefore, certain business-related expenses that occurred during your getaway may be able to be deemed a tax deduction.
But what, exactly, is considered a “business-related activity?”
Well, first off, your travel days out and back on a business trip can be counted as a business-related activity. Here is a list of a few other business-related activities, though there are many more:
• Attending a conference or seminar;
• Meeting with clients, prospective clients or business partners;
• Shooting content for marketing purposes;
• Conducting research and development for your business.
In my experience, the key is to ensure the activities have a genuine business purpose and are not solely for personal enjoyment.
What may be deducted as a business expense?
Now that we have covered the basics, let’s get to the exciting part: the expenses that can qualify for business tax deductions when you’re traveling primarily for business.
Once the travel is considered business-related, you can deduct the transportation, such as airfare, rental car, taxi expenses or mileage on your personal vehicle. You may also be able to deduct the accommodations you used while traveling, such as hotels or lodging. When you are traveling for business purposes, in general, 50% of the cost of meals can be deducted from your tax bill as well, though you can’t deduct expenses for meals that are considered “lavish or extravagant,” according to the IRS.
What documents do you need to keep?
Everything. Keep all of it. The more documentation, the better.
Record keeping is a crucial part of writing off your business-related travel expenses. Keep track of all your receipts and invoices, and include all the dates of business-related activities on your calendar. Document who was there, what was talked about and the purpose of the business-related activity.
One way to organize your expenses is to book your travel accommodations and transportation with a business account or credit card since many have rewards programs. Not only can this help with organization, but you could also take advantage of any perks your business credit card might offer. There are numerous digital tools and apps available that can help you simplify tracking your expenses as well.
Remember this:
By staying compliant with IRS guidelines, you may be able to write off your summer business travel. Remember that the trip’s intent must be for business purposes, and maintain documentation of all expenses.
But most importantly, don’t wait any longer. Take advantage of this opportunity by planning your business travel today. Of course, ensure your trip has the perfect blend of business growth and well-deserved relaxation.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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