Although technology has revolutionized the way we do business, there are still situations where it’s necessary for a face-to-face meeting with staff, management, or customers. With a little planning for the current vacation season, you can mix some leisure time in with your business travel and still get a tax deduction.
Deductible Travel Expenses
If your trip within the U.S. was primarily for business and, while at your business destination, you extended your stay for a vacation, made a side trip, or had other personal activities, you can deduct only your business-related travel expenses.
It’s important to keep records such as receipts, canceled checks, or bills, to support your expenses and be able to prove the number of days spent on business. The following is a list of expenses you may be able to deduct depending on the facts and circumstances:
- 50% of the cost of meals
- Travel by air, rail, and bus fares
- Baggage charges
- Hotel expenses
- Expenses of operating and maintaining a car
- Local transportation costs for taxi fares or other transportation to and from the airport
- Cleaning and laundry expenses
- Computer rental fees
- Telephone or fax expenses
- Tips on eligible expenses
However, these same types of expenses aren’t deductible for non-business days. Personal entertainment costs on the trip, such as a sightseeing tour, aren’t deductible, regardless of the day on which they fall. Cost deductions for a spouse accompanying you on a business trip are allowed only if your spouse is a bona fide employee. Merely having your spouse-employee perform some incidental business service, such as typing up notes from a meeting, isn’t enough to establish a business purpose. Your spouse’s presence must be necessary for your business pursuits – not just helpful.
Travel Outside the U.S.
Travel outside the U.S. has its own set of unique rules and recordkeeping requirements. When documenting your business trips outside the U.S., your trip will fall into one of three categories:
- Travel Entirely for Business,
- Travel Primarily for Business, and
- Travel Primarily for Vacation.
The factors which determine the category your trip falls into are related to the number of business days versus total days away. If your trip is less than one week, don’t count the day you leave the U.S. but count the day you return to the U.S. On the other hand, if your trip is more than one week, count both the day you leave the U.S. and the day you return. If your trip wasn’t entirely for business, you must allocate travel expenses on a day-to-day basis between days you did and didn’t conduct business.
Do you have the support you need to manage your small business bookkeeping?
Schedule a 30-minute appointment to speak with a local small business adviser.