Is there a better place to travel for business than Orlando? We think not! But as you plan your next trip, remember that keeping detailed receipts is important. Many business travelers aren’t aware of what can be deducted from their taxes and what can’t be. The best bet is to speak with your tax professional about your specific needs, but here you can learn the basics so you’ll know what to track and what to toss.
Every expense you claim must be related to your trade or business
It sounds great: go out of town, meet up with a client, pick up the check, and get a tax deduction. While this may work for you, it’s not quite that simple. You must make sure that the business outing is related to your business or trade. Every single payment you deduct, including travel, meals, and entertainment, must be necessary and ordinary in your business or trade. For example, entertainment expenses have to be directly related to or associated with your trade or business.
Does your travel expense meet the two essential conditions?
Your travel expenses can include almost anything that’s relevant to travel that’s both necessary and ordinary for your business. However, these two conditions must be met in order for you to take the travel expense deduction:
- Your duties must require that you’re away from home (this means your place of business and has nothing to do with where you live in your family home) for substantially longer than a typical work day.
- You must require sleep and/or rest to meet the demands of your duties while you’re away.
You can deduct many travel-related expenses
Assuming your trip meets the above described requirements, you could deduct a wide range of expenses including:
- Transportation from your home to the business destination. This could include plane tickets, train tickets, bus ticket, car rental, taxi, commuter bus, and limo fares.
- The cost of shipping items like samples or displays.
- Maintenance for your own car if you use it for business travel. You’ll have the option of choosing a deduction for actual expenses or a standard mileage rate.
- Tolls and parking fees.
- Meals and hotel accommodations. Note that you’re only able to deduct half of your business meals.
- Dry cleaning and laundry care.
- Telephone calls and usage of fax machines.
A note about entertainment deductions
The IRS allows entertainment deductions on any activity that’s generally considered to provide either amusement or recreation. If you’re hosting a client at a social, athletic, or sporting club, then this would likely qualify. Other examples include theaters, hunting, fishing, and yacht trips. If you’re hosting a client at Disney World your theme park tickets may also be deductible. Speak to your tax preparer about the exact details of your situation to be sure.