Business Related Travel Expenses: What Can And Cannot Be Deducted

Do you frequently travel for business? If so, you can take advantage of the travel perks offered by the IRS and get your taxable income reduced. The IRS tax form which you will have to use to deduct these kinds of expenses depends upon the structure of your business entity. It should be remembered that a travel expense will be deductible only if you are away from your normal place of business.

HOW CAN YOU DETERMINE IF YOU ARE AWAY FROM YOUR ‘TAX HOME’?

If your job responsibilities require you to leave your tax home for periods longer than a typical day’s work, you can assume that you are traveling away from home. And if you need to rest or sleep while you are away from home, your business travel is eligible for deduction.

Note that only ordinary and necessary expenses are deductible. So, for example, if you order overly expensive drinks and dishes found on the service menu and drink and eat them all yourself, the IRS won’t allow the deduction. But if you are hosting business clients and you order an expensive bottle of wine or champagne, you will probably be able to deduct 50 percent of that expense. In this case, it will be treated as an entertainment expense. Entertainment that is not related to your business isn’t deductible.

TRAVEL FARES

You can deduct the cost of your air ticket, train ticket, or bus ticket.

AUTOMOBILE EXPENSES

These are the costs involved in maintaining your car while you travel away from your home on a business trip. You can deduct the actual expenses, tolls, and parking. When it comes to automobile rentals, only costs related to the actual business use of the car can be deducted.

LODGING AND MEALS

In the case of overnight business trips, you can deduct the meals and lodging.

TELEPHONE

Business communication using telephone calls and faxing is deductible.

TIPS

Tips, laundry, dry cleaning, and baggage and shipping are also deductible.

Taxis and other transportation means that you use to travel from the station or airport to the hotel or location of business activity are also deductible.

But wait. You still don’t have a lot of reasons to get excited about. The IRS examines travel deductions very cautiously. When you are dealing with the IRS, you need to be careful. If you can’t substantiate a deduction, it is best not to claim it. If you claim deductions that you can’t substantiate, the IRS will most probably disallow that deduction. You will probably also incur a negligence penalty.

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