How to Deduct Your Small Business Travel Expenses
From www.SBA.gov
Small Business Cents
Going on the Road? How to Deduct Your Small Business Travel
Expenses
by Caron Beesley
Going on a business trip? Visiting a potential vendor,
customer or wholesaler? Confused about what business travel expenses you can
and can’t deduct? Here’s what you need to know about what you can and can’t
deduct as well as some tips, tools and mobile apps for managing your expense
documentation.
What Constitutes Business Travel?
You can deduct most of your business travel expenses on your
tax return; however, there are some limitations and considerations that the IRS
sets on what constitutes business travel.
According to the IRS , “travel expenses are the ordinary and
necessary expenses of traveling away from home for your business, profession,
or job.” However, for these expenses to be deductible, you must be away from
your tax home (the town where your business is located) for a period longer
than one day’s work, and you must be away overnight.
What Can You Deduct?
You might be surprised at how extensive this list is, but do
remember that you have to be able to demonstrate that all these expenses are
directly related to your business.
Deductible expenses associated with business travel away
from home include:
Air, Train or Bus Tickets – If they get you from home to
your business destination. If you are
using points or frequent flyer miles to get a free ticket, you can’t deduct the
cost.
Car travel – Both from your home to your destination and any
use while you are there. You can also deduct business-related tolls and
parking. If you rent a car, you can deduct only the business-use portion of the
expenses. Read Driving for Business in 2011 by fellow blogger, Barbara Weltman,
for tips on how to deduct these costs.
Transportation – To and from venues and to and from the
airport
50 percent of Meal Costs – You can either track the actual
costs of your meals or use the standard meal allowance. The IRS has more
specifics on travel-related meal deductions here .
50 percent of Business Entertainment Costs – These must be
directly related to, or associated with, the conduct of your business. Record
keeping is essential. You will need to keep a history of the business purpose,
the amount of each expense, the date and place of the entertainment, and the
business relationship of the persons entertained.
Dry Cleaning and Laundry Costs
Business-related Calls – Including fax or other
communications device
Tips – Any tips your pay related to any of the above.
Exceptions
There are some limits to what you can deduct. For example,
if you travel with a spouse or person other than an employee then you can’t
deduct their expenses. There are also some restrictions on overseas travel
deductions , cruise ship travel and
attending conventions .
Keep Good Records
Be sure to document everything associated with your business
expenses – the IRS requires it. Keep receipts and maintain a centralized
spreadsheet of all your trips, individual line items, dates and the reason for
your travel/meals/entertainment, etc. Learn more from the IRS about
recordkeeping and how to prove your expenses .
Electronic Tools that Can Help
There are many online programs and apps that can help small
business owners quickly and easily document business expenses on-the-go.
Examples include Tax Tracker, Expensify, Mobile Receipt, Shoeboxed (all for the
iPhone) and Receipt Filer Lite (for Droid users).
How to Report Your Expenses
For sole proprietors and single-member LLCs, show these
expenses in the "Expenses" section of Schedule C
For partnerships and multiple-member LLCs, show these
expenses in the "Deductions" section of Form 1065
For corporations, show these expenses in the
"Deductions" section of Form 1120.
Always Consult a Tax Professional
This article is just a snapshot of what you can and can’t
deduct and some of the do’s and don’ts involved. For more information specific
to your business, always consult a knowledgeable tax professional.
Related Resources; SBA Guide to Small
Business Expenses and Tax Deductions, Business Entertainment Expenses (IRS.gov), 7 Tips to Well-Managed Business Travel that Can Enhance Your
Bottom Line
How to Choose a Tax Professional for Your Small Business
3 Tips to Make Selecting Tax Software Not Taxing
When Avoiding a Tax Audit the Best Offense is a Good Defense
About the Author; Caron Beesley is a small business owner, a writer, and
marketing communications consultant. Caron works with the SBA.gov team to
promote essential government resources that help entrepreneurs and small
business owners start-up, grow and succeed.
Helping folks navigate through the process of buying and
selling Small Family run Businesses and Franchises has been our only Business
since 1994.
Call Vince LoCricchio 813 690-0109
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