Travel Deductions by John Hawks
Many of us have learned the basics of documenting our business expenses. However, deductions for travel (e.g., fam trips, agent conferences) can be tricky. If you’re audited in the future, your best defense for deducting travel expenses will be a diary or record in which you noted these expenses as they occurred throughout any given year.
Though it may seem a hassle in the beginning, you should adopt the habit of buying a small pocket-size diary or calendar at the start of each year. Then, on every day of every business trip, jot down your mileage, meals, tips, lodging costs, and other expenses as they occur.
Note the amount of each expense, the time and date, and the location. At the end of the trip, make a note in the diary about the business reason for the trip.
What about receipts? As a general rule, you should consider keeping and filing away receipts for expenses above $10 in value. (Some experts say it’s OK to do without receipts up to $75, but $10 is a much safer level.) One easy way to maintain receipts is to store them at the end of each day inside a blank # 10 or 9” x 12” envelope; then, at the end of the month, seal the envelope and note the month and year on the outside. That way, you’ll have receipts sorted by month when it’s time to prepare your tax forms!
(See www.IRS.gov for more information about business and travel deductions.)
Fam Trip Deductions
While professionals in many other fields sometimes have trouble justifying business travel deductions -- for example, how often does a dentist or podiatrist truly have to hit the road? -- travel agents with an established home-based business are literally in the business of travel. That’s why many home-based agents successfully write off 100 percent of their fam trip costs each year.
U.S. tax rules permit you to deduct travel costs that you incur while you’re on the road. One immediate qualification for these deductions is that you must be pursuing your business when you’re traveling. The trip must be appropriate to the growth of your business, and it must be “customary and usual” within your field. Certainly, legitimate fam trips usually meet these standards easily.
You can generally deduct fam trip expenses immediately, as a business expense. Conference Travel Deductions Many of these rules also apply when you travel to industry conferences, workshops, and conventions.
What about your spouse’s expenses? Generally, you cannot deduct travel expenses for a spouse, defendant, or any other companion on these trips unless the person is your employee (or co-owner) and he or she is traveling for a “bona fide” business purpose. If your husband or wife is simply going along for the ride, you’ll find it difficult to justify deducting his or her travel expenses.
Please remember that this article offers general tips, not specific legal or accounting advice. We recommend that you check with your professional accountant about any tax deductions