Conferences, worksite visits, and other travel may be claimed as a travel deduction. The Internal Revenue Service allows “ordinary and necessary” expenses regarding travel. They also take into account how far you travel from your tax home.
But what is a tax home, and what is meant by ordinary expenses? Here are the facts about traveling for business.
Tax Home Is the Base
You need to establish your tax home before you start deducting business travel. The IRS considers the tax home the entire city or general area where your business is located. This may not be where you live. For example, if your business is in Cleveland, Ohio, but you live in Savannah, Georgia, you cannot deduct the traveling expenses in Cleveland, because that’s your tax home. And your travel back to Savannah isn’t for work, so you can’t deduct that either.Ordinary and Necessary Travel Expenses
Although “ordinary” and “necessary” is slightly vague, there are some ways to gauge what is acceptable. For starters, choose your hotel carefully. Think of where you would usually stay if you were on vacation. In other words, if you usually wouldn’t stay at a five-star hotel for personal, don’t suddenly stay at one for business. It’s a red flag.The same goes for meals. Don’t choose the fanciest restaurant for a business meal. Instead, go with something in the middle.
Business Travel Considered
Traveling overnight from your tax home is considered a business trip. You must have the intention of conducting business while traveling.Pleasure trips are not deductible. If you want personal and business activities, most of your travel must be for business. But there are ways to add a few days on the beach to your trip.
Plan Itinerary for Vacation Days and Business
You can take personal time during business trips. You just need to be careful how much time. You’re safe if you conduct business all day and go out in the evening for personal reasons.But there is a way to add some vacation time. For example, schedule your business meetings so they wrap around a weekend. For instance, you could have a Thursday, Friday, and then Monday meeting. You'll be able to relax over the weekend.
Your travel days are also considered business. An early flight lands you at the destination soon enough for downtime.
Transportation and Meal Write-Offs
Traveling by air, train, or vehicle are considered transportation expenses. This goes if you drive your vehicle or rent one. A hotel is also deductible.Meal expenses are usually 50 percent of the cost when traveling. But for the 2021 and 2022 tax years, the allowable expense was 100 percent. This applied to restaurants and takeout. It didn’t apply to grocery stores.
Miscellaneous Write-Offs Add Up
Other expenses pop up when traveling. Some of these include:- baggage charges
- cleaning and laundry expenses
- tips on eligible expenses
- Uber, taxis
- etc.
Organize Travel in Advance
Make sure you organize your trip in advance. You want to solidify with the IRS that this is a business trip, not a vacation.Set up your meetings in advance. Don’t just show up at the Super Bowl and hand out business cards. One way to provide a record and proof to the IRS is to set appointments via email. That leaves you with a time-stamped record of a planned business trip.
Freelance Workers and Travel
Freelance or remote work has opened business travel to many Americans. Of course, freelancers still must claim a tax home, but they have the freedom to travel via a computer and Wi-Fi. And they can deduct the use of Wi-Fi if used for business purposes.You can have a studio in Chicago but travel to New York to visit your sister. And as long as you’re working those eight hours a day, you might be able to write off your trip. But if you stay a year, you’ve changed your tax home, and it’s not eligible for a business trip deduction. Check with your tax preparer to ensure you’re inside the tax law.
Write Off Mostly Business Expenses Abroad
There are different rules for conducting business abroad. International travel can be considered a business expense if less than 25 percent of the time is spent on personal pursuits.The caveat is that you can only deduct the expenses if you have “substantial control” over the itinerary.
Use Strategy to Plan Business Trips
Ensure you have time to relax by scheduling days off in the middle of your business trip. Always plan and use email to record your plans.Make sure you discuss business expenses with a tax preparer. The last thing you want is a 20 percent penalty applied if you have business expenses disqualified by the IRS.
The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
