4 Essential Tax Tips for Business Travellers

Traveling expensesKeep more money in your pocket by deducting legitimate travel expenses.

While the travel expenses you incur while you are away from home on business are deductible expenses, you should know and follow all the applicable rules to avoid an IRS audit. Here are some tips that can help you make sure that your tax deductions don’t get disallowed.

Know which expenses are deductible. You can deduct your transportation costs (air, rail and bus fares from your point of origin to your final destination; local transportation costs from the airport or station to your hotel as well as from one place of business to another; transportation costs for sample and display materials; and baggage charges), hotel expenses and 50% of the cost of your meals (including that of a client or a business partner) while travelling on business. You can likewise include computer rental fees, fax, telephone and internet expenses, public stenographer’s fees, cleaning and laundry expenses, and tips on eligible expenses to the list.

However, please note that you can only claim deductions if you are travelling away from the general area or vicinity of your tax home, and if your trip is far enough or long enough that you cannot complete the round trip without obtaining sleep or rest.

Make sure your travel is business-related. You can only deduct travel expenses if you are travelling in connection with an existing business. Expenses incurred when starting a new business are not deductible. When combining business with pleasure, you can only deduct the legitimate expenses you incurred during the amount of time you spent on activities devoted primarily to your business.

So, if you spent three days for business-related activities and stayed for another two days for a much needed vacation, you may deduct your transportation expenses to and from your destination, your lodging for three nights, 50% of the cost of your meals for three days, and all the legitimate expense items mentioned earlier (provided they were incurred in connection with your business). Anything you spend outside of the days that were primarily related to your business cannot be deducted, even if you spend a portion of those days doing business.

Expenses must be ordinary, necessary and reasonable. To be safe, avoid lavish or extravagant expenses. Your expenses should always be reasonable considering the facts and circumstances.

Always keep your receipts. Be safe. Keep every receipt possible, and don’t forget to note the reason for the purchase. Document everything to ensure that you will have a lower risk of being subjected to a tax audit.