With lockdowns coming down to an end and travel opening back up, many business owners will be looking to go to conferences or start traveling more to educate themselves and to restart meeting face-to-face with clients and partners. Deducting business travel expenses can be a great way to save thousands every year.
The good news for small business owners is that travel expenses and lodging for conferences and other business events are 100% tax-deductible including meals (which were 50% tax-deductible until a recent change in 2021), train tickets, & bus tickets. If you rent a car to get there, those costs are tax-deductible expenses.
Deducting business travel expenses could save you thousands of dollars if you are able to meet certain requirements.
Round trip transportation and lodging within the US are what are called all or nothing expenses. If the trip is primarily for business the trip is 100% tax deductible, if the trip is primarily personal, the trip is 0% tax deductible.
There are however rules for lodging in order to utilize it as a tax deduction. The rules are as follows.
- The lodging is necessary for the individual to participate fully in, or be available for, a bona fine business meeting, conference, training activity, or other business function.
- The lodging does not exceed five calendar days and does not secure more than once per calendar quarter.
- The lodging is not lavish or extravagant and does not provide any significant element of personal pleasure, recreation, or benefit.
How to prove that your trip is a business trip –
- Business Trip Itinerary – make sure that you are prepared to show the IRS a detailed business trip itinerary. This should include a breakdown of what you did each day on that trip. For example, when you were at a conference, when you when sightseeing, when you took a potential partner out for lunch, what was discussed, etc.
- Keep track of your receipts – like any business expenses that you are going to deduct, make sure you keep track of your receipts. Keep track of your meal costs, your plane tickets, your Lyft rides, and everything that was necessary or ordinary to ensure that if you were to get audited, you are able to prove that these expenses are in fact tax-deductible under your business.
When it comes to taking advantage of business tax deductions, including those not discussed in this tip, the support of a trusted tax professional is vital. Beyond filling your taxes the right way, a CPA can spot deductions you may have overlooked, and represent you during a tax audit.
If you have any questions about taking advantage of travel expenses or any other business tax deductions, schedule an appointment to speak with an expert.