Expensing Business Travel: What Works
Did you do any traveling in 2015 for your small business, or have a few meetings lined up for 2016 that would require you to make business-related trips? To avoid crossing the line with the IRS when it comes to deducting expenses for travel, let’s take a look at what qualifies as a travel expense deduction:
- Transportation Fares: Total or partial costs of plane, train or bus fares generally qualify.
- Automobile Expenses: This includes the cost of gas, oil, lubrication, washing, repairs, parts, tires, supplies, parking fees and tolls. According to irs.gov, if you use your car for your business (in this case if you drive to your destination) you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses. For a list of current and prior year, mileage rates see the Standard Mileage Rates.
- Dry cleaning and laundry
- Baggage and shipping
- Computer rental fees
- Paid tips on eligible expenses
- Hotel expenses
Bizfilings.com also reports that travel expenses incurred in connection with acquiring or starting a new business are not deductible as business expenses. However, you can add these costs to your startup expenses and elect to deduct a portion of them and amortize the remainder over 180 months.
For insight on what is considered an ordinary expense (the kind you can write off) bankrate.com says, “In general, an ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your business."
Under these standards, deductible travel expenses typically include hotels, meals, entertainment and round-trip travel to meet with existing or potential out-of-town clients.
Convention and seminar costs could also be deductible, as long as the conferences specifically relate to your business or profession, or help improve your career skills.
If you have additional questions about your tax credit eligibility, contact your tax specialist.