Do You Travel on Business? Here’s What You Need to Know at Tax Time
If your work requires you to travel, you’re probably eager to take full advantage of your right to deduct certain expenses associated with those travels — especially if you’re a small business owner looking for every financial edge you can obtain. The good news is that you can indeed deduct many travel-related expenses; the less-good news is that, but determining the allowable types and amounts can get a bit complicated. Here’s a basic overview of the rules, options, and limitations applied to typical travel expenses, courtesy of our small business loan and merchant cash advance services team.
Mileage and Vehicle Expenses
It makes perfect sense that you should be permitted to deduct at least some of the cost of your vehicle expenses. You can do this by calculating your actual expenses (gas, repairs, automotive wear and tear and so on), but this approach requires you to keep detailed mileage records, receipts and other supporting documentation. You also have the option of taking the standard mileage deduction — usually a much simpler solution. The standard mileage deduction rate for business travel in 2018 was 54.5 cents per mile. You can also deduct parking and toll payments unless you’re already claiming depreciation on the vehicle in question.
If you’re travelling long and far enough to require a rest and a meal, you’re entitled to deduct your meal expenses. As with mileage deductions, you can either deduct the actual (documented) meal expenses or simply deduct 50 percent of a standard per diem rate. Be aware, however, that this per diem rate varies, not just from state to state, but also from city to city. Texas business travelers, for instance, might use a daily rate of $96 in El Paso, $145 in Austin, or $94 in any area that doesn’t have a clearly-stated rate. The entire table of rates is available on the U.S. General Services Administration website.
You can usually deduct your expenses for hotel, motel, or other other lodgings while you’re traveling on business. It’s important to note that these deductions only apply if you’re outside of your tax home (the city or area where you normally conduct business) and the duration of your stay is less than one year. Even if you’re away from your tax home for less than a year, your deduction may be disallowed if your stay was originally planned for a longer or indefinite period.
Business trips inevitably rack up lots of small expenses for countless needs and situations that come up. The IRS recognizes this fact of life, which is why you can deduct such diverse expenses as tips, taxi or bus fare, laundry/dry cleaning bills, local equipment fees, fees for local business services, business-related shipping fees, personal baggage fees, and costs related to business communications.
Don’t Make Assumptions — Ask the Experts
Just as guessing at other critical items on your tax return is asking for trouble, making assumptions about what you can and can’t deduct from your business travels can lead to confusion, leave money on the table, and (worst of all) present the government with a glaringly inaccurate tax return. Take the time to review your travel expenses with your CPA. You’re more likely to get a healthy tax break without reaping a less welcome result — like an audit.