For many small business owners, traveling a few times a year (or even as often as every week) is a necessity. Fortunately, you can deduct many of your business expenses on your taxes. Knowing which are and aren’t eligible for write-off can save you a lot of headache come tax time. Here’s our guide to identifying deductions.
Expenses that are tax-deductible
As long as you are actually conducting business in a city other than the one you live in, the following business expenses generally qualify as tax-deductible.
Whether you fly, take a train or bus, or rent a car to get to your business meetings or conference, you can deduct the expense. Toll and parking fees qualify, as well. And don’t forget your standard mileage rate deduction. For every mile you drive for business, you can currently deduct 54.5 cents. This offsets what you spend on gas and upkeep on the car (it counts whether it’s your own car or a rental). Taxi rides count too, so make sure to get a receipt.
The IRS will let you deduct dining expenses, within reason. According to the IRS website, the deduction for business meals is generally limited to 50 percent of the cost. So before you go for that $100 feast, realize that only half qualifies for write-off.
You can also write off your accommodations. Be sure to ask for an itemized bill when you check out, because some hotel expenses might be ineligible, like your trip to the mini bar or movie rental.
Conference fees, equipment rental, and miscellany
Any expenses you incur that are necessary for your business trip, like registration for an event, renting equipment for a presentation, or dry cleaning and laundry for your business apparel, all qualify for tax deduction.
Expenses that aren’t tax-deductible
There’s no getting one over on the IRS. It’s seen people try to claim all sorts of strange things as business expenses. Save yourself the trouble, as it will only increase the odds of you being audited.
Family travel costs
Bringing your family along on a business trip can be fun, but their expenses don’t qualify for tax write-off. Yes, your hotel is a business expense, because you would need one whether they were there or not, but their plane tickets and meals can’t be deducted.
Expenses in your home city
While you may conduct business in your town, only your standard mileage rate and meals— assuming you dine with business contacts — are deductible. You can’t, however, rent a hotel room within a reasonable distance of your home (even if you’d spent the day at a conference at a nearby hotel) and expect to write it off.
Sure, this category is a bit nebulous, but there’s no telling what the IRS will flag. The rule of thumb is: if you feel an expense is not necessary for you to conduct business, don’t claim it. Being audited is no fun, and it’s not worth getting caught to try to reduce your taxable income with questionable expenses.
Keep your receipts together while traveling to make it easy to file them all when tax time rolls around. Better yet, use an app like QuickBooks Self-Employed to scan receipts as you receive them so you have a backup if you lose the physical ones. It can even match them to your expenses for you.