4 Things You Need to do for Business Trip Deductions
Whether you are traveling to Idaho or the Caribbean on business, you may have the ability to deduct a large portion of your trip costs from your tax return. The IRS has a specific set of criteria to abide by, however, when determining which expenses are eligible. You must carefully ensure the trip planning and execution phases remain in line with IRS rules to avoid absorbing the associated costs as a loss. By taking the following steps, the majority of your business trip expenses will likely qualify as deductions on your taxes.
Schedule Business Before Leaving
You cannot set sail for Hawaii to troll for clients along the sandy beaches and claim it as a business trip. You must schedule your business activities ahead of time to justify taking the trip in the first place. Furthermore, you must only be able to complete those activities by traveling to qualify the trip. Otherwise, the IRS will want to know why you did not just skip the trip, and the expense, and complete the tasks in your home state.
Your trip will only count as a deductible business expense if you plan to stay away from home for longer than 24 hours. The IRS generally requires that you sleep at some point on your business trip and you cannot skirt by the requirements by taking a brief nap at the airport or in your vehicle.
Choose Eligible Conventions
One of the most scrutinized aspects for business trips is convention location and necessity. The conventions must improve your skillset or relationships within your business’ industry. You can only claim expenses that other individuals in your industry commonly accept as a cost of doing business. Furthermore, if multiple conventions are held in various places in the world, you must choose the most reasonable, in both expense and location, to attend. You should grab and save brochures and admission receipts from the event for your tax records.
Keep Expenses Reasonable
While on your trip, you can claim your lodging, meal and entertainment expenses for yourself and your associates. You cannot, however, claim expenses for your family or your associates’ family members. If you do elect to bring your spouse along on the trip, for example, only claim hotel costs for a single occupancy room, even though you paid for a double. When purchasing meals and entertainment for yourself and your associates, remember that you can only claim 50% of the total cost for reasonable accommodations. That means, luxury accommodations are out, if basic seats or services are available at that venue.
Save All Documentation
Good records ensure that you can apply the appropriate deductions to your tax return without worry. Your tax preparation professional at The Income Tax Center in Missouri will use the documents to identify eligible trip expenses and apply them as deductions relating to your cost of doing business. By abiding by the rules, you can rest assured that you will avoid an audit and your tax return will remain in good standing with the IRS.