Tax Deductions Tips for Business Travel Expenses

Hopefully by now your tax return is signed, sealed and delivered, and you can breathe a sigh of relief.  But it’s hard not to wonder if there are any deductions out there that you could have claimed and didn’t.  When it comes to business travel deductions, there is a lot of grey area.  Within this grey area, filers can sometimes be aggressive with their deductions and the IRS looks at all business travel expenses VERY closely.

Here are some tips to keep in mind throughout this year about deductions and business travel so you can be better prepared for your 2013 filings:

-If you’re an employee traveling for business and your company does not reimburse all of your expenses, you can deduct your out-of-pocket expenses that exceed 2% of your adjusted gross income.  If you’re self-employed or a small-business owner you do not have to reach the 2% mark, all your out-of-pocket expenses are deductible.

-Anything work-related is fair game including airfare, lodging, meals, gasoline, baggage fees, taxis, phone calls, supplies, dry cleaning, gratuities and even a drink at the bar!  The key is, according to the IRS, the expenses must be “ordinary and necessary.”  So a glass of wine with dinner while you are out of town is acceptable, but 10 drinks for you and your spouse throughout the night is not. 

-Be prepared to provide documentation of any and all deductions you claim.  Keep your receipts and write on the back: the reason for the expense, the person you met with, the location and the date. 

-If you need help tracking your travel expenses, there’s an app for that!  Try Expense Manager for Android or Expensify for both Android and iOS; both apps are free.

-Instead of keeping records of all your meal expenses and deducting the actual costs, you can use a standard meal allowance which varies based on the city your visitng.

-Don’t mix business with pleasure.  The purpose of a business trip has to be primarily business if you plan to deduct it, however you are allowed some personal time.  Say you have a business trip to New York but you also have family in the city that you want to visit while you’re there.  You fly in on Tuesday with your spouse and take a vacation day Wednesday.  On Thursday, you have an all-day client meeting and on Friday you take the client out to Lunch before you head home.  Your reasonable expenses on Tuesday and Friday are deductible as your travel days, as are your expenses on Thursday when you meet with your client.  Your expenses on Wednesday and your room on Tuesday night are not deductible because they were not necessary for your client meeting.  It should go without saying, but we will say it anyway- none your spouse’s expenses are deductible.

-Convention and conference attendance can be tricky, but as long as you stick to the “ordinary and necessary” principle, you will be ok.  A conference directly related to your profession in Denver is perfectly acceptable and your hotel, registration fees and flights are deductible.  Should you opt for the conference in Paris instead, you will have to justify why you couldn’t get the same benefit from the meeting closer to home.  Ancillary ‘meet and greet’ events sponsored by the conference organizer are deductible.  Make sure to keep a copy to the program or brochure that lists the excursion as a networking event being held in conjunction with the conference just in case.

No one wants to miss out on legitimate deductions and no one wants the stress and possible penalties that can result from an audit.  It’s a fine line between what can and cannot be deducted, so just make sure your expenses are ordinary and necessary and you