Posted by Tiffany Gaskin

Business Trip and Tax Deductions

Business Trip and Tax Deductions

A self-employed individual can generally deduct their necessary and ordinary business expenses incurred when traveling for business purposes from their income. However, it is important to understand what Uncle Sam means by ordinary, home, business and necessary expenses before you list travel deductions.

 

Comparing Ordinary and Necessary Expenses 

Uncle Sam defines ordinary and necessary business expenses as follows:

  • An expense is ordinary provided it is the norm and the accepted way of doing things in your industry

  • A necessary expense on the other hand is important and helpful for the business.

 

Business Home, Different From Real Home 

It is possible to claim business travel expenses when away from home, even though home does not necessarily point to the place of abode of your family. There is also a tax home – the location of your central business place which might be different from the location of your family home. 

For example, if you live in EL Paso, Texas but your permanent work place is in Dallas where you lodge in Hotels and eat at restaurants during the week, it is impossible to deduct your expenses in Dallas or your fees for home transport on weekends

  • In a situation like this, Dallas is your tax home which removes every deductions for necessary and ordinary expenses here

  • Your journeys to your home in El Paso are not business related.


Expenses on Transportation for Business trip can be deducted 

Whatever your means of transportation – bus, train or airplane, you can deduct the real cost of the ticket ride, alongside baggage fees. Even if you had to pay so much to get a last-minute flight, such an expensive ticket is a business expense. Using flyer miles for a free ticket on the other hand, makes the deduction zero. 

Renting a car for a business trip also makes the rental deductible. For people that drove their personal vehicle, they can take the actual cost provided by Uncle Sam’s Standard Mileage Deductions – 56 cents per mile for 2020 business trips One can also add parking costs and tolls.


You can Deduct Fees for Getting Around 

Bus or shuttle fares for expenses related to travel can be deducted. For instance, all fares alongside other costs related to going to the train station or airport, the hotel from the train station or airport, and for visiting clients in the vicinity can be deducted. 

Even if you rent a vehicle for moving around when you get to the destination, such expense is deductible provided it was used exclusively for business. While you can use the vehicle for both personal and business purposes, the business portion can only be deducted.

 

Tips, lodging and Meals can be Deducted 

According to Uncle Sam, business travelers can deduct hotel costs and meals related to business provided they are reasonable in the circumstance, not elaborate or luxurious. 

While at home, you will need to eat which might explain why Uncle Sam reduced the meal deduction to half of either the:

  • Real cost of such meal

  • Standard meal allowance

The allowance is a value of the incidental expense per diem rate or federal meals and the former is a factor of your location and time of travelling.

Ideally, half of the meal cost can be deducted. On the other hand, if you did not have any meal expenses and did not claim such standard meal allowance, it is possible to deduct $5 each day to take care of incidental expenses. Incidental expenses like the following can also be deducted:

  • Fees and tips you gave hotel workers

  • Fees for baggage carriers and porters


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Tiffany Gaskin
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