Travel and transportation expenses related to business can be deductible, which means it can lower your business’ taxable income and ultimately lower your tax bill to the IRS. However, consider these rules and your circumstances before claiming your travel and transportation expenses as deductible. To start off, the expenses must be considered ordinary and necessary to the industry and to the conduct of your business.
Deductible travel expenses require the worker to be away from the general area of a worker’s tax home, substantially longer than a regular day’s work and require substantial sleep or rest to do the work while away from a tax home.
Tax Home
Determining where your tax home is located is important whether your travel expenses may be deductible or not. Simply put, your tax home is your regular place of business. This also includes the general area you conduct your business in. It may not necessarily be your family home. For example:
Kevin works for a construction firm based out of Pasadena, CA. He commutes from his home 50 miles away in Fontana, CA. The firm carries out various transportation projects throughout the state. Kevin is assigned to help manage a project located in Ridgecrest, CA and is stationed there for a few weeks.
Despite his long commute from Fontana, Kevin’s tax home is considered to be in Pasadena, CA because he primarily works out of there. His costs related to commuting are not considered deductible business travel expenses because those are personal expenses he takes to get to his primary place of work in Pasadena.
Deductible Travel Expenses
Travel from the tax home to locations where business needs to be conducted and related expenses can be claimed as business expense deductions. This includes all common transportation (airplane, bus, taxi, etc.), meals (subject to the 50% limit), business calls, baggage and shipping, and even small incidental costs.
Going back to the previous example, the related travel expenses Kevin incurs for his trip to Ridgecrest from Pasadena can be deductible, including his car expenses should he take his own car there. Any meals he has on his way can also be claimed as business-related deductions, but are subject to the 50% limit, so for example he can only claim up to $5 on the $10 meal he orders. The hotel expenses he incurs while staying in Ridgecrest can also be claimed as deductible travel expenses.
Standard Mileage Rate & Standard Meal Allowance
As an alternative option to keeping track of actual car and meal expenses related to travel, you can opt for federally-set standard mileage and standard meal allowances. The rate for the standard mileage rate is 53.5 cents per mile for 2017. The standard meal allowance per day is $51 for 2017.
As always, maintain extensive and detailed documentation to help substantiate the deductions you claim in case the IRS may question them. Records of meetings, who attended, the purpose, and other detailed notes will always help.
Due to the open-to-interpretation rules surrounding claiming deductions on travel expenses, additional considerations must be made for more complicated expenses, such as depreciation of vehicles used and travel taken outside of the United States. What we have gone over is a general overview. However, we do hope you found this article informative, or at least tipped your interest in learning more about deductible business travel expenses.
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