With 2008 behind us and many accounting and finance departments working
on the books for business conducted in 2008, there is that one little
word that we all must prepare for, "taxes". If your company does alot
of business travel it is important to understand the do's and don'ts of
your travel expenses and tax deductions.
Here is what you need to keep in mind when preparing your business
travel expenses for tax season. In order to obtain a tax deduction for
your business travel the purpose of your travel must be directly
related to your business, and the trip must be "primarily" for
business. If "primarily" for personal reasons, such as vacation, none
of the costs are deductible. If primarily for business, but you also
spend time engaged in non-business activities, all the transportation
costs but only 50% of the meal expenses incurred while engaged in
business activities are potentially deductible.
In making decisions about what expenses to deduct the keywords are
ordinary, necessary, reasonable in amount, and directly related to the
production of income. "Directly related to income potential"
generally means associated with an activity that results in
increased revenue, development, production or quality, of your products
If you are traveling for more than one day you can deduct your business
travel expenses if your work requires you to be away from your "tax
home" substantially longer than an ordinary day's work and during your
time off while away you need to get sleep or rest to be able to
continue working the next day. In this instance you can deduct the
costs for transportation, lodging, and meals.
Your tax home is your main place of business, regardless of where
you maintain your family home. You are allowed to deduct your actual
transportation costs, the cost of your car, and 50% of your actual meal
expenses. Lodging expenses are deductible to the extent they aren't
extravagant. To justify travel costs you must be able to demonstrate a
direct relationship between the activities carried out while on your
business trip and the business trip's income potential.
Business expenses are reported on the appropriate business form.
For Sole Proprietorships this would be Schedule C. Partnerships and
corporations report expenses on their returns.
For a complete discussion of how to figure allowable travel deductions see www.irs.gov/pub/irs-pdf/p463.pdf.
Tax season is approaching rapidly. Understanding business travel
expense deductions could help lower your overall cost to travel and
bring down some of your overhead.
Online Marketing Director.