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Business Travel and Tax Deductions

by Walter 5. January 2009 10:14

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 or services.

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

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.

Joseph Maresca
Online Marketing Director.

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Tags: business taxes, business travel, business travel expenses, tax deductions

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