Travel is one of the most commonly misunderstood tax deductions amongst business owners and the self-employed. A basic understanding of what travel means in IRS-speak can help you to avoid disallowance of your deduction, should your tax return ever be examined.
Here are the three most important things you should know:
1. There is an important distinction between travel and transportation. A destination is a general geographical area. Transportation is movement within a destination. Travel is movement from destination to destination while away from your tax home overnight.
2. Whether or not your travel expenses are deductible depends upon whether your trip was primarily business-related or primarily personal in nature. An important factor to consider is the amount of time during the period of the entire trip that was spent on personal activity compared to the amount of time spent on activities directly relating to business.
3. There are many components of traveling away from home on business. Examples of deductible expenses include airfare, train, bus, ship, taxi and limousine fares, baggage fees, lodging, meals (but only 50%), local transportation while at your destination, car rental, internet fees, dry cleaning and tips.
Want to learn more? Call us at 732-739-2632 for a consultation. Our Certified Public Accountants are ready to help.
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