Meals and Incidental Expenses While Traveling for Business
Are you paying for your own meals while you are out of town for business? What is the purpose of your business travel? Is it to see a client? You may have an expense for your own meals and you may have an expense for wining and dining a client. Other blogs have addressed the deduction of meals while entertaining a client. Is the cost of your meals included in your seminar registration? Understand that you must keep a record of how you are determining your deduction. You can keep the restaurant receipt showing what you paid. It will often show what you ordered and whether there was more than one guest on this ticket. Business entertainment is not part of this discussion. Think about the meals you eat in a day. Breakfast? Lunch? Dinner? How much will you be spending? The cost of your meal PLUS the tip (an incidental expense) you leave your server for their good service is what you want to deduct. Remember, lavish and extravagant are not deductible. Ordinary and necessary can be deductible. You can decide if you want to track and deduct the actual cost of your meals. Or, instead of actual expenses, you can use the standard allowance for the CITY you are in. The IRS posts this every year. The standard per diem (per day) rate for meals and incidental expenses for Phoenix, Arizona is $71. The standard per diem rate for Tucson, Arizona is $56. Smaller cities around the state of Arizona can claim $46 per day. On the days your travel TO and then back FROM your temporary business location you can claim 75% of the day’s per diem rate. So, on the day I leave for my training meeting in Tucson, I can claim 75% of $56 which is $42.00. The government is thinking I’ll have breakfast at home before I leave. They would be correct in my case. On the day I return home, I can claim another $42.00. Would I have spent the full $42 for meals and tips those days? Maybe yes, maybe no. Whether I spend more or less, I will deduct the full $42. One more thing – your meal deduction is limited to 50%. So I will only deduct $21. Do you need to keep receipts? The most recent tax laws state that you MUST have receipts for lodging. For other travel and entertainment expenses less than $75.00 you do not need to have the receipt. You MUST, however, keep a record showing the time, place, business purpose and amount of each separate expense. The IRS will match up the expenses you are claiming with your hotel receipt and other travel expenses, like airfare, in their verification process. Do you receive reimbursement for your expenses? If you are reimbursed in full, then you are repaid for your expenses and really have nothing left to deduct. If your reimbursement is included in your W2 income, then of course you will have income in the amount of the reimbursement you received. You will certainly want to claim the expenses if you itemize your deductions. Have I raised more questions than I answered here? The tax laws can be confusing. Email your questions to Nellie@BulletProofYourTaxes.com.