Deductions
Deducting Travel and Transportation Expenses
It is impossible to cover EVERYTHING on this topic, but I hope this gives you a basic understanding.
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In order to deduct expenses for travel, transportation, meals and incidental expenses you must first be away from home overnight for business.
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Before you even think about deducting expenses for being away from home, you must have a business purpose for that trip. What is the reason you are away from home? Is it a seminar? Is it a business meeting with a client or customer? Is it to make a presentation? Is it to seal the deal? Keep notes in your calendar and keep that calendar.
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Why keep the CALENDAR? Why keep copies of letters sent and received confirming the appointment? The Audit Division of the Internal Revenue Service is all about proof. You must PROVE your deduction is legitimate and allowable.
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Overnight sounds easy. You have a LODGING expense. Keep the hotel BILL. It will show your lodging expense with taxes and other fees. It will show if you charged meals to your room. The bill will also show if you charged personal (non-deductible) purchases like in-room movies or gift shop items.
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Cancelled checks and credit card statements are not enough. They show the dollar amount. They don’t have the detail about what was purchased. Your credit card statement only proves that you paid the hotel. It does not prove that 100% of that payment is deductible. The best protection you can have is your paperwork. Keep the receipts!
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If you stayed with friends or family, you won’t have any hotel bill. Will you have given them money for their hospitality? How does that compare to what a hotel bill would have been? Will they be reporting that income? Was is really a non-deductible gift? Oh, the IRS has so, so many questions.
Overnight might include TRAVEL expense. Did you travel by airplane? Did you travel by train? Did you travel by car? Did you travel by ship? I book my airfare online. I keep the confirmation showing when and where I am traveling. It will tie in with the seminar dates shown on the registration form. I keep that form. If you use your car, I hope you know you MUST keep a mileage log if you want to deduct business use of your vehicle.
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TRANSPORTATION is different than travel. Travel gets you from city to city. Transportation gets you from place to place within the city. Did you have taxi, subway, bus, shuttle, ferry or other expenses? You can’t always get a receipt for those expenses. Do you have a fare chart to show what that service charges?
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Often these expenses are paid by cash. Write down what you spent in your daily log. The IRS will look to see if what you are claiming appears ordinary, necessary and reasonable. Lavish and extravagant are not deductible. Remember, the IRS is your deduction “partner” when you claim items on your return that reduce the amount of tax you pay.
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Are you paying for your own meals while you are out of town for business? Meals and incidental expenses and reimbursements will be the topic in my next blog. You’ll want to be sure to watch for that next week.