Business travel can be an exciting part of your job. But it's also important to remember that tax deductions are available when employees must travel away from their tax home or main place of work for business reasons. To help you understand what is deductible, let’s break down some of the details so you can maximize your deductions and save money.
Travel Expenses Defined
Travel expenses are generally defined as ordinary and necessary expenses related to business activities. They must be reasonable in amount, not lavish or extravagant, and not for personal purposes. This means if you want to deduct expenses for a business trip, then the primary purpose of the trip must be to conduct business activities. Here are some examples of deductible travel expenses:
Travel by airplane, train, bus or car between your home and your business destination.
Fares for taxis or other types of transportation between an airport or train station and a hotel, or from a hotel to a work location.
Using a personally owned car for business (this includes mileage allowance).
Lodging and meals.
It’s important to remember that all receipts should be kept in case they are needed as proof during an audit. Additionally, these deductions can only be taken if there isn't any reimbursement from the employer. For this reason, it's important to keep track of all the details on each trip including dates traveled and destinations visited so that any valid deductions can be claimed at tax time.
Record Keeping Requirements
When taxpayers claim deductions for travel expenses associated with their trade or business, they may need to provide records such as receipts and diary entries showing the amount spent on each expense as well as its purpose and relationship to their trade or business activities. Records should include items like plane tickets, hotel bills, car rental receipts, gas purchases when using personal vehicles for business (mileage allowance), tolls paid while traveling on business trips etc… Depending on how much was spent on each item will determine whether it requires a receipt or just an expense form with an explanation of why it was purchased for a specific trip/project/client etc… Many companies have software programs where employees can enter their information directly into the system making it easier for them track every detail associated with their trips throughout the year without having to worry about keeping paper receipts around which could get lost easily over time. If you don’t have access to this type of technology then keeping digital copies saved in one secure file along with hard copies filed away neatly could be helpful come tax time when trying to document all your travels throughout the year.
Researching and understanding what is deductible when it comes to filing taxes ahead of time will make the tax season much smoother for anyone who travels. By signing up below, you can get quick, easy, accurate, and free tax return estimates so that you can be prepared for anything come April 15th!