Your Vacation Travel Can Be A Business Trip
When you consider taking a trip this year, you might want to ask yourself, “How can this be a tax deduction?” You might be surprised to learn that the IRS allows you to deduct many travel-related expenses.
When you travel away from home on business, the IRS allows you to deduct related expenses, including the cost of reaching your destination, the cost of lodging and meals, and other ordinary and necessary expenses. The IRS definition of “traveling away from home” is when your duties require you to be away from home substantially longer than an ordinary day’s work, and you need to sleep or rest to meet the demands of your work.
Start by breaking your trip down into three categories: Travel, Lodging, and Meals and Entertainment.
The days of the week that you travel is very important. Weekend days can be treated as business days if you plan your business meetings on either side of the weekend. For example, if Monday is a federal holiday and you have meetings scheduled for Friday and Tuesday, then the three days in between are considered business days, and all your on-the-road and transportation expenses during those days are deductible. To add to this, there is an IRS Private Letter Ruling that allows for Saturday and Sunday to be considered business days if the costs of staying over are less than the airfare to travel after Saturday.
Your travel expenses for a business trip are broken down into two groups, Transportation and On-The-Road Expenses. Transportation expenses are the costs you incur in getting to and from your destination, such as airfare, a rental car, or your personal vehicle. On-the-road expenses include all costs necessary to sustain life while on the road, such as meals and lodging. Also, keep in mind that the cost of the travel is deductible no matter the cost. For example, you can deduct your $200 airfare to New York or the $350 cost of taking a train.
For even more tax deductions, consider taking your family car. Whether you travel all by yourself or if you bring non-business family members, you get the same benefit. Whether the car is full or not, you get to deduct your mileage at the 2009 rate of $.55/mile, meaning you get $55 in your pocket for every one hundred miles driven. Important: You must properly document miles and costs in order to deduct them. The easiest way to record auto miles is with an auto mileage log. Simply record the mileage at the beginning of the day, detail all your business mileage, lump together any personal miles, and then record the ending mileage.
You can also deduct the cost of your hotel lodging when your business trip requires you to sleep away from home. Only actual costs for lodging may be claimed as an expense and receipts must be kept for documentation. Expenses must also be reasonable and appropriate; deductions for extravagant expenses are not allowable, so don’t plan to stay at the most expensive hotel in town. Don’t forget about the “strange bed rule,” which allows you to deduct your hotel even if you could make it home. For example, if you traveled two hundred miles from your residence and you decide to stay in a hotel room for the night and have the business pay for it, the expense for the hotel is deductible. Similarly, if you go to a convention just across town, but you opt to stay overnight at a hotel near the convention, you can deduct your lodging expenses for the hotel.
What if you stay with family members instead of a hotel? The IRS provides a two-week allowance for this, but you must follow the rules. The main rule is that you must actually pay your family something, and get a receipt.
Meals and entertainment expenses are also deductible. There are many expenses in this category. Generally speaking, 50% of these expenses are deductible. Expenses for entertaining clients, customers or employees may be deducted if they are both ordinary and necessary and meet one of the following tests:
Directly-related test: The main purpose of the entertainment activity is to conduct business, business was actually conducted during the activity and you the taxpayer had more than a general expectation of gaining income or some other specific business benefit.
Associated test: The entertainment was associated with the active conduct of your business and occurred directly before or after a substantial business discussion or meeting. For instance, if you take a business colleague to a professional ballgame after your business meeting is over.
IMPORTANT NOTE:
The above education works for those people that have a business - any kind of business. But what if you don’t have a business? Become an affiliate of www.findingfinancialfreedom.com and you will be able to allow Uncle Sam to pay for some or all of your summer vacations.
