Home Business Tax Savings – Business Travel

If you have a home business that requires you to travel, either by plane, car, or train, then you have additional tax deductions you may qualify for. This includes but is not limited to the cost of airfare, meals, dry-cleaning, and hotel/motel expenses. This article will cover the rules and requirements so you can claim these deductions on your 2006 tax return.

For business travel that takes you away from home overnight or for several months (but still within the United States), the major expenses that can be claimed are as follows:

The cost of traveling to the new location including the standard mileage deduction for your car, airfare, or train tickets.

The cost of activities while you’re there, including renting a car, taxis, meals, hotels, and mileage if driving your car.

Keep in mind that to claim 100% of these deductions, the primary purpose of your travel must be for business. For example: if you travel to Orlando, Florida to attend a convention in your area of business, then you can deduct all of the expenses during the days the convention is open. After the convention is over and you decide to extend your stay for a few more days, then expenses incurred during those extended days would not be covered. If your spouse is with you the entire time, you cannot write of their expenses unless they are an employee of the business and as a good business reason for being there. However, sharing a room and rental car if they are with you would have the same deduction amount as if you were alone regardless of their business status. In other words, you would split the cost of the room and rental car in half.

If the primary purpose of the visit is for a vacation to Orlando, the you cannot write off the transportation costs, such as the airfare of traveling to Orlando. However, once you are there, you can still write off the amounts of traveling around Orlando for business. Keep careful records of your business expenses when mixing business with pleasure. The tax savings can be significant. *Note that travel outside of the United States have different rules.

Always keep detailed records of your business travel expenses. The IRS takes these deductions seriously. This means keep all receipts for meals and entertainment, which are mandatory for expenses over $75. It also would be helpful to keep a journal or business log of activities, describing the business activity conducted. In the log, include the date, name and address of the restaurant or entertainment place, including the type of entertainment. Also identify people entertained and the business reason for their presence.

If you didn’t keep records up to this point, the IRS offers a standard allowance between $30 and $50 a day, depending on where the business travel is. See IRS publication #463 for a complete list.

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