A write-off for your travel expenses is one of the most underutilized tax deductions by small business owners today!
Making sure your travel has a “business purpose” is critical. It’s a perfect opportunity for business owners to take a great tax write-off. In fact, even properly planned holiday travel can generate a significant tax deduction for your travel expenses. This can include visiting family or going to a special place anywhere around the world. However, in order to claim this deduction, there are some rules.
Travel Deduction Rules
Travel expenses are 100% deductible when traveling for business. These include expenses for the following:
- Hotel, Airbnb/VRBO
- Rental cars, Uber & Lyft
- Valet & Taxi
- Trains, Tolls, etc.
Imagine the tax deduction from travel expenses you can take advantage of with proper planning.
Keep in mind, that the Auto Deduction is completely separate from the Travel Deduction and involves the use of your vehicle for business. (See Auto Deduction under a separate blog post).
Also, remember the Dining Deduction is separate from Travel Deduction. (See Dining Deductions under a separate blog post).
Business Purposes for Travel
The trick becomes finding a legitimate, honest and justifiable business reason for the “travel”. Honestly, it’s not too difficult to find a business purpose for travel.
Here are 5 reasons for a deductible trip:
Company Annual Meeting:
If you have a corporation, this would be considered your Board of Directors Meeting and Shareholders Meeting. If you have an LLC, elect a Board of Advisors to assist the Manager or Managers of the Company. This is an excellent opportunity to discuss the operations of the company over the past year. Profits, losses, acquisitions, new ventures, goal setting…utilize the advice of your board members and make plans for the next year.
Tax Pro Tip: There’s nothing wrong with appointing your adult children to your Board of Advisors.
Visit a Client:
Whenever you’re traveling, ask yourself, is there a customer in the area? Could you cultivate a new relationship or strengthen a current one? Schedule meetings each day you are traveling, at least for a few hours, and keep notes of what you accomplished along with why the meeting was important.
Tax Pro Tip: Keeping good notes about why you’re traveling will help substantiate your expenses in the event of an audit.
Visit a Vendor:
When traveling, think about if there is a vendor or supplier, sub-contractor, or affiliate you could meet with where grandma or grandpa live. Could you negotiate new pricing, tour a facility, talk about networking and how you could work more closely together?
Tax Pro Tip: The tax write-off is just one benefit from traveling. Just think of the business you could generate with a strategic meeting that produces more revenue for your business.
Attend a Conference or Workshop:
Look at possible workshops in the local area where you are visiting. Tax, legal, business, marketing, website, SEO, customer relationship, or technical training based on your type of business. Are there classes in the area that you could consider taking?
Tax Pro Tip: Visit a local real estate or investment club meeting. The training could generate revenue and justify a great write-off.
Check on your Rental Property:
Consider and/or attempt to purchase rentals where you travel. More specifically, could you buy rentals where your extended family lives? You could have them help manage your properties or you could simply work on them while you are visiting. That’s a great tax strategy.
The list goes on and on; it just doesn’t make sense for any business owner to not have at least some travel expenses.
Tax Pro Tip: Just because your rental property is located in an area where you are also visiting family, doesn’t mean that you can’t write off your travel expenses.
How many Days can I Write-off?
Keep in mind that travel days include the ‘day’ you get there, the ‘day’ you do business, and the ‘day’ you travel back home! Thus, a properly planned 3-day trip, with a legitimate business purpose, could be coordinated with some personal relaxation or fun and still be a 100% tax write-off.
With all of these strategies, moderation is key. Make sure that you are doing business each day you aren’t traveling and keep records of what you are doing, who you are meeting with, and how it relates to your business. As usual, the more money you make in your business, the more opportunity we have to be aggressive and take a larger deduction.
Finally, don’t get greedy. Keep your receipts, and records. Discuss the expenses with your CPA/Accountant at the end of the year in order to report a well-balanced tax return.
Visit our resource tab for tax organizers and worksheets to keep track of your expenses.