Tax season might be over, but it doesn't mean we're off the hook completely! What we do NOW directly effects how stressful and accurate next year's taxes will be, so we brought in Amy Northard, CPA for creative business owners, to help educate us on a few key topics. We used Amy for our business taxes last year and can honestly say it was the most stress-free year for us because of her expertise. So, if you're looking for a tax professional to help guide you with bookkeeping and / or do your taxes for you next year, Amy is your girl! Today she's helping us figure out what 4 groups of things you can deduct from your taxes when traveling.
Whether you’re traveling for a business workshop or for a client event, travel expenses can add up quick so let’s make sure you’re taking advantage of all the deductions.
The big thing to keep in mind is that the IRS is looking for these expenses to be necessary and reasonable in the course of your business. Going on a site visit for a client’s wedding? Probably not reasonable or necessary to book a 5-day trip for this.
Deductions to get there
If you’re flying to the business event, your flight expenses are deductible. This includes things like your ticket price and luggage fees.
If you’re driving your own vehicle, you can deduct the mileage to and from the destination. For more details, check out this post on car and truck expenses. Don’t forget, you can also count any mileage driven to and from the airport!
If you need to take a taxi, Uber or Lyft while traveling for business, this expense can be deducted. The only time you’d exclude this expense would be if you were traveling for personal purposes before or after your business event. If you need to split the fare with another business owner, Uber and Lyft let you do that within their app so you’ll both get receipts.
Meals while Traveling
When traveling away from your “tax home” (city or area where your main place of business is located), you can deduct all meals eaten while away, not just meals where you talk business.
You’ll want to track and record your meals at 100% of the cost, but know that only 50% of your meal expenses (travel-related or not) are deductible on your tax return.
Any tips you pay related to deductible meals, lodging, or travel can also be expensed. If they are paid in cash, keep a log that shows the date, amount of tip, and reason (ex: server tip at dinner).
Dry Cleaning and Laundry
If you’re gone for an extended period of time and need laundry done while traveling, these expenses can be deducted.
Do your best to use your business debit or credit card for all business travel expenses and try not to accidentally use your personal card for these expenses. Keep receipts of all your expenses OR take pictures of the receipts and upload them to a Dropbox folder or your bookkeeping software. I like to keep paper copies as well, just in case, so I usually bring along a zippered pouch or wallet to stash receipts in.
By keeping track of all your expenses while you’re traveling for business, you’ll receive the maximum tax benefit when it comes to tax time!
This guest post was written by Amy Northard. Amy is a Certified Public Accountant (CPA) who has a passion for working with creative entrepreneurs all over the US and making the tax and accounting side of owning a business less stressful. For more tax tips and to learn about Amy’s Be Your Own CFO course, visit her website.