Travel & Business Expenses
For many businesspeople the world over, traveling is a regular and essential part of operating a successful business. Fortunately, the government allows businesspeople to classify some travel as part of deductible business expenses if they meet certain requirements. Certain tips can also help businesspeople avoid overspending, which will affect their bottom line.
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Acceptable Expenses
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The IRS allows a person who travels to deduct "ordinary and necessary expenses" if the trip was primarily focused on business. Most companies provide employees with a meal and lodging allowance to cover the cost of working out of town. Other normal, acceptable expenses associated with a business trip include airfare, taxi rides and car rental fees. In some situations, the cost of entertaining business partners or clients may also be considered important and therefore a reasonable cause for spending additional funds during the course of an employee's time away from the office.
Minimizing Expenses
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Using a corporate credit card for all purchases discourages overspending since the bill may be scrutinized by the corporate entity. Make use of car rental clubs to get discounts and upgrades on car rentals. Joining an airline club is wise for those who travel by air often. After paying an annual membership you can take advantage of amenities such as complimentary beverages, snacks, magazines, internet access and phone calls. By using online travel agencies, you may find discounts on flights, hotels and car rentals.
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Tracking Expenses
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When traveling, it can be difficult to keep track of exactly how much has been spent on what services or items. Since most companies require that their traveling employees file an expense report when the trip is over, it is important to understand how to calculate and document expenses properly. A vital step of the process is the saving of receipts. This means asking for a receipt for every expenditure made during the entire trip as well as keeping receipts in a place where they will not be lost.
Exceptions
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The IRS makes an effort to prevent a person from deducting the expenses from personal trips where a slight amount of business is also handled. If the trip was of a personal nature, a person can only deduct those expenses specifically related to the business. Alternately, the IRS says, "if your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct your business-related travel expenses." The IRS stipulates that a person can only deduct 50 percent of the price of his meals.
Tax Deduction Requirements
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Many companies cover the costs of their employees' work travel and receive a deduction from their taxes based off of that travel spending. This can also be done by self-employed individuals and small business owners. Naturally, proper documentation of all expenses is important in order to prove that tax deductions are valid. Some examples of deductible expenses include the price of transportation, lodging, fifty percent of what is spent on meals, car rental, and other similar costs. If your company covers any of your expenses, you may not deduct them from your taxes.
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References
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