How to Make Your Next Trip a Tax Write-Off
Taxpayers may try to write off personal trips as business trips hoping to recoup some of their expenses, but the fact is that personal trips are not considered a write-off by the Internal Revenue Service. Only business-related travel can qualify for a legal tax write-off. However, that does not mean you cannot combine the two needs into one trip. It just means you need to understand what circumstances constitute a business trip and know which expenses qualify for a write-off so you can deduct the correct amount when tax time arrives.
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Find out what kind of expenses and trips can be included as a tax write-off. IRS Topic 511, titled "Business Travel Expenses," and Publication 463, titled "Travel, Entertainment, Gift and Car Expenses," are helpful when determining whether a trip or a portion of a trip can be written off.
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Know the boundaries of your "tax home." You must travel outside your "tax home" (outside the city or town where you work regardless of where you live) to meet the demands of a job, profession or a business to write off a trip. Working in one city during the week and traveling home to another city on the weekends is not considered travel that can be a tax write-off. Working in one city (your tax home) and traveling to another city or state to work for that same business is travel that could qualify for a write-off.
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Design the trip to be related to your business. Trips taken for conferences, conventions and trade shows must benefit your business to qualify as a write-off. Travel taken outside the U.S. for business but with added non-business activities could be included as a tax write-off if you were outside the U.S. longer than a week and 25 percent or less of your time was spent in nonbusiness travel activities. Trips taken inside or outside of the U.S. primarily for vacation are not deductible. However, business expenses incurred during those trips, such as cab fare to a business meeting or lunch purchased between business meetings, are deductible.
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Consult a tax expert to verify that the trip qualifies as a tax write-off. Tax experts can help you rearrange a trip before it occurs so that it can be accurately written off at tax time.
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Collect receipts for business-related expenses during the trip to avoid problems during an audit. Business expenses can include the taxi ride to a conference or meeting, the lunch tab you picked up during a client meeting, the portion of the hotel expense that applies to the business part of the trip or the rental car you needed to get to the business meeting. Costs for sightseeing are not deductible. See IRS Topic 511 at the IRS website for more qualifying expenses.
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Place all expense records together so they can be accessed when tax time rolls around. It's easy to lose trip receipts and forget details about events that occur during a trip. Keep a daily record of business events, times and locations and place the record and receipts together in one envelope. Date, title and seal the envelop so that nothing gets lost and the information can be retrieved when needed.
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