With Mardi Gras set to kick off soon, did you know that a business trip during the celebration could be chalked full of tax write offs? If you are a business owner, discover what is tax deductible in this article from eSmart Tax.
A tax deduction secret of many business travelers is the practice of wrapping a vacation into a work meeting or event in a destination city. While the planning requires a little work beforehand, you can maximize your trip not just for your business and tax situation, but for your pleasure as well.
For the premise of the trip, you must be traveling there for legitimate business purposes. Whether that is a client meeting, tradeshow or convention, etc. you must have real business there for any of your expenses to be claimed as tax deductions. You should also keep personal and business receipts and charges separate from one another to make it easier during tax time. It’s also a good general rule of thumb to keep documentation of your reason for traveling for business (e-mails, itineraries, etc.).
Let’s say you fly into New Orleans for six days to meet with three clients. Your roundtrip airfare is fully deductible, as well as transportation costs related to those meetings (public, rental, etc.).
During your stay, you can deduct three nights of the trip since those were spent there for business. There are other deductibles related to your stay such as: Tips, dry cleaning or laundry service (for business clothing), cost for telephone or internet access, and other necessary expenses to conduct business.
Any costs incurred for business activities may be deductible. As mentioned before, cost for telephone and internet access can be deductible if it is for legitimate work purposes. If you need to rent equipment (computer, projectors, etc.) to conduct business while traveling, that may be deductible.
Entertainment & Meals
Your meals and entertainment associated with business meetings may be deductible based on their setting. If you’re hosting a lunch or dinner for clients or colleagues in a quiet setting or an atmosphere conducive for conductive business, it usually qualifies as a tax write off.
What’s Not Deductible
By this point, you may be thinking you can take your family to Hawaii while writing the whole thing off. Unfortunately there are limitations to business travel tax deductions:
- Friends & Family are not deductible, only you. If your spouse is a legitimate employee accompanying you, their attendance must be critical and necessary.
- Other nights of lodging while not there conducting business activities.
- Costs incurred during celebrations, even with business clients and colleagues. The IRS states that the atmosphere and location must be conducive to a substantial business meeting.
- Meals and entertainment during periods when not engaged in business activity.
- In-Room entertainment is not deductible. Pay-per-view or On-Demand movies are not deductible unless you can prove they were business-related.
Disclaimer: This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs. For personalized tax service please visit a local tax advisor.
Tax deductions for business can be a difficult thing to navigate, but eSmart Tax provides helpful resources for the business person on The Daily Deduction throughout the year. If you enjoyed this article or found it helpful, Like us on Facebook and follow us on Twitter to get more articles like this posted directly to your timeline or newsfeed! You can also share this stress-relieving info with your social network or friends by clicking on the share buttons above or below.