When to Deduct Travel and Entertainment Expenses

For every owner of a small business, deducting travel and entertainment expenses from the tax form can be very important. For businesses that travel a great deal, these expenses, including overnight stays, can sometimes eat into the profit, and claiming them back as tax deductibles seems like the ideal solution. Knowing how and when to claim your travel deductibles is another problem entirely, as it can sometimes leave you open to questions about your honesty, and this could mean that the IRS will want to investigate all of your tax forms. Correctly applying your travel and entertainment expenses deductibles will mean that you can avoid this worry.

What is Deductible?

If you have a number of business trip expenses, then you should be able to deduct from it as much as you have spent. Necessary and ordinary travel expenses can be deducted, including actual domestic travel costs, whether by air, coach or bus. Up to 50 percent of your room and board for the business trip is also deductible, although if you bring a spouse you will not be able to claim any expenses occurred through their stay. You can also write off up to half of all business meals and entertainment, or you may choose the Daily Meal Allowance, which is around $40 from Jan to Sept, and around $45 from October. As long as none of your expenses were extravagant, luxurious or otherwise unreasonable, you should be able to claim all of these expenses from your tax return.

What is Not Tax Deductible?

Although the list of deductible travel and entertainment expenses for small businesses is quite large, there are some limits to what you can claim. You will not be able to claim any cruises or family vacations. The IRS is constantly on the watch for claims such as these, and will commission a complete audit of your finances if you make this mistake. You also cannot claim extensions of the business trip, so if you stay over in a town for longer than necessary, it is no longer part of your expenses. You cannot claim meals on a trip which did not force you to stay overnight, and you also cannot claim the daily commute into your business premises. Any non-business guests at your entertainments also cannot be counted towards your deductibles.

Providing Proof

As well as taking care about what you can and cannot claim, you will also need to prove everything that you do put on your tax return. Every time you put down a meal, or an overnight stay, you should add the receipt to your tax proof pile. If you have no receipt, you have no claim to the deductible. If you are claiming the use of your personal car in getting to and from a destination, you will need to have a complete record of the mileage at the beginning of the journey, and at  the end, plus any fuel receipts. Again, you can only claim things that you have evidence to support.

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