It is so simple to deduct your travel expenses, if you have a business activity of some kind. You must do a little planning in advance and keep good documentation but this will allow you to save taxes big-time!
First, you need to think outside the W-2 box and decide on a way that you can start a small business on the side to make more money and save taxes as well. You can start out as a sole proprietor, use your own name and Social Security number and get down to business. You don’t need a merchant account to collect money using a credit card, although this is helpful. You don’t need to have a bank account with your business name on it, although this is helpful. The main thing is to start. Once you get going, you will learn a lot!
Your business activity needs to have a purpose to make money. You are not required to make money initially, but must have a goal to earn a profit. This profit potential is how the IRS defines your activities. You are the person on the firing lines. You have to manage your cash flow so you can make money. You will need a cell phone to call and set appointments, so this is a valid business expense, as are meals, dry cleaning and so forth.
Keep in mind that as you work at this business enterprise, you just might make more money. Wouldn’t that be fun to make more money? You will have expenses as you try to make money and here are just a few of those expenses you can deduct:
- Office supplies
- Business miles on a car used for business purposes
- Parking fees
- Some entertainment expenses
- Travel expenses
The last bullet point on the list, travel expenses, can be one of the best and most enjoyable ways to save tax money while operating a small business.
Duane, a coaching client of mine, called me from Louisiana and told me he was planning a vacation to Hawaii and asked what he could do in order to deduct some of his travel expenses I checked with Sandy Botkin, a tax attorney, and Sandy said all he needed to do was schedule appointments in advance of traveling to show business intent, then keep good records of his trip. Since Duane is a dentist, he researched other dentists like himself on the island of Maui and found two dentists willing to meet with him and conduct a dental practice interview.
Duane returned home after his trip with a glowing report. One dentist in particular he interviewed showed him how he had doubled his revenue by installing implants for his patients who did not have any teeth. The extra high quality of life that was added to this patient was immense so Duane decided to get additional schooling on dental implants and has since doubled his revenue. The education and information he picked up in Hawaii was rewarding for Duane, but what was even more wonderful is that he could write off almost the entire trip as a business expense because he followed the tax rules governing business travel.
Creating a business activity can be fun and rewarding, especially as you deduct valid travel expenses associated with your activity. For more information on this topic, explore the book MONEY: What Financial “Experts” Will Never Tell You available here on Amazon.com.