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Requirements for Deducting On-the-Road Business Expenses

In my last post, More on the Value of Deducting Travel Expenses, I outlined more reasons why learning the rules for deducting business travel can be a great way to save tax dollars. I mentioned at the end of that post that there are IRS requirements for what travel expenses can be deducted. Let’s take a look at the way travel is categorized for the purpose of making expense claims. Expenses are deducted in one of two ways, depending on what type of expense you have while traveling:
1) On-the-road expenses: Any and all costs necessary to sustain life while traveling for the purpose of doing business, except for transportation expenses.
2) Transportation expenses: Expenses you incur traveling to and from your destination.
On-the-Road Expenses
You can deduct 100 percent of the cost of lodging, laundry, hairstyling and haircuts, dry cleaning, shoeshines, and even manicures while on your business trip! So if you get your nails done while you are at a convention, for example, you can deduct 100 percent of that little trip to the salon!
Now what about food? Food is only 50 percent deductible. Screen shot 2016-06-01 at 4.07.57 PM
What about transportation? Cost to travel to and from your destination are not considered “on-the-road” expenses by the IRS, and are governed by another set of rules that I will detail in an upcoming post.
Here are the rules for “On-the-Road travel deductions:  
You do not need a receipt for travel expenses under $75 per expense. But there are two exceptions to this rule:
1. You must have a receipt for all lodging, regardless of the cost.
2. You should also try to have receipts for all transportation (this is not transportation for getting to or from your destination, but transporta- tion once you have arrived such as rental cars, bus fares, train fares, and taxi fares). While not absolutely necessary, I recommend getting receipts for these expenses when you can. If you spend $100 on a cab that takes you from the airport to your hotel, must you have a receipt for that cost? Yes, because it’s transportation and it cost more than $75. After arriving at your destination, let’s suppose you eat a nice buffet breakfast and spend $10 for it. Do you have to have a receipt for that meal expense? No, because you ate it while on business travel and it shutterstock_254497954cost under $75.
When it’s time to go home, you check out of your hotel and get the bill, which is $395. After you pay the bill you are sure to take the receipt for that lodging expense because you will need it in order to substantiate your very nice tax deduction for that hotel bill.
The “receipt” rules are fairly simple: Remember to keep receipts for lodging and local transportation. Otherwise, you probably won’t need a receipt for almost anything else you purchase on your trip because it’s unlikely that any expense will exceed $75. Last tip:  Be sure to write down all on-the-road expenses in a tax diary! The IRS expects everything and I do mean everything, to be documented!!!!!

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