As I have noted in the last three posts, business travel can be a great tax deduction, but there are rules for deducting these expenses properly. If you know the rules, you can take these deductions with confidence, all while enjoying some time away from home. In this post I will cover the rules for what constitutes a business travel day.
The IRS considers each day you are on the road traveling as a “busi- ness day.” That means that you don’t have to wait until you get to the seminar or business meeting before you can deduct 50 percent of your food and 100 percent of your other on-the-road expenses (which I outlined in my last post Requirements for Deducting On-the-Road Travel Expenses). You can begin deducting them the minute you get onto the road.
I’ll use my example traveler, Loni, to illustrate:
Loni decides to travel to Las Vegas by car from her home in Evanston, Wyoming. She gets in the car on Thursday afternoon at about 3:00 p.m. and begins driving towards Las Vegas; it will take her approximately eight hours to get there if she drives straight through. She stops about 6:00 p.m. to eat at a nice little roadside restaurant and pays $10 for the meal. She doesn’t keep a receipt for her dinner but does write it in her tax diary. Even though she hasn’t reached the trade show yet, her time on the road can still technically be considered a business day because she’s making efforts to get to a place where she will conduct the actual business meetings; thus, all of her life-sustaining expenses are
Now, let’s suppose instead that Loni decides to leave for the trade show in Las Vegas about five days early so she can stop in Salt Lake City along the way to ski and have fun with friends. The IRS has a rule that says she should try to travel at least 300 miles every day if she wants to count each of those traveling days as business days. To figure whether you are within the bounds of this rule, take the number of miles you are driving to your destination and divide by 300. Round up for fractions. In Loni’s case the total travel miles (if she took a more direct route and did not stop in Salt Lake City) from Evanston to Las Vegas are 650 miles. She would take that 650 miles and divide by 300, which gives her a little over two days to get to Las Vegas if she wants to write off the expenses she incurs while on the road. Does she have time to stop in Salt Lake and ski? Maybe, but it would have to be a very quick trip. Maybe Loni decides not to ski in Utah on the way to the tradeshow, but you can see from this example that it could be possible.
To further understand how this rule works, let’s suppose that instead of going skiing, Loni decides she wants to take her husband with her to the trade show in Las Vegas. She certainly doesn’t feel like traveling 650 miles alone. And besides, she has hired her husband, Kurt, to handle all her office and computer equipment, so she wants him to browse around the trade show and get new ideas for the best ways to update her home office. Because he’s going to be at the trade show conducting his own business and he is her employee, Loni can deduct all of Kurt’s traveling expenses as well.
Now Loni decides that taking her three kids to Las Vegas would be fun, too, so she packs up the whole family in the car. What can she deduct of the costs she will incur to take her entire family to the show? She can deduct anything she would have spent had she gone alone.
Loni’s Deductions If She Takes Her Entire Family
Gas: Yes, she would have used fuel to drive either way. However, the rules that govern this deduction are covered under the “Transportation” category, which I will cover in an upcoming post.
Tolls: Yes, she can take these no matter who travels with her.
Lodging: Yes, if she has to stay in a room then that hotel room is deductible, but only the portion that the hotel or motel charges for a single occupant.
Food: Yes, but only 50 percent of her own meal costs and not those of her three growing children.
Other: Yes, anything she might have to purchase for herself, but not for those in her family. For example, let’s say Loni wanted to get her hair done in Las Vegas at the hotel beauty salon. Could she deduct the cost of that haircut and style? Yes, at 100 percent. Now let’s assume she also wanted to have her daughter come with her to get a trim. Could she deduct the cost of her daughter’s haircut. No, because this is not an expense she would incur on her business travel if she were alone.
Suppose Loni wanted to get some dry cleaning done while she was at the trade show. Could she take this laundry to the hotel cleaners and then write off the expense? You bet. Remember, the IRS rule says that you can deduct any and all expenses (except for food) that you would incur while on the road at 100 percent.
More travel deduction ideas in my next post.