In our Chicago South Loop Tax preparation office, everyone is getting excited for the holidays. The holidays are a time to give thanks, spend time with family, and reflect on your year. For small business owners, travelling can also create business deductions! To help you understand business travel, consider this:
You planned a personal trip to Los Angeles, arriving on Friday afternoon and leaving on Sunday afternoon.
About a week later, you learn that a vendor you need to meet with is going to be in L.A. when you are. You arrange a dinner on Friday night to finalize negotiations on a large contract.
Can you now deduct 100 percent of your flight expenses to Los Angeles? How about meals?
Trouble. You must have business as your primary purpose for the trip. In general, a business trip can involve two types of business days:
1. Travel day. You count as business those days you spend traveling in a reasonably direct route to your business destination. (Again, note this is your business not your personal destination.)
2. Presence-required day. If someone requires your presence at a particular place for a specific and bona fide business purpose, this counts as a business day. That “someone” could be any business associate, employee, partner, client, customer, or vendor.
This trip we created for you works like this:
- Day 1, Friday, is a personal day. (You may deduct the cost of the business meal with the vendor whether you pay for it in total or go Dutch treat.)
- Day 2, Saturday, is a personal day.
- Day 3, Sunday, is a personal day.
But let’s say you had this situation: you travel on Friday to meet with the vendor on Saturday and return home on Sunday. Now, you have a deductible trip.
Do I Have to Keep a Tax Diary for My Business Travel?
No, but the combination of the timely records you keep must prove the four elements below:
- Amount. The amount of each expenditure for traveling away from home, such as the costs of transportation, lodging, and meals.
- Time. Your dates of departure and return, and the number of days on business.
- Place. Your travel destination described by city or town.
- Business purpose. Your business reason for the travel, or the nature of the business benefit derived or expected to be derived.
Although we’ve given you the basics, this is not an all-inclusive article. Should you have tax debt help questions, need Chicago business tax preparation, business entity creation, business insurance, or business compliance assistance please contact us online, or call our office toll free at 1-855-743-5765 or locally in Chicago or Indiana at 1-708-529-6604. Make sure to join our newsletter for more tips on reducing taxes, and increasing your wealth.
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