Did you travel for your small business this year? As a blogger you might have attended a business conference. As an Etsy seller, you may have travelled a long distance to showcase your beautiful handmade products at a big craft fair. So which travel expenses can you deduct on your taxes?
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The IRS defines travel expenses as the ordinary and necessary expense of traveling away from home for your business profession or job. This is travel away from your tax home, which is defined by the IRS as your principal place of business.
As always, remember to keep records and receipts while you travel. The IRS will want you to have these!
If you travel by air or train you can deduct the cost of the plane or train ticket. If you rent a car, you can deduct that cost.
If you drive your own car you can use the standard mileage rate. For instance, if you drove 500 miles round trip to a conference, and the standard mileage rate for the year was .50 per mile (this just a round number as an example, in 2015 the mileage rate was .575), you could deduct $250 as a mileage deduction on your tax return. Learn more about business mileage expense in Episode 69.
If you need to stay overnight, you can deduct the cost of the hotel room. If you use rewards points for your hotel or airfare, and did not actually spend money, you cannot deduct that as a business expense
Other ordinary and necessary expenses of travel such as taxis, tips, or parking are also tax deductible.
Meals are really the only exception. Meals are subject to a 50% limit. So if you are traveling away from your tax home, and you purchase a meal while you are traveling, only 50% of the cost is allowed as a tax deduction. This holds true for non-traveling business meals as well. If you and your partners have a business meeting at a restaurant, only 50% of the cost is deductible as a business expense.
So that's it. If you are legitimately traveling for business, you can deduct all of your expenses. Meals are the only exception with the 50% limit.
The IRS outlines these guidelines in publication 463. The information provided here is a summary of the IRS guidelines, so use your judgment when applying my summarized information to your particular tax situation.
Did you learn something new about business expenses during travel? I'd love to hear your thoughts in the comments!
To learn more about easy tax deductions you could be missing, check out The Blogger's Simple Guide to Taxes: A Guide to Saving Time and Money!