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Your guide to tax deductions for business travel

Posted on March 25, 2014 by Breanna Wilson & filed under Travel
While digital conference technology has made it easier than ever to connect with clients and partners face to face online, there is no substitute for meeting with associates in real life. That's why traveling for business purposes is still essential in this day and age. You know as a small business owner, however, how expensive these trips can get, especially if your company relies on travel as one of its main outreach strategies. Luckily for you, there are a handful of ways to save on your travel expenses through tax deductions if you know where to look. Follow this guide to see where you could be saving on your next trip.

Know where you can save

The first key to getting the most out of your travel budget is knowing what constitutes an official business trip and the items and services that the IRS considers tax-deductible in the context of business travel. According to BizFilings there are a few tips you can follow to ensure you are staying within the limitations of the law. Remember, these are not boundaries you ever want to push!
  • Business travel must occur outside your tax home. That's right, a 20 minute car ride to the next town does not mean you can save on a swanky spa treatment afterward. BizFilings explained that you must be well out of the vicinity of your area code in order to count your trip under the 'business travel' umbrella. A good rule of thumb is to ask whether you can complete the entire trip without requiring sleep or rest - a nap in a hotel after a 10 hour conference is totally reasonable. The source pointed out that there are special circumstances that may arise, such as if you have several business locations and consistently travel among these them. In this case, determine where most of your income is accumulated and deem that area your principal place of business. However, you are considered an itinerant if you have no official headquarters and therefore may not be eligible for any tax breaks. On a temporary assignment in another location for a year or less? Your tax home doesn't change and you can enjoy plenty of deductions.
  • Mixing business with pleasure - what's reasonable? BizFilings noted that the IRS won't deny travel expenses for lavish accommodations such as a fine dining experience or first-class flight, but you'll have to draw the line between business and pleasure somewhere reasonable to avoid drawing too much attention to your tax sheet. You'll only be eligible for breaks when the expenses in question are intended directly for the continuation or acquisition of new business, so make sure those fancy dinners and rounds of golf will be more about strategy than leisure. Are you planning on taking a day or two to yourself on a trip that is primarily for work? You're still good to go for tax breaks, but only if that distinction is made very clear in your records. Be careful to keep your books straight and you won't run into a problem.

Better safe than sorry

Always air on the side of caution when filing your business travel expenses, as many of the grey areas involved are up to personal opinion, according to an article from Newsday. "Some tax professionals are extremely conservative, and others are extremely aggressive," noted Eva Rosenberg, a California-based tax expert. "Find a painless way to track everything." With tax season coming up, look over those records and see where you can cash in this year!
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