Traveling for business? Take advantage of legitimate write-offs

By Annie B. Kelleher
Contributing editor to CBIA News

Whether you’re a seasoned business traveler or an infrequent flyer, there are a few things to keep in mind about tax deductions when you or your employees must travel on the job. 

“The Internal Revenue Code is generally permissive when it comes to business travel, as long as it is connected to a legitimate business purpose,” says Santa Mendoza, CBIA tax specialist. “Taxpayers can deduct ‘ordinary and necessary’ business travel expenses, including meals and lodging, while away from home. And surprisingly, the IRS is very inclusive when it comes to defining just what those expenses are.” 

For example, she says, ‘ordinary and necessary’ expenses aren’t just limited to meals and lodging. They can include things like taxi fares, photocopying costs, tips and the costs of laundering, pressing or dry-cleaning clothing. You can deduct the cost of a temporary employee or a secretarial service you use while you’re on the road. Disabled business travelers can also deduct the cost of a personal care attendant. You can even deduct such things as greens fees or golf lessons, provided you have a legitimate business reason to do so — for example, you occasionally entertain clients or prospective clients on the golf course.

You can deduct 100% of the cost of your travel expenses, with one exception: You can only deduct 50% of the cost of business entertainment expenses. If, for example, you take a business client to lunch, only 50% of the cost of that meal, including the tip, is deductible as a bona fide business expense.

Documentation is a must

“In order to claim any expenses for a deduction,” says Mendoza, “you must be able to provide documentation. Remember to get a receipt.” 

If you don’t have a receipt — say, for a tip at a restaurant — record the expense in a log. “It’s a good idea to get into the habit of keeping a log for yourself, and to require your employees to keep logs, especially if you own the type of business where a lot of travel is required,” says Mendoza. The log should include the date of the expense, the name of the client or potential client (if any) in attendance, and notes explaining the business purpose of the event.

Any expenses that cannot be substantiated with documentation, Mendoza says, cannot be claimed as a deduction.

Business can mix with pleasure — to a point

One piece of good news you may not be aware of is that the IRS will allow you to deduct the cost of staying an additional day or two, if it means your overall costs are reduced. For example, airlines frequently offer substantially lower fares if a traveler is willing to stay over a Saturday night. If your business concludes on Friday, it may make economic sense to stay until Sunday. If that’s the case, the IRS will allow you to deduct the additional night’s lodging (which may be cheaper, as well), as well as the meals and associated costs. Be aware, however, that you can only deduct your portion of expenses — not those incurred by your spouse or other family member who may be traveling with you. 

In short, says Mendoza, the IRS takes a somewhat liberal approach to business travel expenses. Just remember that documentation — in the form of a log and receipts — is necessary to derive the full benefit from this category of deductions.

Editor's note: CBIA members with business tax questions can call Mendoza at 860-244-1900. 

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