Did you know that around 33% of Americans do their own taxes? If you are a business owner, you might be missing out on some deductibles to help you out with lowering your taxes. You might not be aware that you can also deduct travel expenses.
Read on to learn everything there is to know about how you too can calculate your travel expenses.
Has to Be a Business Trip
First, your business travel has to be a business trip in order to qualify for any deductions. You can’t just jump on a plane to Vegas and write it off as a business expense. The primary purpose of your trip has to be for business purposes, according to the IRS.
To make sure your travel qualifies as a business trip, you need to leave the area where your business is based with the intention of doing business somewhere else. The entire trip has to mainly consist of business.
For example, if you leave for 5 days, and you spend 4 days meeting with clients and 1 day lounging by the pool, that would qualify as a business trip. If you were to spend 1 day with clients and the other 4 lounging then that would be a vacation, not a business trip.
The trip also has to be an “ordinary and necessary” expense. This means that the expense has to be “ordinary” for the industry you’re in and “necessary” to carry out the business activity. Last but not least, you need to plan the trip in advance; it can’t be a sporadic last-minute trip.
Travel Expenses List
Some of the expenses you are allowed to claim include:
- Rental car
- Baggage fees
- Train, plane, or bus tickets
- Dry cleaning and laundry
- Hotel
- 50% of meals while traveling to and from
- 50% of eligible business meals
We recommend keeping track of your expenses while you’re out on something like corporate travel management software. This will help you stay organized and will make tax time a lot easier.
If you were to drive your own car, you have two options to deduct those travel expenses. You can either total up the actual expenses that you incurred while you were using your vehicle. For example, you can add up all of your gas receipts, parking fees, insurance, parking tickets, tires, etc.
The second option is to keep track of the business miles you drove, and then you claim the standard mileage rate for that tax year. During the 2021 tax year, the rate was $0.56 per mile and in 2020 it was $0.575. Make sure you are aware of what the mileage rate is during the year you are doing your taxes because it will fluctuate.
Ready to Deduct Travel Expenses?
Now that you learned the ins and outs of deducting travel expenses, you can make informed decisions and not miss out on some valuable deductions.
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