Deducting Business Travel Expenses Montrose CO

Understanding business travel deductions can be a daunting task. However, it is important for investors and business owners who travel as part of their business activities to gain a working knowledge of these regulations in order to take full advantage of the opportunities available to them.

“It’s well within [the average taxpayer’s] grasp...to understand just those particular rules that apply to them, so that they can properly document their deductions and so they can structure their activities so they fall within a proper deduction,” Fred Thompson, founder and principal of Frederick A. Thompson, CPA Inc., said. “I’ve seen a lot of people that miss deductions just because they don’t know the rules.”

First, investors must determine whether their travel expenses are eligible for deduction at all.

When traveling within the United States, all expenses can be deducted if the trip is purely for business. If business and pleasure are combined, only the business costs can be deducted.

If a person traveled from New York to Florida for a business conference, at a total cost of $900 for travel, lodging, etc., and afterwards stopped in North Carolina to visit friends for two days before heading home, bringing the total travel costs to $1,200, that person could deduct the $900 costs from going to Florida and back, but not the expenses from the side trip. It is also important to note that typically only 50 percent of meals and entertainment can be deducted, even on a trip that is purely for business.

All expenses are deductible for domestic, business-only trips One or two business-related events do not a business trip make. “The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip,” according to IRS Publication 463.

The rules for foreign travel get a bit more complicated. “The IRS in general is skeptical of travel [and] entertainment, because they assume there’s a personal element to it,” Thompson said. “And that’s more so when it comes to foreign travel.”

“If the [foreign] trip is less than a week and it’s a business trip, you can deduct 100 percent of the transportation, and the lodging and so forth,” Thompson said. “If the trip is more than a week or non-business is a substantial part of the trip, then you get into a situation where you have to actually figure out the business days, the total days, and you can then...[deduct] a percentage of the travel.”

But here’s a red flag for traveling investors: “If you travel outside of the United States primarily for vacation or for investment purposes, the entire cost of the trip is a nondeductible personal expense,” according to IRS Publication 463 (emphasis added).

Travel for the purposes of scouting out new investment property may not be deductible; however, “ordinary and necessary” expenses related to already-owned rental or royalty proper...

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