Schedule a business meeting on the way to visit family and you can deduct some of your travel expenses
For many of us, the holiday season is synonymous with travel. Often very expensive travel. Whether it’s the ever-climbing price of gas or airfare for the entire family, travel expenses can certainly take a chunk out of your wallet.
You may be able to save a little money by scheduling a business meeting – for example with a client or a vendor – on your way to visit family and friends. This would allow you to deduct some of your travel expenses on your tax return.
According to the IRS, “travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job.” You must be away from home for substantially longer than an ordinary work day and your travel or work must require sleep or rest.
These include
- travel by airplane, train, bus, or car between your home and your business destination
- using a car while at your business destination
- taxi fare and other transportation between the airport/train station, hotel, and business destination
- meals and lodging
- tips related to any of these services
- dry cleaning and laundry
- business calls
- other similar ordinary/necessary expenses related to the trip
Make sure to keep records to document all of these expenses. Get receipts, charge as much to your credit card as possible, and keep a log of everything you do on Google Calendar.
You will need these records if the IRS decides to audit you. Without documentation you will be in a world of hurt. Not only will you have to pay back the money you saved from the deductions, but you will also have to pay interest, late penalties, and maybe even penalties for filing a fraudulent return.
Be aware that while they can save you a lot of money, travel expenses are also more highly scrutinized by the IRS. In other words, they dramatically increase the chance that you will be audited.
There are some limitations as to what you can deduct. The IRS will not allow you to deduct any expenses it considers extravagant or that were for personal use. Employees can only deduct expenses once they exceed 2% of AGI. The self-employed and small business owners, however, do not have this limitation. Note: you can’t deduct any expenses for which you were reimbursed.
You can deduct these expenses on Form 2106 [Employee Business Expenses] and Schedule A [Itemized Deductions]. Sole proprietorships should use Schedule C [Profit or Loss from Business].
Remember, you won’t be able to deduct your entire trip to Grandma’s house, only the portion that is directly connected to business. And if your spouse and your kids come along too, you won’t be able to deduct their expenses. But at least you will be able to save yourself a little last minute money on your 2012 taxes.
Photo via Scott on Flickr.
