According to a new survey of business owners by Marriott Rewards Premier Business Credit Card from Chase, 85 percent of business owners make time for personal activities and relaxation during business trips. For many entrepreneurs, this is actually one of the best perks of owning your own business.
Unfortunately, writing off all your travel as business expenses can trigger an audit by the IRS. So how do you appropriately separate business and personal travel expenses? Believe it or not, the IRS actually makes this easy to figure out.
Here are nine things the IRS says you can deduct as business travel expenses:
- Travel by airplane, train, bus, or car between your home and your business destination. (If you are provided with a ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero.)
- Fares for taxis or other types of transportation between the airport or train station and your hotel, the hotel and the work location, and from one customer to another, or from one place of business to another.
- Shipping of baggage and sample or display material between your regular and temporary work locations.
- Using your car while at your business destination. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking fees. If you rent a car, you can deduct only the business-use portion for the expenses.
- Meals and lodging.
- Dry cleaning and laundry.
- Business calls while on your business trip. (This includes business communications by fax machine or other communication devices.)
- Tips you pay for services related to any of these expenses.
- Other similar ordinary and necessary expenses related to your business travel. (These expenses might include transportation to and from a business meal, public stenographer's fees, computer rental fees, and operating and maintaining a house trailer.)
While there are more expenses you can deduct, these are the standard ones the government recognizes as legitimate business travel expenses. As always, your CPA should be your main resource for your particular tax situation.
Back in the olden days (like the 1990s and 2000s), a common recommendation was to keep a notebook in your personal car to record your mileage and other business expenses incurred while traveling. Nowadays, there are apps you can use to track not only how much your drive for business but all of your other expenses as well. Personally, I use my Dropbox app to scan receipts, bills, and other important papers on the go, but these six business expense tracking apps might also work for you. If you just need to scan documents and/or don't use Dropbox, I've used the free version of Genius Scan for years with good results.
The most important thing you can do to make this easy on yourself is find a convenient way to keep good records. Your CPA can guide you, but if you don't save your receipts (virtually or otherwise) and give her all the information she needs to do your taxes properly, you're either setting yourself up for an audit or leaving money on the table.