Did you know that when you make a trip to visit a client or vendor, or have lunch with a prospective contact, some of the cost is tax deductible? Keeping track of certain things such as mileage and entertainment expenses can be a big help when filling out your tax return.
When determining a business deduction for the use of your car, no personal use, such as commuting to and from work, can be included. Deductible car expenses include traveling from one office to another if your company has two locations, making a business trip to visit customers to attending a meeting not at your regular workplace, or travel to and from a temporary workplace. Keep complete records to substantiate items reported on your tax return. For car or truck expenses, you can claim the standard mileage rate or actual expenses.
Standard mileage rate for the use of a car (including vans, pickups, or trucks) can be found by going on IRS.gov and searching standard mileage rates. To claim standard mileage, appropriate records such as the documentation that identifies the vehicle and provides ownership or lease, and shows the miles traveled destination, and business purposes.
For actual expenses, add together your annual car operating expenses, including gas, oil, tired, repairs, licenses fees, lease payments, and registration fees. Multiply the car operating expenses by the percentage of business use for your car to get the allowable deductible amount. Things that relate directly to the business use of the car, such as business related parking or road tolls, are fully deductible and do not have to be included in the business percentage.
“Ordinary and necessary” expenses incurred while away from home for the purpose of business can be tax deductible. Keep all receipts and relevant documentation, and if you combine business and personal travel, be prepared to show how much of the expense was related to business. Travel expenses can include lodging, transportation (airplane, train or bus, travel agency, etc.), and meals.
For lodging, your receipts should show the location and duration of your stay and the cost of your stay. Keep records for extra costs, such as phone charges, tips, and laundry. Similarly detailed receipts are necessary for meal expenses. Make sure the receipts you keep contain the name and location of the restaurant, the number of people served, and the date and amount of the meal. A general rule to follow is to keep a log of meal expenses and receipts for amounts of $75 or more. Either track the actual costs of all your meals, or use the standard meal allowance amount if you qualify.
For entertainment activities during business trips, you must have records to prove the business purpose and the amount of each expense, the date and place of the entertainment, and the business relationship of the people who were entertained. Entertainment expenses are usually subject to a 50 percent limit.