I’ve been doing some more research on what the IRS says you can and cannot deduct when you travel. This is important to know so that you don’t run into trouble when tax time comes. I have a trip coming up in June and I want to find out if any of the business work I plan to do will be deductible. The trip will be mostly for a vacation, but real work will also be done to gather information for the website. I have a plan to talk to my tax preparer before I go to see if they offer any worksheets or guidelines. Preparing taxes is their main business, so they should know!
The IRS says you must classify any trips outside of the United States as one of the following:
1. Travel Entirely for Business – this is where you fly somewhere overseas and spend each day working or being on site for business purposes. This applies even if you spend a lot of the time waiting for something or someone or if you are just required to be there because the business requires it. There are many possible scenarios, so you should read the rules to be sure you understand them.
2. Travel Primarily for Business – If most of your time will be spent on business, but some of your time will be non-business related, then you cannot deduct the entire cost of your trip. You must follow the IRS “Travel allocation rules”. That way, you can deduct the correct amount of your expenses and stay out of trouble.
3. Travel Primarily for Vacation – If your primary purpose for traveling is for a vacation, then you cannot deduct any of your expenses. The exception would be if you attended some type of seminar or continuing education training that was directly related to your business while you were there. You might also be able to deduct expenses for travel or meals if the expenses were directly connected with your business activities. Here’s an example: You fly to France from the United States on a vacation. While in France, you go to another city with the intent of meeting a person to interview for a travel article you are writing. If you spend the day working on your article and gathering information, then the cost of your travel to your destination and back is deductible. Also, 50% of your meals should be deductible. You will have a tougher time deducting hotel costs for this work, though. It would be best not to try deducting hotel costs unless you have a letter from a magazine or other publication telling you to proceed with an article submission. Without having that first, you are going to have a difficult time justifying the expense. So stick to the basic deductions and you should be fine. The same applies to travel expenses in the United States. You will want to deduct your car mileage, so keep good records when you travel for business. Finally, when traveling primarily for vacation, forget about deducting any airfare or other expenses. The IRS will not look kindly on a tax return with travel expenses taken during a vacation trip.
And, in addition to the above, your trips out of the country need to be classified as either one week or less, or more than one week. The rule for that is:
1. If your trip overseas is less than one week, then you would not count the first day of the trip, but you would count the last day.
2. If your trip is more than one week, then you would count the day you leave and the day you return.
There are rules for the things you can deduct as well. The IRS allows a deduction for hotels, travel, entertainment and meals. The rules are very specific and you are allowed to take a standard meal allowance or else you can deduct 50% of your meal costs (but make sure to get receipts). Thankfully, there is plenty of Online tax software to help you along the way.
Here is a link to the IRS website. The rules are fairly complex, but study them and you’ll soon be well-versed in allowable deductions for travel.
As usual, do your research and know what the rules are. You don’t want to try to claim anything that is not allowed. Be reasonable and stay within IRS guidelines.
I hope this helps some of you to understand the rules for travel deductions in the United States. You’ll get fewer (unwanted) letters from the IRS if you know the rules before you go. Good luck!
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