Deduct Your Holiday Business Travel and Dining

From my perspective, travel is one of the most underutilized tax deductions by small-business owners today. I try to make all of my travel a business write-off by following a few simple rules.
Moreover, meals and travel can be a powerful write-off during the holidays and meetings with your Board of Directors/Advisors are not only a good tax deduction, but a powerful way to boost the success of your business. See this article here for more information on building your “Board”: https://markjkohler.com/setting-up-your-board-of-directors-or-advisors/.
Remember a few key facts. Valid travel expenses are 100% deductible, meals discussing business are 50% deductible and if you are ‘traveling for business’, meals even by yourself are deductible. In 2018, entertainment expenses, whether or not you are traveling, were completely eliminated, but travel expenses are STILL 100%  deductible!!
As for ‘travel’, the following are wonderful expenses, with a legitimate business purpose, are 100% deductible:
  • airfare, baggage fees, etc.
  • hotel and lodging
  • rental cars and gas for rental cars
  • valets, taxis, trains, tolls, etc.

Now keep in mind that ‘travel’ has been defined by numerous Tax Court cases, to be any excursion ‘outside of a normal commute’ of your daily operations.  There’s not a mile distance requirement, just a subjective analysis of your daily commute. FOR EXAMPLE, having a meeting with your Board of Advisors or Directors during the holidays, is a valid business expense to deduct the travel there and at least one day of hotel and meals.

To some of you, this is ‘business as usual’…However, you would be shocked to know how many new clients’ tax returns come across my desk every year with zero travel deductions. Consider the five following ideas that you might be able to incorporate into your holiday travel.

1. Hold the annual company meeting.

If you have a corporation, this would be your board of directors meeting and shareholders meeting. If you have an LLC, elect a board of advisors to assist the manager or managers of the company. This is an excellent opportunity to discuss the company’s operations over the past year: profits, losses, acquisitions, new ventures and goal-setting. Listen to the advice of your board members and make plans for the following year.

2. Visit a client.

Wherever you are traveling, is there a customer or client in the area? Could you cultivate a new relationship or strengthen a current one? Schedule meetings each day you are traveling, at least for a few hours, and keep notes of what you accomplish and why the meeting was important.

3. Visit a vendor.

Is there a vendor or supplier, subcontractor or affiliate you could meet with where grandma or grandpa lives? Could you negotiate new pricing, tour a facility or talk about networking and how you could work more closely together? The tax write-off may even be simply a bonus when you consider the business that you could generate with a strategic meeting that ultimately would boost your revenue.

4. Attend a conference or workshop.

Look at possible workshops in the local area where you are visiting. Consider tax, legal, business, marketing website, SEO, customer relationship or technical training or classes based on your type of business. At the very least, visit a local real estate or investment club meeting if possible. The training could be fantastic and justify a great write-off to boot.

5. Check on your rental property.

I’ve said it time and time again. At least consider and/or attempt to purchase rentals where you travel. More specifically, could you buy rentals where extended family members live? Have them help manage your properties or simply work on them while you are visiting. Sometimes, it’s a great excuse to get out of family functions to have to leave and work on the “rental” — just saying.

The list goes on and on. It just doesn’t make sense for any business owner not to have at least some travel expenses. With all of these strategies or reasons for business travel, make sure that you are doing substantive business on each day you aren’t traveling and keep records of what you are doing, whom you are meeting with and how it relates to your business.

YEAR END TIP: Plan your holiday trips accordingly and incorporate one of the five reasons above into your travel plans.

As usual, the more money you make in your business, the more opportunity you have to be aggressive and take a larger deduction. Don’t get greedy. Keep your receipts and records, and discuss the expenses with your CPA at the end of the year in order to report a well-balanced tax return. As I have said many times before, “Pigs get fat and hogs get slaughtered.”

Every holiday meal has the potential to be a dining expense.

The rules for ‘deducting meals’ before 2018 are STILL THE SAME in 2018. It’s the change in the entertainment expense that threw everyone for a loop. However, after IRS Notice 2018-76 issued on October 3rd, 2018, we can STILL write-off our meals when traveling OR in a valid business meeting with partners, employees, or business contacts. Thus, if you can find a legitimate business purpose for your holiday travel, then you are allowed to deducted your meals for the days in route, and the days doing business EVEN IF you don’t meet to talk business with someone.

In sum, travel and dining during the holidays can be a fantastic tax deduction and a great impetus to have productive meetings with your board of directors, vendors and employees to make plans for the New Year.

Mark J. Kohler is a CPA, Attorney, Radio Show host and author the “The Tax and Legal Playbook- Game Changing Solutions For Your Small Business Questions”  and “What Your CPA Isn’t Telling You- Life Changing Tax Strategies”. He is also a partner at the law firm Kyler Kohler Ostermiller & Sorensen, LLP and the accounting firm K&E CPAs, LLP. For more information visit him at www.markjkohler.com.

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