A write-off for your travel expenses is one of the most underutilized tax deductions by small business owners today!
Making sure our travel has a “business purpose” is critical. It’s a perfect opportunity for business owners to take a great tax write-off. In fact, even properly planned holiday travel can generate a significant tax deduction for our travel expenses. This can include visiting family or going to our special/romantic locations around the U.S. or the world. However, in order to claim this deduction there are some rules.
Travel Deduction Rules
Travel expenses are 100% deductible when traveling for business, Meaning you are able to write-off travel expenses. These include expenses for the following:
- Hotel and Airbnb
- Rental cars, Uber & Lyft
- Valet & Taxi
- Trains, Tolls, etc.
Many new clients’ tax returns come across my desk every year with literally zero travel deductions. Imagine the tax deduction from the travel expenses they could have taken advantage of with proper planning.
Keep in mind, that the Auto Deduction is completely separate from the Travel Deduction and involves the use of your vehicle for business. See my other article “The Best Auto Deductions for 2023.
Also, remember the Dining Deduction is separate from Travel Deduction. See my article “Writing-off the Dining Expense” for strategies on combining the dining deduction with the auto deduction.
Business Purposes for Travel
The trick becomes finding a legitimate, honest and justifiable business reason for the “travel”. Frankly, it’s not too difficult to find a business purpose for travel.
Here are 5 wonderful reasons for a deductible trip:
Company Annual Meeting:
If you have a corporation, this would be considered 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 operations of the company over the past year. Profits, losses, acquisitions, new ventures, goal setting…utilize the advice of your board members and make plans for the next year.
Visit a Client:
Wherever you are traveling to ask yourself, 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 accomplished along with why the meeting was important.
Visit a Vendor:
When traveling, think about if there is a vendor or supplier, sub-contractor, or affiliate you could meet with where grandma or grandpa lives? Could you negotiate new pricing, tour a facility, 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 you could generate with a strategic meeting that produces more revenue for the business.
Attend a Conference or Workshop:
Look at possible workshops in the local area where you are visiting. Tax, legal, business, marketing, website, SEO, customer relationship, or technical training based on your type of business are classes that you should consider taking. 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.
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 the extended family live. Have them help manage your properties or you could 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 to not have at least some travel expenses. So plan and do one of these ideas; and get a write-off for your travel expenses.
How many Days can I Write-off?
Keep in mind that travel days include the ‘day’ you get there, the ‘day’ you do business, and the ‘day’ you travel back home! Thus, a properly planned 3-day trip, with a legitimate business purpose, could be coordinated with some personal relaxation or fun and still be a 100% tax write-off.
With all of these strategies, moderation is key. Make sure that you are doing business each day you aren’t traveling and keep records of what you are doing, who you are meeting with, and how it relates to your business. As usual, the more money you make in your business, the more opportunity we have to be aggressive and take a larger deduction.
Finally, don’t get greedy. Keep your receipts, and records. 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.