In my opinion, the travel write-off is one of the most underutilized tax deductions by small business owners today!
Making sure our travel has a ‘business purpose’ is critical and a perfect opportunity for business owners to take a great tax write-off. In fact, even properly planned holiday travel can generate significant tax deductions while we are visiting family or going to our special/romantic locations around the U.S. or the world.
Unlike meals and entertainment, which are limited by 50%, travel expenses are 100% deductible. These include airfare, hotel, rental cars, valet, taxi, trains, tolls, etc. You would be shocked to know how many new clients’ tax returns come across my desk every year with literally zero travel deductions.
Also, remember that the ‘Auto Deduction’ is completely separate from ‘Travel’ and involves the use of your vehicle for business. See my other article: “The Best Strategy to Deduct Your Auto, SUV or Truck in 2020.”
The trick becomes finding a legitimate, honest and justifiable business reason for the ‘travel’. Much to my families dismay, over the years I have become more and more obsessed in trying to make every trip a legitimate write-off. My wife is consistently asking me to ‘show her I love her’ by not trying to schedule a speaking event, a client meeting, or even a book signing on every romantic getaway she tries to plan. It’s really difficult for me to make this sacrifice…but I’m working on it.
Nonetheless, clients consistently ask me what are some of the things I do to make a trip a write-off and good activities to include on a trip that would qualify as ‘doing business’. Consider the 5 following ideas that you might be able to coordinate with or plan ‘in and around’ your personal travel.
- 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, 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.
- Visit a vendor. Is there 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. Consider classes tax, legal, business, marketing, website, SEO, customer relationship, or technical training 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.
- 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 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.
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.
Don’t get greedy. Keep your receipts, 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.
* To sign up for Mark’s weekly Free E-Newsletter and receive his Free E-Book “The Top 10 Best Tax Saving Secrets Everyone Should Know” visit www.markjkohler.com.
Mark J. Kohler is a CPA, Attorney, co-host of the Podcast “Main Street Business Podcast” and author of the new book “The Tax and Legal Playbook- Game Changing Solutions For Your Small Business Questions, 2nd Edition”. the “8 Steps to Start and Grow Your Business Workbook”, and “The Business Owner’s Guide to Financial Freedom- What Wall Street isn’t Telling You”. He is also a senior partner at the law firm Kyler Kohler Ostermiller & Sorensen, LLP and the accounting firm K&E CPAs, LLP.