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Tax Blog

Traveling Smart: The Tax Benefits Hidden in Your Business Expenses

Are you frequently hitting the road (or the skies) for work this summer? If so, you might be able to deduct these travel expenses from your taxes next year, potentially saving significant money. To help you navigate this, let's break down what qualifies as a deductible travel expense.

Firstly, only travel expenses that are both ordinary and necessary for your business, profession, or job are eligible. This means that any extravagant or personal expenses are off the table. The key requirement is that your travel takes you away from your tax home longer than a typical workday.

But what is your tax home? It's not necessarily where you live, but rather the entire city or general area where your main place of business or work is located. For example, if you reside in Chicago but commute to Milwaukee for work, Milwaukee is considered your tax home. Therefore, you can't deduct any travel, meal, or lodging expenses incurred in Milwaukee.

If your job requires you to work in multiple locations, your tax home is where your principal place of business is. Temporary work assignments away from your tax home can qualify for deductions, but be cautious: an assignment is deemed temporary only if it lasts one year or less. If you initially expect to work at a location for under a year but your stay extends beyond that, the expenses become nondeductible from the point your expectation changes.

Here are some travel expenses that you can typically deduct:

  1. Transportation Costs: This includes travel by airplane, train, bus, or car to and from your business destination.

  2. Local Transportation: Fares for taxis or other types of transportation between the airport or train station and your hotel, as well as between your hotel and the work location of your customers or clients.

  3. Baggage Shipping: The cost of shipping baggage to your temporary work location.

  4. Lodging and Meals: Non-entertainment-related meals and lodging while away from your tax home.

  5. Dry Cleaning and Laundry: Expenses for dry cleaning and laundry services during your trip.

  6. Business Calls: Costs for business-related calls while on your trip.

  7. Tips: Tips for services related to any of these expenses.

By understanding these guidelines and keeping detailed records, you can ensure that you maximize your eligible deductions and potentially reduce your taxable income. For more information, please contact the professionals at The Center for Financial, Legal, & Tax Planning, Inc., at (618) 997-3436.

 



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