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  • Writer's pictureKathryn Bruns, CPA

How to navigate deductible travel expenses

Tax season is pretty much upon us ! What better time to bring up one of the "gray-est" and most difficult and contentious topics for business deductions. Travel expenses (hotels, transportation, etc.) are very fact specific and subjective when it comes to deciding what would be considered deductible in the eyes of the IRS. There is an art to this decision, in a sense. You want to deduct as much as possible under the rules (which do not and cannot address every situation), but you do not want to raise red-flags. Here is a short summary/guide/outline, which is only a superficial dive into this:


The first thing to ask yourself: Is this trip "ordinary and necessary" to conduct your business? "Ordinary and necessary" is an odd phrase for tax law (and not clear IMO), so instead, think "is this trip typical in my industry to help my business be profitable?" If you believe a "reasonable" person would say "yes" then deduct away !


What if there is both a personal AND business element to the trip? In such case, if the trip is "mostly personal", you can only deduct business costs directly attributable. You CANNOT deduct ANY of the transportation to and from (not directly attributable). If the trip is "mostly business", then the transportation to and from is 100% deductible (i.e. you would have incurred this even without the personal portion). To further complicate things, this all-or-nothing rule is different if the travel is to outside the US.


Other notes:


  • One may think it is reasonable to claim that the travel is "educational" for the business - this is NOT deductible under the rules

  • Travel that is "lavish" this not deductible (this is not deemed "necessary")

  • If the IRS questions, you must have good records to back up the deducted expense or else they can and likely will disallow




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