The lowdown on business travel and taxes starts with recording everything. Even if you’re entertaining for business reasons and the amount of the entertainment is less than $75 and you’re not required to have receipts, get them, record them and keep them. According to the IRS in Publication 463, keep records of all your expenses. You’re also going to keep records of all advances made by your corporate entity – if you’ve been advanced $1000 and your expenses are $2000, your claimed expenses are only going to be $1000 – you’ve already been covered for the rest, though the corporation is going to need to track those amounts for the corporate deductions.
Record everything separately and be as thorough as possible. If some of your meals are included in your lodging costs, record this. Record laundry and dry cleaning expenses. Remember that if your spouse goes with you and isn’t a part of your business, his or her expenses are separate, and not deductible. You can, however, deduct expenses for someone traveling with you who is your employee, has a bona fide reason for making the trip and would be able to deduct the same expenses even if not traveling with you. If you have a business associate traveling with you who meets these conditions, then travel expenses for that person are deductible.
According to the IRS, the following expenses are deductible for business travel:
Transportation. Traveling by planes, trains or automobiles, your transportation costs are deductible unless you’re using frequent flier miles or some other free ticket to ride.
Ground Transportation. Traveling between airport and hotel or hotel and the place you’re working or meeting with clients or conducting business, fares for taxis, commuter buses and airport limousines are deductible.
Shipping. Anything related to your business, like sample displays, that needs to be shipped or checked into baggage is deductible.
Personal Vehicle. If you’re driving for your business you can choose to deduct actual expenses or mileage, the same as in your business use of your vehicle at home.
Lodging and Meals. If your trip is overnight, or long enough you need to stop somewhere and check in and sleep, your lodging and meals are deductible. (Restrictions apply to meals.)
Cleaning. You can deduct the costs of dry cleaning and laundry services while on the business trip.
Communications. Business calls and business communications such as faxes are deductible.
Tips. The costs of tipping for any of the services listed as deductible are also deductible.
Other expenses that come up on your business trip that are deemed ordinary and necessary by the IRS, such as renting equipment necessary to the job, paying for fees of professionals whose services are utilized, use of a house trailer or other normal business-related expenses are deductible.