As you likely know by now, your travel meals continue under tax reform as tax-deductible meals subject to the 50 percent cut.
And tax reform did not change the rules that apply to your other travel expense deductions.
One beauty of being in business for yourself is the ability to pick your travel destinations and also deduct your travel expenses. For example, you can travel to exotic locations using the seven-day travel rule and/or attend conventions and seminars in boondoggle areas.
From these examples, you can understand why the IRS might want to see proof of your business purpose for any trips, should it examine them.
With deductions for lodging, a meal, or other travel expenses, the rules governing receipts, business reasons, and canceled checks are the same for corporations, proprietorships, individuals, and employees. The entity claiming the tax deduction must keep timely records that prove the four elements listed below:
When in tax-deductible travel status, you need a receipt, a paid bill, or similar documentary evidence to prove
The receipt you need is a document that establishes the amount, date, place, and essential character of the expenditure.
Hotel example. A hotel receipt is sufficient to support expenditures for business travel if the receipt contains:
Restaurant example. A restaurant receipt is sufficient to support an expenditure for a business meal if it contains the:
You can’t simply use your credit card statement as a receipt. Like a canceled check, it proves only that you paid the money, not what you purchased. To prove the travel expenditure, you need both the receipt (proof of purchase) and the canceled check or credit card statement (proof of payment).
In a nutshell, a travel expense is an expense of getting to and from the business destination and an expense of sustaining life while at the business destination. Here are some examples from the IRS:
The travel deduction rules are the same whether you operate your business as a corporation or a proprietorship, with one important exception. When you operate as a corporation during the tax years 2018 through 2025, you must either:
If you would like my help in planning the business and personal parts of your next trip, please don’t hesitate to contact your team here at Luster Tax Consulting to discuss.
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