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Tax Tips for Deducting Your Travel Expenses

Unless you file for an extension soon, your taxes for this year are coming up. If you're a typical individual, you hate doing your taxes even more than you hate unclogging your drain. You know it has to be done, but you keep putting it off till the last minute.

We suggest that your aversion to tackling your taxes might have something to do with not getting every last deduction you're entitled to under law. One of the biggest deductions that is overlooked are your travel deductions. Here are a few quick pointers to get you started in the right direction.

Business Deductions

If you're a small firm or solo practitioner, you owe it to yourself to get back as much money as you can. Your business will thank you.

Solos do a lot of traveling. Either driving, flying, or just generally being away from home for extended periods of time. In general, your travel expenses can be deducted if they meet three requirements:

  • You incurred your expenses while you were away from home
  • Those expenses were "reasonable, ordinary and necessary"
  • Those expenses are "explicitly connected to a business purpose"

Home

"Home" generally means your usual city of business. If you have a physical office, you can basically treat that as home. The key is to make sure that your expenses at least require you to be away from home for at least one night, or else your travel expenses will not qualify as a travel expense deduction.

Another thing to watch out for is your staying away from home "indefinitely." This is potentially an issue because stays of greater than a year cannot be deducted as a travel expense.

More Like "Reasonable"

The requirement that travel expenses be "reasonable, ordinary and necessary" is as onerous as it sounds and could probably be met with "reasonable." Most attorneys can in good faith include lodging at a regular motel, but will have a hard time justifying deducting his expenses at a 5-star hotel to an auditor. Meals are also subject to special rules. The general rule is that 50 percent of the actual cost of the meal can be deducted lawfully.

Make Sure Your Records Check Out

Finally, the last requirement is that the expense be "explicitly connected to a business purpose." The good news is that your travel expenses, if "primarily connected" to developing your business -- think meeting clients, case research, networking, another attorney, etc. -- then it's lawfully deductible.

The bad news is that you'll have to keep good records of these meetings because an auditor's job is to be a meticulous about your claims expenses and deductions. An IRS agent can also be expected to track down the people you claimed to meet and to verify if your story checks out. If not, deductions will be the last thing on your mind.

Due Diligence -- or a Professional?

These tips are very general and are certainly no substitute for doing your own due diligence with regards to deductions. If you don't really travel all that much, then you could play it safe and not claim any expense deductions. But if you do travel a lot, it might pay to educate yourself as to how you could maximize your deductions.

As always, you should consult a tax attorney or other tax professional if you don't feel up to the challenge to handle your own deductions. Maybe you can take care of it yourself next year when it's not quite so eleventh hour.

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