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Tax Deduction for Employee Travel and Entertainment Expenses 
 
by kmhagen July 15, 2005

Travel Expenses

 Once you determine that you traveled away from your tax home on a temporary assignment, you can deduct the following types of travel expenses:

  • Fares for travel by air, rail, bus, or car for travel between your home and your business destination
  • Taxi, commuter bus, or airport limousine fares
  • Baggage charges
  • Expenses of operating your vehicle while traveling away from home.  You can use actual expenses or the standard mileage rate, plus tolls and parking.
  • Meals and lodging (There is an optional standard meal allowance rate, described below, but there is no standard rate for lodging.  You will need to keep track of your actual lodging expenses.)
  • Cleaning and laundry expenses
  • Business telephone calls
  • Tips and other incidental expenses.  You can keep track of your incidental expenses, such as tips, or you can use an optional amount of $3 per day while traveling away from home, but only if you did not pay or incur meal expenses that day.

If you have one expense (such as a hotel bill) that includes different types of charges, for example, lodging, meals, entertainment, or transportation, you need to separate or allocate the cost of meals and entertainment, since they are subject to limitations

Travel Expenses of Another Person Traveling With You

Normally, you cannot deduct the expenses of another person who travels with you, unless that person:

  • Is your employee
  • Has a bona fide purpose for the business travel, and
  • Would otherwise be allowed to deduct travel expenses.

For example, you could not deduct the travel expenses of your spouse or dependent unless they meet the above conditions.

Personal Expenses on a Business Trip

If your trip was entirely business-related, you can deduct all your travel expenses.  If you combined your trip with a vacation, made a personal side-trip, or had some other personal activity, you will need to separate your business and personal expenses.  You can deduct your costs in getting to and from your business destination, and your business expenses while you were at the business location.  On the other hand, if a trip is primarily for personal purposes, but you had business expenses while at your destination, you can deduct the business expenses, but not the cost of the trip.

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