August 22, 2013

Maybe you’re finally taking that long-awaited vacation, or your employer has assigned you to cover an out of town meeting. Or perhaps you’ve been invited to interview with a company in another state for a really great job. In all of these instances, you may be able to cut some of your travel costs with tax breaks from Uncle Sam.

Mixing Business with Pleasure

You’re traveling to Hawaii for your industry’s annual conference. If you’ve got the time, there’s not reason that you can’t add a few extra days onto your trip to enjoy the islands while you’re there. If you have a spouse and kids, why not make it a family vacation?

You can take a tax deduction for the cost of attending the conference, along with your round trip plane ticket and the hotel bill for the dates you were in attendance, including your arrival date. But be careful – you cannot deduct the cost of the hotel room for days added after the conference, or extra plane tickets for your family. Similarly, you cannot deduct the cost of leisure activities outside of the event. The money that you spend on meals and entertainment for your spouse and kids is strictly on you.

You can deduct only 50% of your business-related meal and entertainment expenses. If you are subject to the Department of Transportation’s “hours of service” limits, you can deduct 80%. – IRS.gov

Out on Business

If you are traveling out-of-town as an employee representative for your company, you may be able to deduct some of the costs incurred. However, if your company reimburses you for your expenses, you can’t double-dip and ask for a tax break again.

The Internal Revenue Service only allows you to deduct un-reimbursed costs that exceed 2 percent of your gross adjusted income. Once you’ve met that threshold, you can declare deductions for expenses such as travel and commuting costs, including travel in your personal vehicle, as well as dry cleaning, telephone calls and other related costs that you accumulate away from home.

If you’re self-employed or own a small business, you are not obliged to meet the 2 percent threshold. Instead, you can begin deducting your legitimate expenses from the first penny you spend. Maintain a home office? You may be able to deduct commuting costs from your home to a client’s office or any other work site.

Job Searching

If you are looking for a job in your present line of work, know that you can deduct some of your expenses on your tax returns, including travel expenses. Even if you don’t get the job, you’re entitled to legitimate travel-related deductions for your job search. It can get tricky though, because you cannot deduct job related travel costs to look for work in a different field.

There is no need to give up tax breaks to which you are legitimately entitled–deductions for travel and business aren’t just for the jet-setting rich and famous. The key is to keep good records of your expenses, hang on to your receipts, and to not go overboard. That way, if any red flags are raised and the IRS does question your deductions, you’re covered.

Photo: Kuster & Wildhaber Photography