Making The Most Out Of Business Travel

Question of the Week

Making The Most Out Of Business Travel

With a first or second shot in our arms, many of us are starting to feel an unaccustomed optimism about reopening. We’ve been locked indoors for a year and a half, and now, it finally looks like we may get a chance to get off our sofas and out the door.  And while “travel is back” may be a bit of an overstatement, it seems like a good time to start thinking about getting mobile again.  Business owners have several advantages when making the most of their travel, so today, I want to cover the basics about maximizing the value of business travel.

Don’t forget ordinary and necessary

Before we get specifically into travel, I want to revisit two essential words regarding business deductions — ordinary and necessary. These two words are at the center of how the IRS defines a business expense. But they may not mean what you think they do.

“Ordinary” in this context means the type of expense that a business like yours typically takes. For example, it’s common and accepted for tax preparers to pay for software, malpractice insurance, and continuing education. Because these are common and accepted in the profession, they are considered ordinary expenses.

However, this point can get very business-specific. It’s not ordinary for tax preparers to deduct breast implants as a business deduction. But for dancers at strip clubs? It’s another story. Even though my tax preparation business can’t deduct that expense, a stripper at the club in the city might.

The other part of the equation is necessary. I’m still unsure why the IRS uses this particular word since they mean “helpful and appropriate for your trade or business,” rather than mandatory or required as you might expect. As long as an expense is helpful, you can consider it a business expense.


Deducting business travel

For business travel specifically, deductible expenses are the ordinary and necessary expenses of traveling away from home for your business.  Your “home,” in this case, is the entire city or general area where you work or have your principal place of business, and that may not necessarily be where you live. If you don’t have a regular or a principal place of business because of the nature of your work, then your tax home may be the place where you regularly live. You have to be away from your tax home for a period substantially longer than an ordinary day’s work, and you need to get sleep or rest to meet the demands of your work while away.

When figuring out your principal place of business, the IRS considers factors like the total time you ordinarily spend in each location, the level of your business activity in each site, and whether your income from each place is significant or insignificant.

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Quote of the Week

 “Life is either a daring adventure, or nothing at all” – Helen Keller


Task of the Week

As I mentioned above, you can only deduct that are ordinary and necessary for business. However, knowing the rules around the travel deduction will allow you to leverage business vacations that also may have a bit of personal use. Take some time to read over the different nuances and start fantasizing about your upcoming business/personal travel trips.