Tax pro Mark Kohler breaks down which travel costs small-business owners can fully deduct: airfare, hotels, rental cars, Uber. You need a clear business purpose like client meetings or property inspections, and the IRS requires four hours of business activity per day to count the trip.
Chapters
Travel deduction has to be one of the most underutilized tax deductions with small business owners. I love to look at their tax returns and find hidden tax savings. So I want to go through some basics here and I'm going to write on my desk here. I love my little whiteboard desk is freaking awesome. So first point, remember, travel is different than dining. Dining is going to be limited by 50% even if you're traveling by yourself. But when it comes to travel, it's a hundred percent, 100%. So I'm going to be writing off things like to do airfare, I want to do the rental car, I want to do Airbnb, I want to do the hotel, Uber, valet. I could be up in Seattle and be on a ferry, I could be on a subway. I mean these are all things that are 100% write off. And if you can get business purpose in place for any of your travel, boom, I'm writing off now. I'll go through the days of the week here in a second. But let's just also think of what are some good business travel reasons. I love meeting with a client or a customer. So you're in town, you're traveling and you're gonna go meet with a family member. Maybe you're at the family reunion. You could be doing the family reunion, doing consults out in the parking lot in your rv. Great write up. Anyway, you might be meeting with vendors or affiliates. And so when you're traveling, you're networking, you're trying to find a good reason for a meeting when you're out on the road. Another one that I like is writing off your rental property visits. Now you can't write off travel to go shop for rental property unless you actually make a purchase or an acquisition. But I love checking on rental property. Then your board meeting. This could be your board of advisors with your LLC board of directors. If you have a small corporation, it could be your family members or just friends. I love it. And when I'm out here thinking of meeting with customers, vendors, rental property, having my board member meeting, and I put board of advisors too. I'm trying to make a good business purpose fit into travel. I may have been taking anyway and I'll give you some days and the rules for the week here in just a moment but. Oh, another one. I love our workshops. Make sure you're attending a workshop on a regular basis. It's just good for business personal development. Anyway, by the way, check out my event in July, my three day Main street growth con. You're going to freaking love it. But these are, these are the reasons we need to come up with to write off our travel. And then we get 100% write off. Now remember, dining is going to be separate. And I kind of think like going to the airport, you got auto mileage to the airport. You might buy a charger in the airport. That's going to be business supplies. Then, oh, you have a sandwich. That's dining limited by 50%. Then I get on the airplane. See, the airplane is a travel expense, but you've got auto parking, office supplies and dining that are ancillary to your travel. So you want to peel out the travel part again with the travel, the hotel, the Airbnb, the valet, all those little things. Now we're going to talk days of the week. Come check this out. So when you travel, let's say we got a week here, we got Monday, Tuesday, Wednesday, Thursday, Friday, we need to add one. So Monday, Tuesday, Wednesday, Thursday, Friday, Saturday, we'll put Sunday over here. Okay. So if I'm going to travel for business, the IRS says the day you're traveling, that's a write off. So I'm traveling this day. Then the day I actually have a business purpose could be a meeting, a conference, checking on my rental, meeting with a customer or client, I get to write off that day, then I get to write out the day traveling back. So I get three days of travel even if I'm only having a critical meeting on this particular afternoon. Wonderful expense. Now here's the cool part. When you look at the week. If you have Sunday, Monday, Tuesday, Wednesday, Thursday, Friday, Saturday. If you are stuck somewhere on the weekend and you have business on Friday, so you do your business meeting, whatever it is, you traveled on Thursday, so I get Thursday and Friday. Damn, I got stuck in Vegas on Saturday and Sunday. You gotta be miserable, right? Maybe you'll find some things to do. And then you have another business purpose, meeting, conference, something that happens on Monday, then you travel back on Tuesday. So look at this. Travel on Thursday, business on Friday, get stuck somewhere on the weekend. IRS allows for travel write off because you got to stay around and do business. Business on Monday, travel back on Tuesday. Now notice here what's going on too. I've got two legitimate business meetings, one on Friday, one on Monday. We're not going to write off 10 days. In Cancun, when you said, oh, we had a board meeting every day, I don't think that's going to fly. You want to make sure you're having at least four hours of business conducted in a given day when you're there on consecutive days. So if you're traveling somewhere to check on your rental property where your kids are going to college, keep a good logbook. What are the what's the work we're doing for those four hours each day? Now finally look at your overall mix of your income, your expenses, the purpose of your business. I don't want to write off 10 grand in travel when you only brought in 20 grand. You bring in 200 grand in your business. Maybe writing off 10 grand in travel makes sense. Don't get greedy. Pigs get fat and hogs get slaughtered. So meet with your accountant. Make sure that you're really digging up all those travel expenses from credit cards, debit cards, cash, Venmo, Apple pay wherever you got a travel expense. You can justify it with a business meeting. Let's freaking ride it on. Now I can talk about per diems and all sorts of international trial things. Anyway, I teach a class my certified tax professional course to help advisors become the best street smart tax advisors they can be. So over@marjorie.com check it out marjay kohler.com and make sure your advisor is looking into it. Maybe you come and just learn for your business itself, but if you're out helping clients with tax legal finance planning, my course is awesome. So I talk about this for at least a half hour to an hour. We've got exams, a little workbooks to really work through this. So I love to teach and go even more in depth. But you as business owners have to take control of your ship. This is your business. Let's make sure that you're talking about the travel expense, tracking everything you can and then talking with your tax professional to make sure it's a write off. Sam.
