The Best Method to Write-Off Travel Expenses | Mark J Kohler

Would it shock you if I said that more than 60% of the clients that come into our accounting firm leave thousands of dollars on the table in tax write offs in one particular area and that's the travel expense. My staff even reminds me on a regular basis, please, please talk about this more and tell people how important the travel expense is and how they need to better capture these write offs and these numbers and put them on their books. Let's break it down. Now. First and foremost, of course, I've got to talk about the fact that you can't just write off your travel expenses going around the country to visit grandma and grandpa and the kids. This is for you, the business owner. If you have a small business, even a rental property that you're going to check on, I'm alright with that. But you've got to have a business purpose to take. Taking the travel expense. I'm going to go through five different reasons or purposes for a business trip. But you have to keep in mind that this is for you, the business owner and I want all of my clients to have a small business on the side, or a side hustle as it's sometimes called. And that's where the travel expense can really be exploited. Now, one other thing before we get into the reasons that a travel expense could be deductible, it's 100% of a qualified travel expense. So it's not like dining where it's 50%. The IRS knew you had to eat anyway, so they cut it in half. But if you've got to Travel for business, 100%. Let's go through the list like airfare, hotel, rental car, rental car, gas, Uber, Airbnb, valet, tolls, the list goes on and on. These are all expenses that you've got to incur while you travel. Now, we'll get into the days of travel in a moment, but, well, let's hit these five great reasons to take a travel write off. Number one, you're going to go meet a customer or a client. Now, you might have an entertainment experience which is not a write off, but you certainly may go to dinner and talk business. Now again, the meal, even if you're traveling, is a 50% write off. But to get there, to go have this meeting and talk business with an important customer or client is a write off. Number two, a vendor or an affiliate some of you might be doing business with. They're not a business partner, but you, you may buy product from them or services and you need to go have an important meeting to talk about the development of your business and how they can support you. That's an important meeting, the board meeting. Oh, I love this. This is the board meeting that you're going to have with your partners or your board of directors or board of advisors. Watch some of my other videos on this. But these could be even family members that are helping you succeed in your business. They could be part owners of the business or not, but they're going to be advisors and they're going to be on the board. And you're going to document the meeting with minutes. Our team has a wonderful company maintenance program. Check out that too at the law firm. See below. But you want to have a regular meeting every year, even with an llc. And it's allowed for and it's a great write off. Number four, you're going to visit a rental property. That's right. I talked about it earlier and I want you to buy rentals where you travel. If it makes economic sense. You may not be buying a rental in a resort area. Well, it could even be an Airbnb or VRBO if it works well. Right, but going to buy rentals where you go. For years I owned a rental property. In fact I still do, next to my mother in law and father in law. And now I live in their small town nearby. But for years we would travel states thousand miles to go visit our rental property. Oh, and go visit grandma and grandpa too. Number five, you're going to attend a workshop. That's right. You're going to go for some training, some important business training and you're going to keep that cost reasonable and you're going to go learn about how you can make your business better. Maybe you'll even go to one of my workshops. I have five every year across the country. Philadelphia, Chicago, Seattle, Orange county and Hawaii. That's right. I don't want to go to Hawaii. But I do it for you because I want you to get a tax write off going to Hawaii. Now of course you know I'm joking because I love my Hawaii clients. And why not make a vacation into a business write off by attending a conference. And again, like I said, keep the cost reasonable. I don't want you to spend thousands of dollars for a conference you may not need. That's why I price my conferences for 200 bucks or less, including lunch, because I want it to be affordable. I'm a business owner like you. So shop around and find a good conference that's going to really help you succeed in your business. Okay? Now finally we need to talk about the Days of travel and what's realistic. And the IRS is going to allow for. Now, this is under IRS regs, the day you travel is a write off and the day you travel back as a write off and the day you do business as a write off. So in a simple example, let's say you fly somewhere on Tuesday, you do your business on Wednesday and you fly back on Thursday. That whole experience is 100% write off. And the travel expense you incurred and the meals would be 50% during the trip even if you didn't meet with anyone. Now you're going to watch my other videos on meals too. And also keep in mind that auto deductions are separate from travel. So let's say you drove somewhere on Tuesday. Then the mileage deduction would apply. And, and then travel expenses along the way like hotel would go under travel. So you would have several categories in that situation. Right. Auto, some travel and some meals. So you're going to keep track of those expenses separately. Now let's take a second example into account. Let's say that you're traveling over the weekend and you're going to travel on Thursday, do business on Friday. Gosh. And then you get stuck in Las Vegas on Saturday and Sunday and then do legitimate business on Monday and then travel back on Tuesday. That's an entire 100% deductible trip. The IRS allows that if you are stuck somewhere on the weekend and you do legitimate business on Friday and Monday, the weekend becomes a write off because you were stuck there. Now the third example here. Let's say you're going to the Cayman Islands for 10 days or to Hawaii for 10 days and you're going to have your board meeting there and you're going to go to a workshop for a day. Can I write off all 10 days? No, that would not be legitimate. You need to keep in perspective that you can't get too aggressive here. So as an accountant, I'd look at your travel to get there and then the days you actually did business and then the day you came back. And then we take a pro rata write off for the hotel and write off a lot of your airfare to get there for the meeting that you had to have anyway. But you'll meet with your accountant and come up with a reasonable amount. And finally, this, of course, all depends on your gross revenue and the size of your business. If you're only making five grand this year, I'm not going to write off 10 grand and travel. But if you made 100 grand in your business, 10 grand in travel may be very acceptable and make a lot of sense. So in summary, when it comes to travel, look at the big picture and track these expenses. Meet with your accountant at the end of the year and figure out how much of this is really a write off and how much is too aggressive and what's reasonable. The travel expense should be a healthy item on your tax return as your business grows. 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