Tax Deductions 10

Can I deduct the cost of business travel?

Yes. If you are making a trip primarily for business you can deduct the costs of traveling to do business or to attend trade shows, conventions, and conferences that are related to your business. You can deduct the full cost of your airfare or train fare; cab fare while away; room charges; incidentals (laundry, dry cleaning); tips; baggage fees, including insurance; and telephone, telegraph, and fax calls. Additionally, you can deduct 50 percent of the cost of your meals while you are traveling and 50 percent of business entertainment costs if you are meeting clients and taking them to the theater, a ball game or other entertainment event. If you drive your own car rather than take an airplane or train, you can deduct your auto mileage at the business mileage rate allowable in the year you take the trip.

Can I deduct the cost of a business trip to another country?

Rules get stricter for out-of-the country travel for self-employed people and major shareholders of small corporations. If you are outside of the United States for a week or less (counting the day you return, but not counting the day you leave on the trip), your travel expense will be fully deductible even if you spent some time on nonbusiness activities. If you are outside of the United States for more than a week and spend less than 25 percent of your time on nonbusiness activities, your travel expenses will be fully deductible, too. However if you are out of the United States for more than a week and spend more than 25 percent of your time on nonbusiness activities, you will have to allocate the travel costs based on the percentage of time spent on business. The rules for allocating the expense can be found in the IRS publication 463, Travel, Entertainment and Gift Expense. See: http://www.irs.gov/publications/p463/

What about conventions held in other countries?

If the convention is held within North America, the general business tests for foreign travel apply. If the convention is held outside of North America, the convention must be directly related to your trade or business and you have to show a reasonable explanation why the convention was outside North America.

Is travel or conventions on cruise ships deductible?

If you use a cruise ship to reach your business destination, the deduction for travel is limited to twice the allowable per diem federal travel rate. If meals and entertainment are paid for separately, meals have to be calculated first at 50% percent of cost. If your meal or entertainment charges are not separately stated or are not clearly identifiable, you do not have to allocate any portion of the total charge to meals or entertainment. The cost of the journey other than meals is then added on to the meals up to the maximum allowable amount for the trip.
If you are attending a convention on a cruise ship, numerous rules apply involving the ship's ports of call, time spent on business activities, and so on. You will need to document and submit records for hours spent at onboard business meetings, schedules of activities, etc. If you meet the rules, then you are allowed up to a $2,000 deduction per year for a convention on a cruise ship.* NOTE- This amount is lower than that allowed for other luxury water business travel.

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