Are you traveling this summer for business? Or, maybe you’re thinking of bringing your family on a business trip. If you’re wondering which travel-related expenses are tax-deductible and which aren’t, you’re in luck.
Our Retirement Daily’s Robert Powell sat down with Jeffrey Levine, CPA and tax professional from Buckingham Strategic Wealth Partners, to discuss business-related travel expenses and your taxes.
Watch the video above for tips and examples or read the video transcript below.
TurboTax Live experts take care of you. Help from experts on your way: get help as you go or take out taxes. You can speak directly to tax experts online for unlimited answers and advice OR, have a dedicated tax expert do your taxes for you so you can be confident in your tax return. Get up to $20 extra when you get started with TurboTax Live.
Recommended: Tax deductions for business travelers
- Sole proprietors and business-related travel: If you are a sole proprietor, you can deduct business expenses that are ordinary and necessary.
- Employees and business-related travel: If you are an employee, you cannot deduct unreimbursed business expenses. The only way an employee can receive a benefit for his expenses is to submit them to the employer and have the employer reimburse him.
Quotations| Tax advice on business-related travel expenses
Jeffrey Levine, Chief Planning Officer, Buckingham Strategic Wealth
Jeffrey Levine, Chief Planning Officer, Buckingham Strategic Wealth
Recommended: Tax advice for sole proprietors
Video Transcript| Jeffrey Levine, CPA and Tax Expert, Buckingham Strategic Wealth
Robert Powell: What do taxpayers need to know about business-related travel expenses? Well, here to talk to us about that is Jeffrey Levine of Buckingham Wealth Partners. Jeffrey, what tax advice do you have for us there?
Jeffrey Levine: Well, the first thing we need to do, Bob, is sort out who we’re talking about here. Are we talking about employees or are we talking about people who have their own businesses, sole proprietors, etc.? If we are talking about a sole proprietor, then you can deduct those business expenses that are ordinary and necessary. Now, that doesn’t mean it can’t be expensive. One may need to fly first class. One may need to fly in a private jet if it takes them to a certain place at a certain time. But the expense must be ordinary and necessary and must be related to the business.
Now sometimes you can combine business and pleasure, right? Maybe you’re going away for work, but you’re taking your family with you because they’re going on vacation at the same time. Or you’ll turn your business trip into a few extended days. Well, extended days, of course, are not business expenses. And your family traveling with you is not a business expense. But otherwise, your travel can still be considered a business expense for the time you’re there for work.
Now, if we look at employees, it’s really important to make the distinction here because employees cannot deduct business-related expenses. You cannot deduct unreimbursed business expenses. It used to be deductible as a miscellaneous itemized deduction, but since the Tax Cuts and Jobs Act of 2017, so starting in 2018, we have not had a miscellaneous itemized deduction. So the only way an employee can effectively receive a benefit for their expenses is to actually turn it over to the employer and reimburse the employer for their expenses.
For S corporation owners who actually own their own business, this can get a bit complicated and a bit convoluted where you basically submit your bills to your business and then ask your business to reimburse you. And it seems like, well, isn’t that the same thing? Its not. It must be part of what is known as a responsible plan. A responsive plan. But the best thing, Bob, if you’re the business owner and the employee, just buy those expenses or use the business credit card, use the business bank account, first instead of your personal account or assets where you should. to be reimbursed.
Robert Powell: Right, so a quick follow-up, Jeffrey. Many times people have questions about whether they can deduct the food they eat while on a business trip.
Jeffrey Levine: Yes, so that would also be a travel expense. It is usually below the amount of meals and expenses. So it’s generally up to a 50% discount. However, we are now under special rules where you can deduct 100% of meals if they are from a “restaurant”.
Editor’s Note: Content has been reviewed for tax accuracy by a TurboTax CPA expert.
Zachary Faulds contributed to the writing of this article and produced the video and/or graphics associated with it.