I want to explain to you how business owners get to travel for free!
So There is no free lunch in the world first of all, but yes there are ways that you can get yourself some free travel within the guidelines of IRS business travel rules. So there are 3 requirements to get there.
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Travel = Needs to have business purpose
First of all the trip you are taking must have some sort of business purpose, it can be anything from client meetings, conferences, R&D for the business or just any revenue-generating travel activity.
Travel = Ordinary and necessary
The 2nd req is the travel need to be ordinary and necessary, this means that within your industry this is a very typical type of business trip you would take. A big tip to remember about business travel is that there is a difference between domestic travel and international travel.
When you travel domestically, is it an all or nothing rule. If you spend at least 50% of your trip on business then it is all deductible, but if it less than 50% then none of the trip can taken as a tax deduction.
International travel is proportionate- so if you spend 30% of business, then only 30% is deductible. If you spend 70% on business then 70% of the trip is deductible. So that’s something to really keep in mind when you are planning your trip as the location matters how much you can travel for free. So the 3rd requirement is that you have detailed recordkeeping for your business travel.
Ensuring you have all your source documents
You want to make sure you save all the receipts, brochures from the conferences so you have proof that the travel is indeed for business travel if you ever get the IRS knocking on your door.
So with that said, you amy be wondering, Alan why did you bored me with all that.I’m just here to learn about the free travel…ahh yes so if you can meet all three of these then yes it is very possible to get some free travel in between this time in.
By taking advantage of the domestic travel’s “All or nothing rule”- By making sure 50% of your travel is business related, you can enjoy some leisurely travel and have a good portion of the trip paid for!
Let me break it down in an ecom example that we got…so Steve, a client of ours……..is traveling for work and he came to us and let us know that annually he travels to SF for a Technology Trade Show for 4 days and he also let us know how he been wanting to go on vacation, but couldn’t find the time. Well, we let
Steve know that if he plans correctly, he can TRAVEL on vacation for free while he’s in Boston. He was confused but excited at this news. So we explained how it would work to him and this is how it went down.
Adam extended his trip to 7 days and he spent day 1 and 2 attending the Technology Trade Show and then he spent day 6 and 7 meeting with potential clients he met from the trade show. This way he can spend day 3-5 enjoying all the great food in SF and got to visit the pier.
You see by ensuring that the beginning and end of the trip is for business purposes, he was able to enjoy a completely tax deductible flight to SF, both going there and coming back. And by making sure at least 50% of the trip was work related, he was able to deduct the whole trip as a business trip.
This means he was able to get his meals covered and he can take advantage of other awesome business expenses that he can deduct while traveling such as gratuity/tips, laundry, baggage fees, rental car, dry cleaning can all be deductible too!
And we texted him on the trip to make sure to Keeps all email confirmation, tradeshow schedule, and names of some of the speaker of the events and transfer it to us for clean recordkeeping for his month end close bookkeeping process to ensure he is fully shielded if the IRS was ever to audit his books.
These are some of the valuable consultations we provide our clients on a daily basis to make sure they always can make the best business decision and also get to enjoy their life at the same time. We hope you learned a lot from this video on how you can also make your next business trip more FUN, if you have any questions about business travel or tax deductions, please feel free to comment below and we will try our best to help you out.
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