Travel, meals and entertainment
Go out on the town with your clients, pick up the bill and get a tax deduction. What could be easier? Just make sure that the outing is business-related. In other words, any payments you deduct for travel, meals and entertainment must be ordinary and necessary in your trade or business. In general, entertainment expenses must be directly related to, or associated with, the conduct of your trade or business.
Travel expenses include those for ordinary and necessary travel away from home for your business. You must meet two conditions to take the travel expense deduction:
- Your duties must require you to be away from home (your regular place of business, regardless of where you maintain your family home) substantially longer than an ordinary day's work.
- You need sleep or rest to meet the demands of your work while you're away.
If your trip meets these requirements, you can deduct a wide variety of travel-related expenses, including costs for:
- Transportation (using a plane, train, bus or car) between your home and your business destination, including taxi, commuter bus and limousine fares
- Shipping items such as samples or display materials
- Maintaining your own vehicle if you use your car or truck for business travel. You can choose between deducting actual expenses or taking the standard mileage rate.
- Tolls and parking
- Rental cars
- Meals and overnight lodging. You may deduct only 50% of the cost of business meals.
Other deductible expenses include costs for dry cleaning and laundry care, telephone calls, use of fax machines and tips. For more information on travel, see IRS Publication 463: Travel, Entertainment, Gift, and Car Expenses.
Meal expenses include those incurred while traveling away from home or for entertainment of business customers at your place of business, a restaurant or other location. This deduction may also apply to meals you furnish on your premises to your employees.
Entertainment expenses fall into a broad category and include any activity generally considered to provide amusement or recreation. Some examples include hosting clients at social, athletic or sporting clubs, theaters, yacht trips, hunting or fishing, vacations and the like.