Travel-Related Tax Tips for Your Self-Employed Clients

Tax Law and News Travel

Many self-employed professionals travel frequently, whether for leisure, client needs or professional development. If your self-employed clients are traveling for business meetings or professional development, including continuing education credits, trade shows, conferences, classes and training, some of their expenses may be tax deductible. Here are a few tips you can pass along to them to help them be smart about their business travel:

Ensure the trip qualifies as business travel. According to the IRS, trips must be “ordinary and necessary,” as well as outside of the city or area where your client works, to be considered tax deductible.

Expenses may include the travel costs of getting to and from a business destination, and any business-related expenses at your client’s destination.

“Ordinary and necessary” trips are those that are justifiable and not extravagant. That doesn’t mean your client can’t visit exotic destinations on business, but they must be able to justify why they are there. For example, your client may be able to justify attending a conference in Hawaii, but it may be difficult to justify an overseas conference, unless they are involved in business globally.

Your client’s travel expenses must also be attributable to a real business, not simply a hobby, interest or potential business. The IRS considers whether individuals are in business to make a profit. According to the IRS, “An activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year – at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.”

Determine which expenses are deductible. If your client is traveling for a business meeting or professional development, they can deduct associated travel costs, including airfare, car rental, mileage if using their own vehicle, taxi/rideshare expenses and, possibly, hotel expenses. Meals are 50 percent deductible, including meals your client is purchasing for colleagues or industry peers. Registration fees and course materials for conferences are also deductible.

What happens if your clients would like to bring the family on a business trip? If your client reserves a single hotel room for the whole family for the entire duration of the conference or business meeting, the entire cost of the room is deductible. However, if your client books a second room, extends their stay or adds another destination to their trip, those expenses are not deductible. Meals with family members also aren’t deductible, unless they work for the business and are attending the event with your client.

Maintain good records. No matter the occasion for travel, or how far your client is going, it’s important to maintain good records. Remind your clients to save or scan receipts for meals, transportation, hotels and event registrations, and to keep their non-deductible personal expense receipts separate from their business receipts.

If your clients are looking for an easy way to manage their business receipts and track mileage, check out QuickBooks Self-Employed. It also offers one-click export of tax detail and P&L reports, making it easy for your clients to provide the data you need at tax time. Test drive QuickBooks Self-Employed today!

For more information, please see IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses.