Tag Archives: business expenses

Taking Your Spouse on a Business Trip? Can You Write Off the Costs?

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A recent report shows that post-pandemic global business travel is going strong. The market reached $665.3 billion in 2022 and is estimated to hit $928.4 billion by 2030, according to a report from Research and Markets. If you own your own company and travel for business, you may wonder whether you can deduct the costs of having your spouse accompany you on trips. Let’s look at what you can and cannot write off when taking your spouse on a business trip.

If Your Spouse is an Employee

The rules for deducting a spouse’s travel costs are very restrictive. First, to qualify for the deduction, your spouse must be your employee. This means you can’t deduct the travel costs of a spouse, even if their presence has a bona fide business purpose, unless the spouse is an employee of your business. This requirement prevents tax deductibility in most cases.

If your spouse is your employee, you can deduct his or her travel costs if his or her presence on the trip serves a bona fide business purpose. Merely having your spouse perform some incidental business service, such as typing up notes from a meeting, isn’t enough to establish a business purpose. In general, it isn’t enough for their presence to be “helpful” to your business pursuits — it must be necessary.

In most cases, a spouse’s participation in social functions, for example as a host, isn’t enough to establish a business purpose. That is, if their purpose is to establish general goodwill for customers or associates, this is usually insufficient. Further, if there’s a vacation element to the trip (for example, if your spouse spends time sightseeing), it will be more difficult to establish a business purpose for their presence on the trip. On the other hand, a bona fide business purpose exists if your spouse’s presence is necessary to care for a serious medical condition that you have.

If your spouse’s travel satisfies these requirements, the normal deductions for business travel away from home can be claimed. These include the costs of transportation, meals, lodging, and incidental costs such as dry cleaning, phone calls, etc.

If Your Spouse Isn’t an Employee

Even if your spouse’s travel doesn’t satisfy the requirements, you may still be able to deduct a substantial portion of the trip’s costs. This is because the rules don’t require you to allocate 50 percent of your travel costs to your spouse. You need only allocate any additional costs you incur for them. For example, in many hotels the cost of a single room isn’t that much lower than the cost of a double. If a single would cost you $150 a night and a double would cost you and your spouse $200, the disallowed portion of the cost allocable to your spouse would only be $50. In other words, you can write off the cost of what you would have paid when traveling alone. To prove your deduction, ask the hotel for a room rate schedule showing single rates for the days you’re staying.

And if you drive your own car or rent one, the whole cost will be fully deductible even if your spouse is along. Of course, if public transportation is used, and for meals, any separate costs incurred by your spouse aren’t deductible.

We Can Answer Your Questions

You want to maximize all the tax breaks you can claim for your small business. So, if you’re taking your spouse on a business trip, the tax professionals at Ramsay & Associates can help iron out the details. Contact us if you have questions or need assistance with this or other tax-related issues.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Now’s the time to review your business expenses

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review your business expenses

As we approach the end of the year, it’s a good idea to review your business’s expenses for deductibility. At the same time, consider whether your business would benefit from accelerating certain expenses into this year.
Be sure to evaluate the impact of the Tax Cuts and Jobs Act (TCJA), which reduces or eliminates many deductions. In some cases, it may be necessary or desirable to change your expense and reimbursement policies.

What’s deductible, anyway?

There’s no master list of deductible business expenses in the Internal Revenue Code (IRC). Although some deductions are expressly authorized or excluded, most are governed by the general rule of IRC Sec. 162, which permits businesses to deduct their “ordinary and necessary” expenses.
An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your business. (It need not be indispensable.) Even if an expense is ordinary and necessary, it may not be deductible if the IRS considers it lavish or extravagant.

What did the TCJA change?

The TCJA contains many provisions that affect the deductibility of business expenses. Significant changes include these deductions:

Meals and entertainment.

The act eliminates most deductions for entertainment expenses, but retains the 50% deduction for business meals. What about business meals provided in connection with nondeductible entertainment? In a recent notice, the IRS clarified that such meals continue to be 50% deductible, provided they’re purchased separately from the entertainment or their cost is separately stated on invoices or receipts.

Transportation.

The act eliminates most deductions for qualified transportation fringe benefits, such as parking, vanpooling and transit passes. This change may lead some employers to discontinue these benefits, although others will continue to provide them because 1) they’re a valuable employee benefit (they’re still tax-free to employees) or 2) they’re required by local law.

Employee expenses.

The act suspends employee deductions for unreimbursed job expenses — previously treated as miscellaneous itemized deductions — through 2025. Some businesses may want to implement a reimbursement plan for these expenses. So long as the plan meets IRS requirements, reimbursements are deductible by the business and tax-free to employees.

Need help?

The deductibility of certain expenses, such as employee wages or office supplies, is obvious. In other cases, it may be necessary to consult IRS rulings or court cases for guidance. For assistance, please contact us.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Deducting Business Expenses

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Deducting Business Expenses - Ramsay & Associates

 

As you prepare tax documents and receipts for your 2016 income tax returns, pay close attention to the items that you’ll need for business expense deductions. Deducting business expenses can lower your taxable income. Even if you aren’t self-employed or a small business owner, you can take certain business-related deductions as an individual.

Individual Tax Returns

If you are an employee, you may be able to deduct work-related expenses as miscellaneous itemized deductions. These deductions must exceed the standard deduction as well as 2 percent of your adjusted gross income. This is commonly known as the “2 percent floor,” meaning you may only deduct expenses above that amount. All deducted expenses must be from the 2016 calendar year, be business-related, and be “ordinary and necessary.”

Here are some common deductions and guidelines:

Vehicle and Travel

  • Although expenses for your regular daily commute, including parking, aren’t deductible, some local transportation costs qualify. For example, traveling from one workplace location to another would qualify, as well as from your home office to another workplace location if your home office is your primary place of business for your employer. Parking fees for a business meeting outside of your usual daily commute are deductible. More information about home offices and transportation costs is available from the IRS website.
  • Use standard mileage rates to calculate deductible costs if operating your personal vehicle for business purposes. 2016 mileage rates are 54 cents per mile for business miles, such as traveling to meet a client or attend a conference. If you do not use the standard mileage rate, you can deduct actual car expenses for the year.
  • While on a business trip, you can deduct costs incurred such as airline, train, or taxi fares, car rental, baggage fees, meals, lodging, and tips. Find more details here.

Entertainment Expenses

  • Business entertainment expenses are subject to certain limits. Generally, 50 percent of meal and entertainment expenses are allowed, with records to prove their business purpose. Learn more.

Home Office

Use of part of your home exclusively and regularly for conducting business may also allow for deductions of certain expenses, such as mortgage interest, property taxes, utilities, and home repairs. Learn more about the requirements to claim these deductions.

Other Potential Deductions

  • Memberships or dues to professional organizations
  • Job search expenses, including travel expenses
  • Work clothes or uniforms that are a condition of your employment, but that would not be suitable for everyday use

Small Business & Self-Employed

If you are self-employed or the owner of a small business, there are additional deductions and requirements to consider when filing your business taxes, excluding cost of goods sold, capital expenses, and personal expenses. Some deductible business expenses include:

  • Fees for professional services
  • Employee wages and benefits, such as health or life insurance, as well as contributions to retirement plans or profit-sharing
  • Advertising costs
    Education expenses, such as fees for seminars or courses to maintain professional certifications
  • Fees for banking, attorney, or accountant services
  • Federal, state, and local, payroll taxes

Refer to the IRS website for additional information on these and other business expenses deductions, or contact Ramsay & Associates with your questions. We provide tax preparation services businesses as well as individuals. Call us at 651.429.9111.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Business Deductions Not Allowed Due To Lack of Substantiation

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In a recent tax court case, the taxpayer who is a self-employed nutritional supplement salesperson, deducted expenses for travel, vehicle, meals and entertainment allegedly related to his sales business.  Even though the taxpayer kept a mileage record on his calendar, the record lacked specific and necessary information on how and why the mileage was related to business.  The taxpayer supplied a spreadsheet to the court in support of his deducted meals.  However, he admitted that many of his meals were eaten alone.  The tax court concluded that the records and substantiation supplied were not reliable and could not be considered “adequate records” as required by the tax code.

The morale of the story…Document, document, document!  Each claimed meal and mile must be directly related to or associated with an active trade or business or for the production of income.  And specific documentation must be kept to substantiate the deduction.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.