Written by attorney Henry Daniel Lively

Difference between travel and entertainment expenses

In terms of tax deductions there is a big difference between entertainment and travel expenses. Why? Because Travel expenses are typically deductible 100 percent and entertainment expenses are only deductible 50 percent. Therefore, it is important to account for these expenses separately. What is the difference. In a word, entertainment expenses are usually fun. It involves dining out, going to clubs, going to sporting events, etc. These expenses still must include a business purpose. It can be before or after the meeting to qualify. Good documentation is the key. Keep a record of the expense, who you met with, when you met, where you met, and the business purpose of the meeting.

Travel expenses are expenses incurred while traveling out of town or traveling somewhere with a business purpose. Any commuting time must be excluded. Again, good records are important here as well. Document your starting mileage and ending mileage, the total miles for the trip, the business purpose, who you met with, and where you met. You can back up your mileage be maintaining repair bills that document the mileage of your vehicle at different points in time. A log book that documents your mileage contemporaneously is a key document. While maintenance of contemporaneous records is not necessary, they go a long way to documenting your position if you are audited. Most people simply do not keep these records and lose this deduction when audited. Keep all of your travel records by the trip you are taking. Keep agendas and any other documents that can provide support for your business purpose of the meeting.

If you go to exotic locations for your business watch out. The IRS is particularly suspicous of these expenses and you will need to be especially diligent with your documentation here. Documentation of your business purpose is the key. You may even want to keep emails and letters to the person you are visiting that documents the business purpose.

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