How to Deduct Your Travel Expenses

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Travel expenses are a favorite deduction of many clients, because they love to travel and especially enjoy it when the IRS is subsidizing part of the expense. In order to deduct travel expenses, however, you must show that the expense has a business purpose and is ordinary and necessary to the business.

Travel expenses that have a business purpose include:

– Meeting customers/prospects/vendors residing in a different location;

– Searching for investment property;

– Meeting with business partners, both current and prospective; and
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– Holding annual shareholder meetings (usually held in conjunction with an annual board meeting).

The phrase “ordinary and necessary” generally is defined to mean, “in the ordinary course of business” and that “the expense will contribute to the success of the business.”

If a taxpayer travels to a destination and while at such destination engages in both business and personal activities, traveling expenses to and from the destination are deductible only if the trip is related primarily to the taxpayer’s trade or business.

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