CHARITABLE AWAY-FROM-HOME TRAVEL

 Charitable deductions are allowed only for travel expenses (including meals and lodging) by volunteers who do charitable work for their organization while they are away from home on the charity's behalf. Unlike other areas of taxes, meals are not subject to the 50% limitation. Any “significant element of personal pleasure” negates a complete deduction (i.e., not even a partial deduction is allowed). Significant personal pleasure is assumed if the taxpayer has only minor duties and is not required to perform any duties for the charity for major portions of the away-from-home stay. If the taxpayer's personal vehicle is used for the charitable travel, then the taxpayer may deduct the cost of gas and oil, but not depreciation, insurance, or repairs. As an alternative to deducting the cost of gas and oil, the taxpayer can use the current standard mileage rate of 14 cents per mile for charitable travel. The taxpayer can also deduct parking fees and tolls, whether actual expenses or the standard mileage rate is used.

The 14 cents per mile is not adjusted for inflation, so the current high cost of gasoline may well make it appropriate to document the cost of gas and oil for charitable trips. For example, when this article was prepared, gasoline prices were in the range of $4.50 per gallon in many parts of the country. Assuming that a vehicle gets 20 miles to the gallon, this turns out to be 22.5 cents per mile just for the cost of gasoline. Where there is significant charitable usage, it may be worth the time to document the gasoline usage for the year.

Car expenses record requirements - If you claim expenses claimed directly relate to the use of the taxpayers car in giving services to a qualified organization, reliable written records must be kept of the expenses. Whether the records are considered reliable depends on all of the facts and circumstances. Generally, they may be considered reliable if the taxpayer made them regularly and at or near the time in which the expenses were incurred.

For example, the records might show the name of the organization the taxpayer was serving, as well as the dates the car was used for a charitable purpose. If the standard mileage rate of 14 cents per mile was used, the records must show the number of miles that the taxpayer drove the car specifically for the charitable purpose. If actual expenses are deducted, the records must show the costs of operating the car that are directly related to a charitable purpose.

If you have questions related to the deductibility of your charity volunteer expenses, please give this office a call.

Summer Travel Tax Deductions

The summer travel season is almost upon us. Keep in mind that if your summertime travel is primarily for business or career-related education, then a portion of the trip may be tax-deductible. As long as most of your travel days are for business purposes, you can deduct the cost of travel (airfare, trains, car), hotel, parking, taxi service, meals, and so on.

As defined by the IRS, travel expenses are the Ordinary and Necessary expenses of traveling away from home for your business, profession, or job. An Ordinary expense is one that is common and accepted in your field of trade, business, or profession. A Necessary expense is one that is helpful and appropriate for your business. An expense does not have to be required to be considered necessary.

The key factor is that your trip must be primarily for business
Days of leisure can be added to a trip and still be considered primarily for business. The more days and time per day spent on business will help substantiate the trip. There are no set rules on how many days and how much time per day need to be spent on business for your trip to be considered business related.

Keep all the documentation for business-related travel, including confirmations of appointments, emails, phone records, registration to conferences, etc. The days spent traveling to and from a business trip are considered part of the trip. This includes the weekend if it is impractical to come home between weekday business meetings. Planning ahead can make this happen.

Traveling with Your Spouse
If a spouse goes with you on a business trip or to a business convention, his or her travel expenses can only be deducted if your spouse
1. is your employee,
2. has a bona fide business purpose for the travel, and
3. would otherwise be allowed to deduct the travel expenses.

To be an employee, your spouse must be on the payroll and payroll taxes must be paid. If your spouse is not an employee and travels with you on vacation, you can still deduct the cost of your room at the single-occupancy-per-day rate, rather than half the rate. Meals could also be deductible. If you are paying for lunch or dinner for a customer or business associate and that person's spouse, the full cost of the meals might qualify under the 50% meal deduction. Let us know if you're unclear on this deduction; we can give you the details.

Examples
Bill drives to Boston on business and takes his wife, Joan, with him. Joan is not Bill's employee. Joan occasionally types notes, performs similar services, and accompanies Bill to luncheons and dinners. The performance of these services does not establish that her presence on the trip is necessary for Bill's business. Her expenses are not deductible.

Bill pays $199 a day for a double room. A single room costs $149 a day. He can deduct the total cost of driving his car to and from Boston, but only $149 a day for his hotel room. If he uses public transportation, he can deduct only his fare. Further, if Bill has dinner with a customer and spouse, the meal may be deducted under the 50% meal deduction.

Travel Outside of the United States
With travel outside of the United States, the transportation for business trips of one week or less may be deducted. However, only a portion of transportation costs for longer trips are deductible.

Example
You live in New York. On May 4 you flew to Paris to attend a business conference that began on May 5. The conference ended at noon on May 14. That evening you flew to Dublin where you visited with friends until the afternoon of May 21, when you flew directly home to New York. The primary purpose for the trip was to attend the conference.

If you had not stopped in Dublin, you would have arrived home the evening of May 14. You did not meet any of the exceptions that would allow you to consider your travel entirely for business. May 4 through May 14 (11 days) are business days and May 15 through May 21 (7 days) are non-business days.
You can deduct the cost of your meals (subject to the 50% limit), lodging, and other business-related travel expenses while in Paris.

You cannot deduct your expenses while in Dublin. You also cannot deduct 7/18 of what it would have cost you to travel round-trip between New York and Dublin.
You paid $450 to fly from New York to Paris, $200 to fly from Paris to Dublin, and $500 to fly from Dublin back to New York. Round-trip airfare from New York to Dublin would have been $850.

You figure the deductible part of your air travel expenses by subtracting 7/18 of the round-trip fare and other expenses you would have had in traveling directly between New York and Dublin ($850 - 7/18 = $331) from your total expenses in traveling from New York to Paris to Dublin and back to New York ($450 + $200 + $500 = $1,150). Your deductible air travel expense is $819 ($1,150 - $331).

What Expenses Are Deductible?
Here's what you can deduct when you travel away from home for business.

(1) Transportation Expenses
You can deduct Transportation Expenses when you travel by airplane, train, bus, or car between your home and your business destination. If you were provided with a ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero. If you travel by ship, additional rules and limits apply.

(2) Taxi, Commuter Bus, Subway, and Airport Limousine Fares
You can deduct the fares for these and other types of transportation that take you between the airport or station and your hotel, and the hotel and the work location of your customers or clients, your business meeting place, or your temporary work location.

(3) Baggage and Shipping Expenses
You can deduct the cost of sending baggage and sample or display material between your regular and temporary work locations.

(4) Car Expenses
You can deduct the cost of operating and maintaining your car when traveling away from home on business. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking. If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses.

(5) Lodging and Meals
You can deduct your lodging and meals if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. Meals include amounts spent for food, beverages, taxes, and related tips. Additional rules and limits may apply.

(6) Cleaning Clothes
You can deduct the dry cleaning and laundry expenses you incur while away on business.

(7) Telephone
All business calls while on your business trip are deductible. This includes business communication by fax machine or other communication devices.

(8) Tips
You may deduct the tips you pay for any expense listed above.
Other Expenses

You can deduct other similar ordinary and necessary expenses related to your business travel. These expenses might include transportation to or from a business meal, public stenographer's fees, computer rental fees, or Internet access fees.

If you have any questions about business travel this summer, just give us a call or send us an email.