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Maximizing Business Expenses: Travel, Education, and Entertainment Deductions

Learn about deductible transportation, education & entertainment expenses, as well as home office deductions for business purposes. Understand the rules, tests, and limits for claiming moving expenses, education costs, and meal/entertainment deductions. Discover how to allocate expenses and qualifications for various tax deductions. Navigate the complexities of unreimbursed employee expenses, travel deductions, and maximizing your tax benefits as a business owner.

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Maximizing Business Expenses: Travel, Education, and Entertainment Deductions

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  1. Chapter 9 • Transportation • Travel • Moving Expense (deduction FOR) • Education • Entertainment • Other ……. Home Office

  2. Company Business Expenses Deductible Unreimbursed EE expenses can be deducted as Misc. Expense Employees

  3. Transportation (local) • Unreimbursed employment related travel • Not away from “tax home” • Commuting not deductible • What about commuting from 1st job to 2nd job?? • Travel to job sites / other offices (in the community) • Computation • Mileage – 44.5 cents per mile (versus actual) • Depreciation – for basis purposes (17 cents)

  4. Travel – (broader concept, away from home) • Transportation plus meals, lodging & expenses while away from home overnight. • Temporary versus Indefinite ( < 1 year) • Conventions – must be “business” related • Education – continuing ed • Business / Pleasure – trip must be “primarily for business. • if not, transportation not deductible. Meals and lodging are allocated between personal and business. • transportation expenses must be allocated unless: • trip is 7 days or less, or personal percentage < 25%. Domestic Foreign

  5. Moving Expense (For AGI) • Moving expenses are deductible in conjunction with a new job • Distance Test – move > 50 miles more …… compare distance from old residence to old job and old residence to new job. • Time Test – 39 weeks out of 78 weeks or if Self Employed, 78 weeks out of the next 2 years. • Breakdown of Moving Expenses: • Cost to move household effects • Travel – miles @ 18 cents per mile and lodging • Meals – not deductible

  6. Education • Deductible as ordinary and necessary business expense • to maintain and improve skills • required by employer or by law • Not Deductible • if courses are to meet minimum standards • qualifies for a new trade of business • Qualified Tuition Deduction • $4,000 deduction in 2006 -- FOR AGI • AGI limit - $65K single and $130K joint

  7. Meals and Entertainment • 50% Reduction for meals and entertainment. Must be business discussion. • Club Dues – not deductible but specific expenses related to the (golf) club may. • Tickets – limited to face value (less 50%) • Skybox – use the most expensive seats in the stadium (less 50%). • Business Gifts – limited to $25 per year per donee.

  8. Other Expense • Office in the Home • Exclusively used for business on a regular basis • as a principal place of business, or • a place used by customers, clients, or patients • Home office expense cannot exceed gross income less all other business expenses • (Translation: home office expenses are fully deductible unless the home office deduction creates a loss ………. If so, deduction is limited to income but unused loss can be carried forward.

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