The end of the year is a good time to review your small business expenses…
Ridesharing services such as Uber, Lyft, and Juno have gained significant popularity over the past decade. The use of these services for transportation continues to increase, indicating that ridesharing businesses are here to stay. Ridesharing is a great alternative to driving and public transportation. From a night out on the town, a ride to the airport, or to a long work commute, ridesharing services have quickly become the go-to for people all over the U.S., including residents of Raleigh, NC.
Our Raleigh tax preparation accountants at C.E. Thorn, CPA, PLLC are frequently asked if work-related ridesharing is a tax-deductible expense. If you use ridesharing services for professional use, it’s important to understand what is and is not considered a tax deductible expense in the eyes of the IRS.
What is Work-Related Travel?
The term “work-related travel” refers to any travel made for the purpose of work that is outside of the normal commute to and from the office. For instance, a regular day driving to your normal location of employment does not qualify as work-related travel. In contrast, if you are scheduled for an out-of-town conference or a seminar that exceeds the distance of your normal commute, those events would likely be classified as work-related travel and qualify as a tax deductible expense.
What Qualifies as a Work-Related Travel Expense?
In order for a travel expense to qualify as “work-related,” the expense must be reasonable, necessary, business-related, and take place away from home.
For instance, if you are on a business trip where your meals are already covered as a travel expense, it would not be reasonable to expect your employer to incur an extravagant dinner bill. Exceeding what would be a necessary meal expense can be looked at unkindly by most businesses. While the IRS may not become alerted by big-ticket items like luxury car rentals, first-class airfare, or extravagant dinners, it’s best to operate with reason and necessity in mind.
However, there are instances where the IRS will undoubtedly take notice. For example, if you are scheduled for a business trip and decide to bring your spouse along with you, your expenses related to the trip are tax-deductible, whereas your spouse’s expenses are not. This is because your expenses for the trip are business related, while theirs are not.
What are Examples of Work-Related Travel Expenses?
Examples of work-related travel expenses that are tax deductible expenses are:
- Hotel bookings.
- Rental cars, along with fees related to the rental car (such as gas, repairs, tolls, parking fees, etc.)
- Taxis or rideshares that are used during the time of travel.
- Air, rail, and bus fares.
- Baggage fees.
- 50% of the cost of meals related to travel.
- Tips related to eligible expense services.
When considering how to deduct work-related travel expenses during tax time, it’s best to consult with a local Raleigh accountant with experience in work-related travel expense deductions.
Can I Write Off My Work-Related Ridesharing Expenses From My Taxes?
The answer to whether or not you may write off your work-related ridesharing expenses as a tax deductible expense is not as clear as a simple “yes” or “no.” There are a couple of factors that come into play when defining what qualifies as “work-related travel” versus regular “commuting.”
Can I Deduct My Commute To and From Work?
Commuting and work-related travel are not the same things– when you commute to and from your normal place of work, this is a personal financial responsibility of yours and is therefore not tax-deductible. Your employer does not foot the bill for your normal car expenses, gas money, toll fees, or car maintenance costs. Nor does your employer pay for taxi fare, ridesharing expenses, bus, or train costs that are a part of your everyday, normal navigation to and from the workplace. Unfortunately, “commuting” in any form is not a tax deductible expense. This includes ridesharing services such as Uber and Lyft.
What is the Difference Between “Commuting to Work” and “Work-Related Travel”?
Commuting to work is merely your travel to and from work that is not an expense paid by your place of employment. In contrast, work-related travel refers to travel that would be out of the ordinary and business-related.
Examples of work-related travel would be a ride to a mandatory business meeting away from your regular office, a lunch meeting with a client that takes place out of the office, an industry conference in another state that your company chooses to send you to, or a company dinner that takes place at the hotel where industry-training is taking place.
If you are out of town for work-related travel but are unsure if your expenses will qualify as tax-deductible expenses, it’s always best to seek the advice of a reputable and experienced tax preparation accountant who can help you with your work-related deductions and filing.
What About Travel that Combines both Work and Personal Matters?
If you are on a trip with your family and, while enjoying a day by the pool, you have your laptop out to answer work emails or to get some work done, this does not constitute a business trip. Just because you may work while on vacation, this does not mean that your vacation is a “business trip.”
The IRS is diligent in ensuring that personal travel experiences are not classified as business trips when it comes to tax deductions. Looking at the situation in the opposite way, if you are on a trip that is primarily for business purposes, but while at the destination you take some time for souvenir shopping or to receive a spa treatment when your workday is over, your travel expenses will still be tax-deductible. However, those particular personal expenses will not be tax-deductible.
As long as you spend more time for the purpose of business rather than for the purpose of pleasure, your trip is classified as “work-related travel.” However, do not attempt to deduct your spa treatment or souvenir shopping expenses as “work-related.” It is only the work-related activities and the transportation to and from your hotel, airport, or work-related activities that are tax-deductible, and your tax filing must reflect this.
Are Convention Expenses Tax Deductible Expenses?
As long as you have documentation that conventions you attend are work-related or benefit you professionally, they are tax-deductible.
How Can I Simplify and Track My Work-Related Expenses?
The most important thing you can do when it comes to work-related travel expenses is to save all the receipts for travel, lodging, meals, conference or training costs, or any other expense that relates to your business or professional development.
Working with a CPA who offers bookkeeping services and who will review all of your financial statements and documentation related to work-related travel expenses is the best way to ensure that you are complying with the ethical standards of the IRS.
Work-related travel is indeed deductible, including ridesharing. Our Raleigh accountants at C.E. Thorn, CPA, PLLC recommend keeping a detailed log of any work-related travel you utilize– whether it’s ridesharing services, meal expenses, the cost of professional development training, or something else. You will typically need documentation stating your business purpose, destination, cost of the ride, any tips included, and anything else you or your employer deems necessary.
Have An Raleigh CPA on Your Side
Working with a Raleigh CPA for your tax preparation needs is one of the most beneficial things you can do for yourself when it comes to determining what is considered tax deductible expenses.
Our Raleigh accountants at C.E. Thorn, CPA, PLLC are available to help you with all your tax planning needs. Give our Raleigh accounting firm today at 919-420-0092 or get started by filling out the contact form below.
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