Big Considerations When Traveling for Work
If you work for a big company, corporate travel means expense reports, company cards, and jumping through hoops to pick the right airline, hotel, and other arrangements to meet company guidelines. When traveling for work when self-employed, you can book your travel any way you want, but it is important to look at your budget, taxes, and other concerns before booking a work trip as a freelancer or other self-employed worker.
Traveling for Work: Start with a budget
I recently spent a week in Orlando for FinCon, my favorite conference of the year – I may be biased, as I run the Ignite FinCon event. I’ve been to 8 FinCons, 3 Podcast Movements, and a spattering of other conferences from New York to San Diego that gave me new opportunities to grow my skills, make connections, find new clients, and build my business.
While it is tempting to fly first class and stay in a suite, that wouldn’t be financially practical. I wouldn’t stay in a luxury room when traveling for pleasure, and I work to stay in an even tighter budget when traveling for professional reasons.
I put together a budget including airfare, hotels, local transit, and meals before heading to any conference. One big savings spot for me is sharing a room. I have friends that attend the same conferences I do, and splitting the room means half-price accommodations. I sometimes book my travel with miles or points if the booking makes sense.
Whatever you do, don’t just spend and spend and spend. While you can deduct professional travel costs on your taxes, that isn’t a license to spend.
Traveling for Work: “Write it off” doesn’t mean free
When I’m at a conference, one of my favorite phrases is “write it off.” At the average tax rate, you can likely save about 25% of the cost of any business purchase on your taxes. Don’t fall into the trap of thinking it is free if the business is paying, however, because you still do foot the bill for about 75% of the net cost, and 100% of the cost at checkout.
Always be wary of any situation that encourages you to spend more. Be thoughtful and thrifty with each business travel expense. Particularly if you are a solo business owner or freelancer, every business expense takes away from your overall profits and bottom line.
Traveling for Work: Know what is and isn’t deductible
Expenses that are normal and ordinary for your business or industry can be fully deducted and paid for by the business, but not all travel expenses get the entire deduction. For example, food and beverage purchases may be only partially deducted. The IRS has the logic that you would be eating anyway, so only a portion of what you pay to eat on the road can lower your taxes.
If you drive yourself to an event out of town, you can write off a certain expense per mile (currently 57.5 cents per mile). Taxis, subways, Ubers, airfare, train tickets, parking, hotel room or Airbnb stays, and other direct expenses are all fair game for a 100% deduction. Meals generally get a 50% deduction.
Keep in mind that you can’t deduct costs related to your family joining you on the trip or anything unrelated to the business portion of the trip. If you were to go to a conference in Orlando and stay an extra night to go to Disney, you can’t write off the extra hotel night or Disney admission.
However, if you were to treat a client to a day at Disney in an effort to build your business relationship, you might be able to argue that is a legitimate business expense. When in doubt, ask a tax professional or leave it off of your taxes. It isn’t worth getting audited to save $20 on amusement park tickets or a night on the town.
Traveling for Work: Keep good records
Travel for work when self-employed is just like a corporate trip in some ways. One biggie is tracking every single expense. Just like your boss wants to see receipts before approving your expense report after jetting off for a work meeting, you’ll want to keep every receipt and record related to traveling for work as an entrepreneur.
If the IRS does decide to audit you and your business, you’ll be glad you have that folder stuffed full of receipts, printouts, and other records. Don’t put an expense on a business credit card without keeping that receipt!