You can consult IRS Publication 463 to determine how much, if any, of the travel and meals expenses you incurred on your trip are deductible if you travel out of state as a business owner for a three-day conference to promote your business, but you also spend the last day of your trip sightseeing for pleasure.
Definition and Examples of IRS Publication 463
IRS Publication 463 has six chapters:
The first four chapters cover the tax rules for deducting travel, meals and entertainment, gifts, and transportation expenses.The fifth chapter covers how to keep adequate records to document these expenses.The sixth chapter covers how to report the expenses covered by the publication on your tax return or other tax documents.
Chapter 1: Travel Expenses
Chapter 1 contains helpful information for taxpayers who incur travel expenses while traveling away from their tax home for business purposes and want to know how to deduct them for tax purposes. Information covered in this chapter includes:
The definition of travel expenses for tax purposes How to determine where your tax home is (this is not necessarily your family home, but your regular place of business and its surrounding area) What travel expenses are deductible
Chapter 2: Meals and Entertainment Expenses
Chapter 2 covers deductions for meals and entertainment expenses. Meal expenses incurred in your business may be fully or 50% deductible as long as they are not considered “lavish," and entertainment expenses are generally no longer tax deductible. Most of Chapter 2 covers determining whether a meal expense is deductible and, if deductible, to what extent: fully or 50% deductible. There are some exceptions to the non-deductible entertainment rule, such as any expenses that are associated with a recreational activity like a holiday party or employee BBQ, or those related to attending a business meeting or convention of certain exempt organizations.
Chapter 3: Gift Expenses
Chapter 3 covers the deductibility of gifts given in the course of your business. This is the shortest chapter in the publication because the tax rules for deducting business gifts are relatively straightforward. A taxpayer’s deduction for business gifts is generally limited to $25 per recipient per year.
Chapter 4: Transportation Expenses
Chapter 4 covers the rules for deducting business transportation expenses. The difference between the transportation expenses that are covered in Chapter 4 and the travel expenses that are covered in Chapter 1 is that transportation expenses are generally incurred within your tax home while travel expenses are incurred in leaving your tax home for business purposes.
Information covered in this chapter includes:
The definition of transportation expenses The two methods (standard mileage and actual expenses) for deducting vehicle expenses Vehicle depreciation
Chapter 5: Recordkeeping
Chapter 5 covers how to adequately keep records for the expenses covered by the publication. It explains what you can do if you have incomplete records, when to separate payments in your records, and how long you should keep records and receipts.
Chapter 6: Reporting
Chapter 6 covers how the expenses covered in Publication 463 should be reported on your tax return and other tax documents. Information covered in this chapter includes:
Where business owners should report the expenses covered in this publication on their tax returns How certain kinds of employees, such as Armed Forces reservists, government officials, and qualified performing artists, can report unreimbursed business expenses on Form 2106 How reimbursements are reported to employees, both with and without an accountable plan
Where To Get IRS Publication 463
The IRS has provided taxpayers with multiple ways to obtain IRS publications, including Publication 463: The publication can be downloaded from the IRS website. A hard copy can be obtained from an IRS Taxpayer Assistance Center, or it can be obtained by mail by submitting a request online or calling 800-TAX-FORM (800-829-3676).
How To Read IRS Publication 463
IRS publications are written for the average taxpayer who will likely find them much easier to read and decipher than the Internal Revenue Code. In addition to being divided up into six straightforward chapters, Publication 463 also includes an index at the end. You can check this index for the topic you’re looking for if you need information on a specific topic. That said, keep in mind that IRS publications are not the ultimate authority on income tax matters. The Internal Revenue Code is. Touch base with a tax professional to ensure that you understand the rules correctly.
