Power of Deduction

Now's the time to squeeze every possible tax deduction out of your travel expenses. Tax expert Robert Wilensky says paperwork is the key. "Keep records of all business travel expenses-written notes on receipts, any kind of log, appointment book or other record," says the Atlanta accountant. Other suggestions:

• Leave no stone unturned. Some business travel expenses, such as transportation, car or cab fares, and meals and entertainment (limited to 50 percent), are obvious. But don't forget smaller outlays like baggage, shipping for samples or display materials, laundry, phone calls and tips.

• Mix business and pleasure. If your trip is primarily personal, you can't deduct transportation costs. But you can deduct business lunches and business equipment you buy as well as lodging for the nights following days during which you do a significant amount of business.

• Be careful about your significant other. A spouse's travel costs can be deducted only if the spouse is your employee and if his or her presence on the trip serves a business purpose.

• Know the rules for meals and entertainment. To document these, you must record five items: date, place, amount, name of person and business discussed. A convenient solution is to use a credit card and take notes on the receipt.

Wilensky says you should keep business and personal travel separate, but he has a perfectly legal way to parlay business trips into vacations: "Use your frequent-flier points for personal travel."

Christopher Elliott is a writer and commentator and the editor of www.elliott.org.

This article was originally published in the December 2001 print edition of Entrepreneur with the headline: Power of Deduction.