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Travel Tax Deduction Rules For Your Business

travel tax deductiAs the controversy surrounding certain senators’ expenses swirls in Ottawa, what better to time than now to post a reminder of the rules regarding claiming travel expenses as a tax deduction.

For those operating sole proprietorships or partnerships, you can deduct travel expenses you incur to earn business income. Travel expenses include:

  • Public transportation fares
  • Hotel accommodations
  • Meals

Be aware, of course, that a 50% limit applies to the cost of meals and entertainment.

If you are a salaried employee, the 50% limit also applies. Additionally, you must meet all 4 of these conditions:

  1. You were normally required to work away from your employers’ place of business
  2. Under your employment contract, you had to pay your own travelling expenses
  3. You did not receive a non-taxable allowance for travelling expenses
  4. You keep a copy of Form T220, Declaration of Condition of Employment

If you are a long-haul trucker, meal expenses are deductible at a higher rate than the aforementioned 50%. For 2012, the rate is 80%.

For more handy tips for your income tax preparation, download the free e-book  — 7 Big Mistakes Small Business Owners Make at Tax Time.