The mantra of tax record keeping has remained relentlessly burdensome for decades: “No Receipt, No Deduction”.<\/p>\n
But fear not, you who loathe the never-ending climb up the mountain of paperwork required by the U.S. tax code. Many of our most beloved tax rules have exceptions, and such is the case with this one.<\/p>\n
Believe it or not, there are actually expenses you can legally deduct without a receipt. Here’s one for self-employed folks who travel out-of-town on business.<\/p>\n
When it comes to deducting your meals while on an overnight business trip, you have two options with regard to receipts and record keeping:<\/p>\n
OPTION #1:<\/p>\n
You keep your receipt from each meal and simply deduct the cost of the meal times 50%, a la the “No Receipt, No Deduction” rule.<\/p>\n
OPTION #2:<\/p>\n
You use The Per Diem Method to determine your meal deduction. For each day of the trip, you are allowed a daily meal allowance, depending on what part of the country you were visiting.<\/p>\n
For example, the per diem meal rate for Birmingham, AL is $56. For San Francisco, it’s $71. Like Option #1, your actual deduction is 50% of the per diem amount — $28 in\u00a0 Birmingham and $35 in San Fran.<\/p>\n
To find the per diem allowances, go to IRS Publication 1542 \u2013 Per Diem Rates (For Travel Within the Continental United States).\u00a0 You can access it here: http:\/\/www.irs.gov\/pub\/irs-pdf\/p1542.pdf<\/a>.\u00a0 If a particular area is not listed, then the allowance is $46 per day.<\/p>\n Take note: There are two very nice benefits to The Per Diem Method.<\/p>\n Benefit #1: You don’t have to keep receipts for your meals. Yep, you can pitch ’em. Scouts honor.<\/p>\n Benefit #2: It doesn’t matter how much you actually spend on meals, you still get to deduct 50% of the per diem amount. This can result in hundreds of dollars in tax savings for you.<\/p>\n Example: You regularly go to several cities for overnight business trips, traveling about five days each month. These cities all have a per diem rate of $51.<\/p>\n You are frugal. To save both time and money, you prefer to eat at fast food restaurants three times a day. On average, you spend only $20\/day on meals.<\/p>\n But the per diem rate is $51\/day. If you used Option #1, your actual deduction would be $20 x 50%, or $10\/day. With Option #2, you get to deduct $51 x 50%, or $25\/day.<\/p>\n The difference between Option #1 and #2 is $15\/day. Over the course of the year, this adds up to an extra $900 in deductible meal expenses ($15\/day x 60 days) — even though you didn’t actually spend the $900.<\/p>\n End result: you save $315 in taxes (assuming your combined federal and state income tax rate is 35%). And you can throw away 60 days worth of meal receipts.<\/p>\n So you get $315 in tax savings without spending a dime.<\/p>\n One final note: The per diem method is only available to Sole Proprietors and Partners. If your business is a Corporation and you own more then 10% of the company stock, you can’t use the per diem method for yourself. Sorry!<\/p>\n","protected":false},"excerpt":{"rendered":" The mantra of tax record keeping has remained relentlessly burdensome for decades: “No Receipt, No Deduction”. But fear not, you who loathe the never-ending climb up the mountain of paperwork required by the U.S. tax code. Many of our most … Continue reading