Business Tax Savings

You're in Business for Yourself...Not by Yourself

As a referring travel agent (RTA) we're entitled to tax breaks. This is a very powerful part of this business.

"There are two systems of taxation in our country: One for the informed and one for the uninformed."

When you own a business, all of your expenses can become tax deductible. Having a business enables you to keep more of your money! Please note, all tax matters should be reviewed by a tax professional. If you do not have one, get referrals from people you trust and hire a tax advisor.

Tax Deductions

As a travel agent, you may take tax deductions for your business, vehicle, telephone, entertainment, and travel.Here is a list of business deductions you may take:

1. Business Assets

2. Direct Business Expenses

3. Indirect Business Expenses

4. Exclusive Business Use
When deciding whether or not to take a tax deduction for a particular purchase is exclusive or not, ask yourself the following question: Is this purchase ordinary, necessary, and reasonable? For example, is it reasonable and necessary for an attorney to go on a cruise? The answer is no. How about a travel agent?

For vehicle deductions, make sure you keep a log of your mileage. Your mileage log should include the following: date, where, purpose, and odometer reading. Keep records of all expenses, for example oil change receipts.

What about telephone deductions? Well, the base service is not deductible. However, add-on services may be, but check with a tax professional. Long distance for business is definitely deductible. Also, cell phones are deductible if the phone is being used primarily for business.

Entertainment Deductions

Unlike other deductibles, this is a 50% deduction. Does it meet 4 IRS requirements:

1. Is there a future gain or benefit?
2. Topics for future gain must be discussed.
3. Is the money spent necessary for business?
4. Was money spent to gain access to a particular person?

Also, when taking an entertainment deduction, is there a clear business setting? Meaning, does the person know it's for future business gain not a meaningful personal relationship. Associated entertainment would also fall under this category. Associated entertainment precedes/follows the active conduct of business, for example, breakfast followed by golf, or attending a baseball game followed by a business meal.

Travel Deductions

Travel deductions are unique to travel professionals. Check your expenses against the IRS using the following 3 part test:

• Are the expenses usual and customary in your industry.
• Is the intent to obtain a direct business benefit?
• Are the expenses helpful to developing your business?

Sound like a business you know?

The 51%/49% rule gives a 100% deduction if more than 1/2 of the day is spent on business and the primary purpose of business is explained. Let's compare: 3 people go on a 1 week cruise including air. The cost of the cruise is $4,400, plus the income taxes - $2,933. The total cost is $7,333. An RTA purchases the same cruise including air at the travel agent price of $1,400. The typical tax deduction for this trip is $560. So, the actual cost is $840.

Which would you rather pay? The tourist cost of $7,333., or the RTA price of $840.?

Final note: have fun with your travel business! If you are not yet a travel agent, join YTB and make your future travel deductible! Keep a travel tax notebook and record where you went and why! Save your receipts! Do a site inspection! Record your children's perspective!