Finance - Jul 7, 2017

A quick guide to travel-related tax deductions

Expert tips on how to save money while travelling for business

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When you’re a small-business owner on a fixed budget, the expenses associated with travel can be daunting and prohibitive. It helps to know that come tax time you’ll be able to claim a significant portion of those costs. Understanding what can be deducted and what can’t – and at what rate – is crucial. Here are some strategies for keeping and filing travel expenses so you can uncover savings and stay on the good side of the Canada Revenue Agency.

Keep detailed records

According to Jamie Golombek, managing director of tax and estate planning at CIBC, in order to enjoy savings from tax deductions, you have to be diligent and organized in tracking your travel expenses. All is lost if you can’t find your receipts, or determine which ones were for business – and you risk being penalized if CRA finds mistakes in your reporting. For example, the rules around deducting mileage and gas for travel by car – whether it’s to and from your office, to a client meeting, etc. – can be complicated (see below). So, keeping a detailed log of the kilometres you drive, where you go, for what purpose, and who you are meeting with will result in fewer headaches in the long run.

Know the rules and the rates

While business-travel expenses involving flights, trains, buses, taxis, hotels and the cost of conferences and conventions are fully deductible, only 50 percent of out-of-town client meals and entertainment can be claimed. You can also deduct 50 percent of the cost of meals you eat on your own while travelling for business – which is something you can’t do when you’re eating alone at the office. According to Golombek, many people make the mistake of deducting the mileage and gas they use going from home to the office and vice-versa – this is not considered “business travel” and is not eligible.

Skip the green

When it comes to entertaining clients while travelling (or at home), your best bet is taking them to a professional sporting event, concert or theatre show. Forget the tee time. “The CRA has said expressly that golf is non-deductible,” says Golombek. “Even if you legitimately take clients golfing and discuss business for five hours, none of the fees can be [written off].”

Destinations matter

The CRA allows small businesses to deduct the costs of up to two conventions a year. These must be connected to your profession, put on by a business or professional organization, and they must be held in a locale where the sponsoring organization conducts business. In other words, expenses from a winter convention in the Caribbean will raise some eyebrows. And at no time will the government allow you to write off a conference or business trip on a cruise.

Mix business and pleasure

Golombek sees tacking on a personal vacation to a business trip as a big money-saver – considering your full flight and hotel (for the days you’re working) are covered. That said, extra diligence is needed when it comes to your spending while away, so he suggests having a business credit card and a personal credit card with you to keep all expenses separate.