Going through all of your income and expenditures for the fast approaching Tax Day you may have noticed a few black car transportation transactions. Hold on to those receipts! You can most certainly deduct transportation services from your taxes, and you may also have to report it if someone else paid for the ride.
It’s All About Business
The first rule of thumb is that the black car services had to be used for business purposes, not personal ones. If you hired a limo for your birthday or a holiday event then that shouldn’t be included in your taxes.
Business travel expenses that can be deducted include:
- Travel to and from conventions
- Travel in connection with a temporary work assignment that’s away from your home
- Travel from the airport to the hotel
- Travel from the hotel to places of business
- Tips paid for transportation services
Business travel expenses must be itemized to get the deduction on your taxes. Below is the paperwork you’ll need to use to make the deduction.
Form 2106 or Form 2106-EZ – used to figure deductions
Form 1040, Schedule A – for employees, Form 2106 or Form 2106-EZ deductions carry over to this form
Form 1040, Schedule C – for self-employed, Form 2106 or Form 2106-EZ deductions carry over to this form
Is it Transportation or is it Entertainment?
Businessmen and women use chauffeur services for many different reasons, which can call into question how the expense needs to be noted on your taxes. Chauffeur services could potentially fall into one of two deduction categories: business travel expenses and business entertainment expenses.
If you hire a limo to wine and dine a client technically it’s being used to transport them around, but they may also enjoy food and drinks or a movie during the drive. As long as the limo is being used for business purposes, such as bringing yourself and clients to a work-related event, then count it as a travel deduction. Typically, you’ll only be allowed to deduct 50% of entertainment deductions as opposed to the whole shebang if it’s noted as transportation.
What Not To Do When Reporting Transportation Services on Your Taxes
Deduct services that you don’t have a receipt for. If you get audited you have to have a record of everything you deduct.
Deduct services that you were reimbursed for. If your employer reimbursed you, gave you an advance, allowance or additional pay for covering the cost of a chauffeur service then it’s not deductible.
Fail to mention you got free transportation – it can count as income. Former senator Tom Daschle got in some hot water during his nomination for Secretary of Health and Human Services because of his failure to report that a donor had given him use of a chauffeured limo from 2005-2008.
Deduct travel expenses within your ‘tax home’. Your tax home is the city or general area of your main office. Travel expenses incurred within your tax home cannot be deducted.
Original Source: https://www.royalaustin.com/limo-101/tax-tips-for-black-car-transportation-services/