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Business travel deductions: Go the extra mile

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in Small Business Tax

No matter how far you travel on business, you can deduct auto expenses so long as the trip’s primary purpose is business- related. That’s true even if you derive secondary benefits from the trips.

A new court case hammers this point home but makes clear that you should keep detailed records to support your business-travel deductions. That includes keeping track of the business reasons for your trips.

New case: Richard Berge was an attorney and accountant employed full time by Arthur Andersen. Both his home and office were in Los Angeles. Berge also operated a self-employed tax and legal consulting business from home.

In 2000, Berge drove almost 14,000 miles for his sideline consulting business. He claimed a deduction of about $4,500 using the standard mileage rate in effect for 2000.

But, the IRS disallowed part of the deduction based on 60 trips—comprised of about 4,500 miles—that Berge made to a law school library in Orange County. Despite having several law libraries closer to home (including one just five miles away on the campus of the law school he attended), Berge chose to travel to a library located near his parents’ home. The IRS said he made the trips primarily to visit his family.

But the Tax Court disagreed; it was convinced by Berge’s claim that the library in Orange County was superior to those closer to his home and a better resource for his clients. Since his primary purpose for the travel was business, he rightfully could deduct all of the mileage to and from the library. (Berge, TC Summary Opinion 2006-29)

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