Operating a Business vs. Traditional Employment
- A corporation is obliged to pay taxes on its net profit, which means that it can subtract expenses from its gross income before declaring that income as taxable. Individual citizens must pay taxes on their income as well, though many expenses incurred by work can be deducted in like manner. The result is that many of the tax deductions applicable to transportation are available to employees of firms or business owners and function in essentially the same way.
- The Internal Revenue Service recognizes that it is far more affordable to shop for groceries and prepare your meals yourself. At the same time, it assumes that this is impractical while traveling and that additional expense is incurred when eating "on the road." As of 2010, the IRS issued a standard rate of $46 per day as a meal allowance deduction. Employees should note that they may claim this deduction even if they are reimbursed for their travel expenses. Also, some areas that have a higher cost of living (including food service) are listed in IRS Publication 1542 and may qualify the traveler for a higher daily deduction.
- Some transportation workers don't have to worry about lodging; for example, passenger train staff, truckers who have sleeper cabs, etc. However, for those who must pay for lodging, certain tax deductions can reduce the effective cost. Employers may wish to provide lodging for their staff as a benefit to them and a convenience to the firm. This lodging can be excluded from the employees' income (so they don't have to pay tax on it) and claimed as a tax deduction for the firm (reducing its effective cost to the company).
- Virtually any item, service or other tool used in the conduct of business can be claimed as a tax-deductible expense if it's use is "helpful and appropriate." The item need not be indispensable, only useful. The "but, for" rule serves as a handy guideline. If a transaction would not have taken place, but for the tax benefits produced, it is not appropriate. On the other hand, if the transaction incurring the expense serves a purpose in furthering the interests of the business, it is most likely a valid deduction.