Napier & Company, LCC

The mantra of tax record-keeping has remained relentlessly burdensome for decades: “No Receipt, No Deduction”. But fear not, those of you who loathe the never-ending climb up the mountain of paperwork required by the U.S. tax code.

Many of our most beloved tax rules have exceptions, and such is the case with expenses. Believe it or not, there are actually expenses you can legally deduct without a receipt. Here’s one for self-employed folks who travel out-of-town on business.

You have two options you can use when it comes to deducting your meals while on an overnight business trip.

Option #1: You keep your receipt from each meal and simply deduct the cost of the meal times 50%, a la the “No receipt, No Deduction” rule.

(An example; you’re out of town on business for 5 days. Each day you spend $20.00 for meals….. 5 x 20 = 100 so 100 x 50% = $50.00 in deductions).

Option #2: You use The Per Diem Method to determine your meal deduction. For each day of the trip, you are allowed a daily meal allowance, depending on what city you were visiting.

(An example; you’re out of town on business for 5 days. The Per Diem for each day is $50.00 for meals…..5 x 50 = 250 so 250 x 50% = $125.00 in deductions).

To find the per diem allowances, go to: http://www.policyworks.gov/perdiem. If a particular area is not listed, then the allowance is $31.00 per day for meals in 2004. There are two very nice advantages to The Per Diem Method.

Benefit #1: You don’t have to keep receipts for your meals. We promise you won’t get in trouble.

Benefit #2: It doesn’t matter how much you actually spend on meals, you still get to deduct 50% of the per diem amount. This can result in hundreds of dollars in tax savings for you.

For lodging expenses, the standard per diem rate is $55.00 per day. So instead of keeping all those motel receipts, you can also use the per diem allowance, which varies, depending on what city you’re staying at.

One last little note about Per Diems…..this method is available to Sole Proprietors, Partners, and LLC Members. If your business is a Corporation and you own more then 10% of the company stock, you can’t use the per diem method for yourself.