An employee who works as a traveling salesman often incurs a substantial number of job-related expenses that the typical nine-to-fiver isn't usually burdened with. If you pay out-of-pocket to entertain clients or to cover your own transportation costs, for example, these expenses may be tax-deductible if you itemize on Schedule A instead of taking the standard deduction.
Selling goods and services can be challenging, and the federal government recognizes that it's sometimes necessary to wine and dine current and prospective clients, which is why it allows you to deduct an array of forms of entertainment costs, including the cost of dining in restaurants, inclusive of tax, tip and drinks and the cost of admission to sporting events and nightclubs. However, any portion of an expense that's considered lavish or extravagant must be eliminated from the deduction calculation. The tax law provides a number of alternative tests you can use to determine whether an entertainment expense qualifies for the employment-related deduction or is personal and nondeductible. Once you compute the sum of all eligible entertainment expenses, you can generally report a deduction that's equal to 50 percent of the sum.
Video of the Day
Whether your travel takes you away from home for days at a time or is limited to your local area, a majority of your travel expenses are fully deductible on Schedule A. If you use a personal vehicle, you can deduct your car expenses using the IRS standard mileage rate – which is a fixed amount you can deduct for each mile you drive while fulfilling your traveling salesman duties – or by using actual costs, such as the actual cost of gas and oil. When traveling away from home, you can also deduct the cost of hotels, taxis, car rental charges, airline and train tickets, and even a reasonable amount of food purchases that you must make on the road.
If your employer doesn't provide you with a laptop computer but you're required to have one so that you can conduct business wherever you are, you can deduct the cost of having to use your own. The IRS allows you to claim annual depreciation deductions for the portion of the computer's purchase price that you allocate to business rather than personal use. If you use the computer mostly for work, you may be eligible to deduct the entire cost in the year you begin using the computer for sales work. And if you incur charges for the Internet in your hotel or at airport hotspots or have a portable Internet device, you can deduct all service charges paid during the tax year, as well.
No matter what the expense is, only those amounts that your employer doesn't reimburse you for are tax-deductible. However, if your employer reports reimbursements on your W-2 as salary or wages – meaning you must report them on your tax return as income – you can report a deduction for the underlying expenses, despite the reimbursement.