Tax Incentives for Work from Home Travel Agents
One of the many rewards of operating a home-based travel agency franchise is the tax incentives you may qualify for. You may be able to deduct your mortgage, property taxes, insurance, utilities, and household maintenance, as well as travel expenses.
According to the Internal Revenue Service, “[t]o qualify to deduct expenses for business use of your home, you must use part of your home . . . exclusively and regularly as your principal place of business.” With that in mind, let’s take a look at travel agent tax deductions for 2021 that you may qualify for.
How Do You Qualify?
There are some rules for claiming travel agent tax deductions for 2021. For example, personal activities like eating or watching TV cannot be done in that part of your home. It must be dedicated to conducting business. However, the IRS does not stipulate whether that space is a desk or an entire room. In many instances, you may be able to write off more than just space. For example, housing expenses, such as utilities and mortgage interest may qualify as deductions.
What Else Can You Deduct?
Home-based businesses can take advantage of a variety of tax deductions, in addition to the expense of using space in your home for work. Make sure you keep receipts from any business-related activity and keep thorough records of your transactions.
Since you are in the travel industry, you may also be able to write off travel expenses, provided it’s for the benefit of your business. For example, if you write about the location you’re visiting and convey that information to customers, it counts as benefiting your travel business. Just make sure you document the trip and keep receipts.
Costs associated with attending travel conferences and trainings are also tax-deductible, including any expenses related to traveling locally. This means any time you drive somewhere on a business errand, your mileage is deductible. If your vehicle is used solely for business, you may be able to deduct other car-related expenses as well, such as gas and maintenance.
Networking in person will be part of getting started as a home-based travel agent. The costs associated with meeting with people—like conference attendance, renting a booth, driving to networking events—is also deductible because it counts as business development.
If you happen to entertain potential clients, you may be able to deduct 50 percent of those expenses. For example, if you take a client out to dinner or a sporting event, you can write off half of what it costs.
If you run a small business, such as a travel agency, you are likely responsible for providing your own insurance. You can deduct the premiums for health insurance and life insurance, so keep track of how much you pay each year for coverage.
If you have a vehicle designated for business and not personal use, you can also deduct your car insurance premiums for this vehicle.
Growing a business can be tough. It’s important to get the word out however you can, which can mean spending some of your hard-earned money on marketing and advertising. Fortunately, these are also expenses you can write off on your taxes.
Along with having a designated space in your home for conducting business, you need office furniture, software, a computer, and more. Did you know these items are also tax-deductible? However, once again, they must be used only for business. For example, if you use a printer for both home and office, the ink and paper will not be tax-deductible.
What’s Changed Since 2020?
The last couple of years have been a whirlwind in the workforce, especially with COVID-19 sending workers home and closing the doors of many businesses. There are a couple of things to consider when calculating your travel agent tax deductions for 2021 compared with previous years.
- Home-Based vs. Working From Home: Do you own a home-based business (i.e., travel agency), or do you work for a company that has you working remotely? Remote workers don’t qualify for the same deductions.
- Unemployment: If you collected unemployment during the last year because your revenue was below the minimum, you’ll need to include this when filing taxes.
- Stimulus Money: Stimulus payments are based on your annual income, so make sure you have filed everything accurately in order to receive the highest possible amount.
Tax Tips for Travel Agents
The most important thing to remember: save your receipts and track all of your expenses throughout the year. Additionally, it is extremely helpful to work with a tax professional familiar with all the travel agent tax deductions for 2021.
- Track expenses
- File early to avoid delays
- Use direct deposit to get your return safely and quickly
- Don’t forget charitable donations
- Set aside 10% of your income every time you get paid
- If you have clients in more than one state, make sure you know the tax laws for each state
Discover your passion for travel with the flexibility of a home-based travel agency business. Check out our video for the benefits of being a home-based travel agent.
IRS, Travel Market Report, Money Talks News
This article is part of our How to Become a Travel Agent: The Complete Guide series:
Benefits of Being a Travel Agent
Sharpening Your Travel Agent Skills
- Travel Agent Requirements: Education & Licensing
- Travel Agent Skills
- Travel Agent Training
- What Tools Do Travel Agents Use?
- How to Find Clients As A Home-Based Travel Agent
The Travel Agent Experience
Travel Agency & Franchise