Tax deductible: business trip or vacation?

By Dave Barnett, CPA

It’s not uncommon for business owners to combine business travel with a few days of rest and relaxation, or to bring along their spouse for an extended vacation. I’m often asked if any of the travel costs can be deducted when business and pleasure is combined.
Assuming your trip is considered primarily for business, you can deduct 100 percent of your transportation costs to reach your destination. You’ll also be able to deduct actual lodging expenses and 50 percent of meals for days you spend conducting business, attending business meetings, or conferences. It’s important to understand how the IRS defines a business day to maximize your deductions.
Here are the business day rules laid out in IRS publication 463:

 

  • You work for more than half a day.
  • You spend the day traveling to or from the business destination.
  • Your presence is required even if you don’t end up working four hours.
  • You were prevented from working by circumstances beyond your control.
  • Weekends and other holidays that fall between working days.

 

The rules are set up so that if you have a legitimate business trip planned, it’s possible to also enjoy four or five days of rest and relaxation, without losing the business deduction. Let’s say you are attending three-day conference directly related to your business or profession. You could fly down to Orlando on Saturday, enjoy a personal day Sunday, attend the conference Monday through Wednesday, have Thursday and Friday for golf or sightseeing, and then fly home Saturday morning. The result, including the two travel days, would be five business days and three personal days. Therefore, your plane tickets and all related transportation costs would be deductible. So would the business day hotel lodging and car rental, plus 50 percent of business day meals. Anyone else’s expenses are not covered.
If you’re setting up business meetings with clients or prospective clients, consider scheduling appointments for Friday and Monday. Based on the IRS rules, by flying in Thursday and attending Friday and Monday meetings, you’ve created six deductible business days (including the travel home day) and can now enjoy five more personal days without losing the “primarily business” designation for your trip.
Of course, these scenarios only work if you can provide accurate business documentation. That includes the nature of your meetings, who you met with, and their relationship to your business. Passing out business cards or working on self-study continuing education courses won’t turn your summer vacation into a business trip.
This brief discussion applies to domestic US travel only. The IRS has a different set of rules for both cruise ships and travel outside the United States.

Andie Freeman Photography | Georgia Editorial Photographer

Dave Barnett attended the Centenary College of Louisiana where he received a Bachelor’s in Accounting. He’s been practicing public accounting for 32 years. Dave Barnett is a member of the Georgia Society of CPA’s. On his off time, he enjoys jogging and golfing.

 

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