Mix business with pleasure and get a tax deduction!

When mixing business with vacation on out of town trips, follow these key strategies to maximize your tax savings from the cost of travel, meals and lodging:

  • Keep the primary reason for the trip as business-related. The IRs does not specify how you prove it, but it does describe how you treat week-ends and days delayed for reasons outside of your control. As tax support, keep your notes, programs and agendas to support your business activity.
  • The Saturday ‘What if….” Scenario. If staying over a Saturday night actually saves you money on airfare or doesn’t cost any more, then the IRS allows you to deduct the extra day(s) costs (subject to the 50% meals disallowance).
  • Foreign travel has more criteria for travel to be fully deductible. The ‘one-week rule’ allows you to maximize the travel costs so long as the trip is a week or less. Holidays and weekends often count as business days. The ‘25% rule’ allows you to maximize the travel cost as long as the personal time is less than 25% of the trip.
  • Foreign conventions directly related to your trade or business may also qualify for deductions. The regular foreign travel rules apply, and it must be just as reasonable for the meeting to be held on foreign soil as in North America. In this case, the definition of North America is very broad. It includes Canada, Mexico, parts of Central America, and many islands in the Caribbean and Pacific Ocean.

All is not lost if the personal days do start adding up. As long as the trip is still primarily for business purposes, the travel costs can be prorated. With a little planning and clear documentation, these tips can aid you in maximizing the benefits of your travel costs.

Consult with your CHORTEK tax advisor to discuss the application of tax deduction rules to your travel plans.

Written by Patrick Wirth, CPA, CVA | Partner
Posted in Tax