It’s common practice to add some vacation activity to a business trip to help defray the cost. When and to what extent is it really deductible? Today’s post is written by guest blogger Patti S. Spencer, Esquire
Patti is a nationally recognized Trusts, Estates and Taxation Lawyer, Writer and Expert Witness. Her areas of concentration include trusts, estate administration, settlement, and planning, as well as, inheritance tax, fiduciary liability, and tax planning.
The cost of a pure business trip is 100% deductible. Unreimbursed hotel, airfare, car expenses, cleaning, telephone, tips, are all 100% deductible as well. Up to 50% of the cost of meals are deductible. In general, travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job.
What if you add on a few “vacation days”? After all, here you are in Paris, are you going to skip the Louvre? If the trip is an international one, the travel cost is 100% deductible if the trip is at least 75% business. Less than 75% and then the deductible portion of airfare is generally pro-rated based on the number of business days compared to the total number of days. If the business trip is within the United States, the airfare is 100% deductible as long as the primary purpose of the trip was for business. Lodging and meal expenses for business days are deductible, not for vacation days.
With smart phones, laptops and other new-fangled technology, if you spend most of your time at the Louvre answering e-mails and taking phone calls (say 4 hours) – arguably that’s a business day as well. A business day is any day you are traveling to or from the business destination, a day when you have a pre-scheduled business appointment (regardless of how long), or a day when you spend at least 4 hours on business.
Did you ever see those advertisements for trade associations or professional associations putting on seminars in seaside resorts? Those travel expenses are most likely 100% deductible. The seminar or conference fees are deductible as well.
If the trip is primarily for vacation, then you cannot deduct hotel and travel expenses. Visit the IRS Tax Topic page for more specifics.
Remember: it is very important to keep records.
Be reasonable. (Hiring a luxury limo and driver on the trip when you drive yourself in a used car at home is not reasonable.)
If you are an employee, deductible travel deductions are claimed on Form 2106 and are miscellaneous itemized deductions for which you receive a tax benefit only to the extent they exceed 2% of adjusted gross income. If you are self-employed, expenses are deductible on Schedule C or the appropriate business return. You can get more information in IRS Publication 463: Travel, Entertainment, Gift and Car Expenses. Keep receipts and a log of your travel and activities. More detail is better.