Admit it. The summer months flew by and you were too busy toiling away at your desk to fantasize about – much less plan – a vacation filled with sandy beaches and pina coladas. An estimated 4 in 10 Americans didn’t use any of their vacation days in 2014 and a little under 42% didn’t take a single day of vacation, according to a survey administered by Google Consumer Surveys.
Like so many American workers, you have rolled over so many vacation days you can barely remember the last time you took an actual vacation. But with smart, careful planning you can combine business travel with personal vacation days to minimize out-of-pocket expenses since much of the business portion of your travel may be tax-deductible. Admittedly, combining corporate and vacation travel is easier for self-employed business owners. But employees can also take advantage of combined personal-business trips. The key, as with anything tax-related, is paying attention and adhering to IRS rules and guidelines.
Ordinary, Necessary Expenses
The IRS allows business owners to deduct the legitimate expenses of running a business. You can write off ordinary and necessary expenses as long as the travel aids, benefits or advances your business. Generally, the IRS considers an ordinary expense to be one that is common and accepted in your trade, industry or business. A necessary expense is one that is helpful and appropriate for your business. Under these standards, deductible travel expenses typically include hotels, meals, entertainment (within certain limits) and round-trip travel to meet with existing or potential out-of-town clients. Events and seminar costs are also deductible as long as the conferences specifically relate to your business or profession or help improve your career skills. It’s no coincidence that so many professional groups hold conventions in vacation hotspots like Las Vegas, Miami, and New Orleans.
Travel is a Necessity
Traveling to a business meeting is a necessary, work-related expense and the IRS isn’t keeping track of whether you arrive several days early to hang around for a day or two after your business is concluded. Since your travel is a necessity, you can deduct the cost of your transportation as a business expense when you file your company’s taxes. In fact, when you fly for business purposes and extend your stay to get a reduced fare by, for example, spending a Saturday night at your destination, the associated stay-over costs are deductible, too, even though you have no business meetings that extra day.
“If the primary purpose is business, you don’t have to apportion it even if you spend some personal time,” says Barbara Weltman, tax attorney and author of J.K. Lasser’s Small Business Taxes 2015. The cost of travel by bus, train or auto; either your own car or one you rent, also is deductible. But don’t include the potential airfare if you got your ticket using frequent flier miles.
Timing is Crucial
If possible, try scheduling out-of-town meetings for the tail end of one week and early the following, with a wonderfully free weekend in between. In order to deduct your transportation expenses, your trip must be primarily for business. Although your travel days count as business, be meticulous when calculating the overall work-to-pleasure ratio. Make sure that you don’t extend your personal stay too long. For instance, if you spend three days attending meetings with clients, but bookend the travel with six extra days for sightseeing, the IRS will consider your trip more for fun and disallow your travel deductions.
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