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.
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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
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
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Lodging Costs
Hotel costs while conducting business are also deductible. But as with business and vacation days, you must differentiate between personal and business hotel stays. You cannot deduct hotel charges for the extra days you stay over to enjoy a location’s recreational offerings, such as a magic show or sporting event. But be warned: If it doesn’t pass the sniff test for mere mortals, the agents eagle-eyed at the IRS will ferret out any discrepancy. For example, if you had a breakfast meeting with a client then spent the rest of the day at the hotel pool followed by a Cirque de Soleil show before heading home, you’re asking for trouble. That night’s hotel stay is a personal expense; not a deduction on your tax return.
Dining and Miscellaneous Expenses
Sealing the deal with a handshake over a meal is a time-honored business practice for which the IRS gives some wiggle room. Generally, you can deduct 50% of your business-related meal costs. Many work-related costs also are deductible. But be sure to keep receipts for travel, hotel, meal and transportation costs and other miscellaneous business expenses. You can write off expenses such as cab, car rental, train or bus fares to and from the airport, hotel and business meetings or events. Additionally, if you made photo copies or shipped communication materials to your meeting destination, those expenses are also deductible. So are the extra charges you incur for business calls or Internet access fees.
Taking Family Along
Turning you next business trip into a mini-vacation by taking the family is a smart move, just be prepared to do more rigorous record keeping. Your spouse’s and children’s expenses are not deductible. However, the tax code allows you to deduct some expenses, such as hotel and car mileage to out-of-town meetings, even with your family along for the ride. And for the days you conduct business, most of your family-shared room will be deductible.
Reliable Recordkeeping
If you are an employee, make sure you follow the company policy, which means keeping receipts and documenting the business portion of the travel. Click here for more information on IRS tax guidelines for business travel.