We all work hard to earn a dollar, but working hard can payoff when it comes to travel. Have you ever been lucky enough to have a conference in Hawaii? Ever wondered if you could add extra days to be able to tour the beautiful area and still have it be considered a business trip? The short answer is YES!
The IRS defines travel expenses as being ordinary and necessary expenses of traveling away from home for your business profession, or job. The first question that you need to ask yourself is, “What is the main purpose of this trip?” If it is to go visit Cousin Larry and his family, whom happens to also be your client, this might not be considered a business trip. If you have a meeting in Hawaii and would like to tack on a few extra days to sight see with your family, this could be considered a business trip. However, be sure to not extend your personal stay too long. If your personal stay is too long, the IRS will consider your trip to be more pleasure rather than business and disallow your travel deductions.
What items are deductible when mixing business with pleasure? The following are only deductible if incurred by the employee themselves, you cannot deduct the expenses of their significant other and families.
- Transportation, which includes airfare and auto: The IRS does not really care if you get there a few days early or stay a little extra. If you do go a little early to take advantage of getting lower rates, the associated stay-over costs usually are deductible, too, even though you have no business meetings that extra day.
- Lodging: If you are needing a suite to accommodate your family, then the cost of a smaller room is what is deductible. (Remember, only the expenses related to the employee are deductible.) For the extra days that you stay, you cannot deduct those lodging expenses. You can, however deduct the expenses if it is related to stay-over costs as mentioned above.
- Dining: Dining out is deductible, up to 50%, if the expenses are incurred on business days or stay-over days. If you are having a quick lunch with a client, but the rest of the day is personal time, only that meal is deductible, this day is not a business day.
- Miscellaneous items: Shipping of baggage and materials needed for the business trip, dry cleaning and laundry (if your business trip is longer than planned), business calls, and tips for services related to any of the above expenses, just to name a few.
For more information on how to maximize your tax savings when combining business travel with vacation, please contact us. In some cases, you may be able to deduct business travel expenses that you might not think would be deductible.