Video conferencing has its advantages, but there are still times when you have to leave town for a business meeting or other event.  If you have a business trip on the horizon – and you’re overdue for a vacation – consider combining the two.  You might already have thought about tacking a few vacation days onto the end of your trip, especially if your employer is paying the airfare.  But what you might not know is that there are additional tax incentives that you can take advantage of, as long as the primary function of the trip is business. 

Now, the question of whether business is the primary purpose of your trip is a “facts and circumstances” determination, meaning that the IRS expects you to use your best judgment.  Consider how your time, and your money, will be divided between business and personal activities when making this determination.  That being said, here is an overview of the tax breaks available for business trips that have a little personal time mixed in:

  • Your round-trip transportation costs, as well as your lodging expenses, are fully deductible.  You may also deduct 50% of your meal expenses during the business portion of your trip.  If your employer requires you to submit records and receipts to account for your time and expenses to get reimbursed for them, you won’t be taxed on this income. 
  • If your out-of-town work ends on a Friday, you might opt to save money on the return trip by booking a flight requiring a Saturday night stay-over.  The IRS has acknowledged that this makes sense as the savings on airfare may be more than what you’re spending on Saturday meals and lodging.  In that case, the reimbursement you receive for Saturday’s food and lodging would also be tax-free.
  • If your business obligations overlap a weekend, and the location is too far away to come home for Saturday and Sunday, then that weekend will be treated as business time. 
  • Furthermore, if you’re on an extended out-of-town business trip and you choose to visit home for the weekend, you can deduct a portion of your weekend expenses.  The rule is that these expenses are deductible up to the amount you would have spent on meals and lodging at your remote work location.  This incentive only applies if you check out of your hotel at your work location, then check back in when you return.  Otherwise, you could only deduct your expenses for your trip home up to the amount you would have spent on meals during the weekend at your work location.
  • If you choose to bring a spouse or travel companion along, their expenses likely aren’t deductible unless they’re also employed in the business.  However, you’ll probably save on their travel expenses anyway.   Think of it this way:  you get a deduction for the amount you would have spent if you had traveled alone.  Unless your expenses are doubled by bringing them along, you’ll save money.  For example, a car rental is going to cost the same if you bring a friend along or not.  And the hotel rate for two people probably won’t be much more than it would for one. 

Hopefully that business conference is starting to look more appealing now.

Source: Federal Tax Updates on RIA Checkpoint Newsstand tab 6/21/11.

For Further Reading: Publication 463(2010): Travel, Entertainment, Gift, and Car Expenses, www.irs.gov Topic 511:  Business Travel Expenses, www.irs.gov

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