Business trip + vacation = savings

Companies and partnerships also can hold a tax-deductible retreat, Tiret says. As long as the bulk of the trip is spent on the business, partners can knock off at the end of the day and play golf. Just keep it reasonable. If you're based in Oakland, Calif., the Internal Revenue Service considers a retreat in Monterey or Lake Tahoe as reasonable. A trip to the Bahamas is not.

And if you own investment property, you are entitled to visit it occasionally. "Typically, one trip a year is allowed to review the investment," Tiret says .

The deduction would cover your travel costs, plus hotel and meals for the time you need to examine the property and the related paperwork. But if you want to stay a few days and see the sights, you don't deduct that portion of the trip.

Dear travel diary
Fred W. Daily, author of Tax Savvy for Small Business, says there's nothing very mysterious or tricky about the tax code when it comes to business-travel deductions. "The rule is that business is supposed to be the primary reason of the trip."

That means when you mix tax-break-eligible business travel with pleasure, you need to keep good records.

A diary is a great way to document the business accomplished on your trip. Receipts and credit card statements provide an instant accounting of your spending. It also doesn't hurt to save brochures, programs and business cards, says Daily. "The IRS likes paper rather than your word for something."

You also should plan ahead. Once you work out your combined business-personal travel, look at the plans from the point of view of the IRS or your own accounting department. Then run your itinerary and reimbursement scenario past your accountant (if you're a small-business owner) or the person who handles expense reports (if you're employed at a larger firm). A pre-travel second opinion could prevent a nasty surprise later. As Hasbrouck notes, no one wants to have to deal with a denied expense reimbursement.

And keep in mind that a tax deduction isn't a license to go crazy. Take meals, for example. The IRS sets a reasonable per diem as a guideline. Sure, you probably can write off dining at moderately priced restaurants, but the government will not pick up the bill for a champagne and caviar spending spree. Do a gut-check test: Would the request still seem reasonable if an employee or politician was spending your money?

"The IRS has come to give much more scrutiny to travel expenses than they used to," warns Hasbrouck. That means the practice of scheduling a little business simply to write off a pleasure trip "is not likely to fly these days."

Kennedy concurs. "It has to be a legitimate business trip," she says. "But don't be afraid to play while you're there."

Dana Dratch is a freelance writer based in Georgia.