Tax help for business, pleasure trips
You really need a break, but it's been a tough year for your business and you're not comfortable spending money on vacation travel. Let Uncle Sam help pay for your business trip. When you tack on personal vacation days to the beginning or end of a business trip, your out-of-pocket costs could be minimal since much of the business portion of your travel could be tax deductible.
The pairing of corporate and vacation travel is easier for self-employed business owners. But employees also can take advantage of combined personal-business trips.
The key, as with anything tax-related, is substantiating that you followed IRS rules.
Ordinary, necessary expenses
The IRS has no problem with business owners deducting legitimate expenses. As long as the travel benefits or advances your business, you can write off ordinary and necessary expenses.
What's considered ordinary and necessary? That depends, says the IRS, on the facts and your circumstances. In general, an ordinary expense is one that is common and accepted in your trade 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 and round-trip travel to meet with existing or potential out-of-town clients.
Convention and seminar costs also could be deductible as long as the conferences specifically relate to your business or profession or help improve your career skills. That's why so many professional groups hold conventions in vacation spots like Orlando, Florida, or Las Vegas.
Traveling to a business meeting obviously is work-related and the IRS doesn't really care whether you get there a few days early or hang around for a bit after your business is concluded.
Since you had to travel anyway, you can deduct the cost of your transportation as a business expense when you file your company's taxes. This applies to both auto travel as well as airfare.
"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 2014."
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 usually are deductible, too, even though you have no business meetings that extra day.
The cost of travel by bus, train or auto, either your own car or one you rent, also is deductible. But don't try to slip in the price of airfare if you got your ticket via frequent flier miles.
Timing is everything
Many people set up out-of-town meetings for late one week and early the next. "That basically requires you be in town, but you have the weekend to yourself," says Maria Mercedes R. Infante, an Orlando, Florida-based CPA.
Be sure, though, that you don't extend your personal stay too long. In order to deduct your transportation costs, your trip must be primarily for business. You do get to count your travel days as business, but carefully calculate the overall work-to-pleasure ratio.
If you spend three days getting to and meeting with clients, but bookend the travel with five extra days for sightseeing, the IRS will consider your trip more for fun and disallow your travel deductions.
Your hotel costs while conducting business also are deductible. Here, too, you need to differentiate between the portion of your stay that was personal.
For the extra days you stay to enjoy a location's recreational offerings, you cannot deduct those hotel charges.