Are you thinking about turning an upcoming business trip into a family vacation this summer? This can be a great way to fund a portion of your vacation costs. But if you’re not careful, you could lose the tax benefits of business travel.
Reasonable and necessary business travel expenses
Generally, if the primary purpose of your trip is business, then the expenses directly attributable to business will be deductible. (If your employer is paying the expenses directly or reimbursing you through an accountable plan, this will be excluded from your taxable income.) Reasonable and necessary travel expenses generally include:
- Air, taxi and rail fares,
- Baggage handling,
- Car use or rental,
- Lodging,
- Meals, and
- Tips.
Travel expenses associated with taking extra days for sightseeing, relaxation or other personal activities generally aren’t deductible. Nor is the cost of your spouse or children traveling with you.
Business vs. pleasure
How do you determine if your trip is “primarily” for business? One factor is the number of days spent on business vs. pleasure. But some days that you might think are “pleasure” days might actually be “business” days for tax purposes. “Standby days,” for example, may be considered business days, even if you’re not engaged in business-related activities. You also may be able to deduct certain expenses on personal days if tacking the days onto your trip reduces the overall cost.
During your trip, it’s critical to carefully document your business vs. personal expenses. Also keep in mind that special limitations apply to foreign travel, luxury water travel, and certain convention expenses.
Maximize your tax savings
For more information on how to maximize your tax savings when combining business travel with a vacation, please contact your tax adviser. In some cases, you may be able to deduct expenses that you might not think would be deductible.
