If you have a business trip lined up to a charming city or summer resort, you may end up tacking on a few days of vacation while you’re there. And guess what? Most expenses will remain tax-deductible if you stay within the tax law boundaries.
Deducting your business-vacation travel expenses
To claim deductions for domestic business travel, the primary purposes of the trip must be related to business. Simply put, you must clearly spend more time on business than pleasure. Clearly separate your travel days on your calendar between “business days” and “personal days.”
When it comes to writing off expenses, start with airfare or other round-trip transportation, lodging and 50 percent of the cost of your meals. Add on incidentals like cab fare to a business meeting. Just remember that costs related to the vacation part of the trip, such as extra hotel nights and sightseeing excursions, are nondeductible.
Here are a few hints for maximizing deductions on the trip:
- Keep a close watch on business versus pleasure days. If the IRS ends up deeming the trip a disguised vacation, no deduction is allowed.
- The 50 percent deduction for business entertainment has been eliminated. The IRS is expected to issue guidance on how this change affects deductions for meals with clients.
- Don’t go overboard. You can’t deduct expenses that are lavish or extravagant. That means you probably shouldn’t splurge on the penthouse suite.
- Keep business travel expense records. Without receipts and other proper records, your deductions are in jeopardy.
- Know the rules around traveling with your spouse. Generally, travel expenses related to a spouse accompanying you on the trip are nondeductible unless there’s a valid business reason, such as when your spouse also works for your company.
Contact Dye & Whitcomb, Fort Collins CPAs if you’re thinking about adding a vacation to a business trip. We can help you understand what will and won’t be deductible.