Business Travel

If you are aware of any conferences, trade shows, other events, or searching for a job in line with your industry, you probably understand that these trips can be deductible. So, why not combine a business-related trip with pleasure? That’s right, if you have an annual industry conference on the other side of the country, you could plan your trip carefully so that not only do you get to attend the conference, but also make a family vacation out of it. This doesn’t mean the family can tag along tax-free, but here’s how it works.

You can deduct expenses that are “ordinary” and “necessary” for your trade, business or profession. It doesn’t matter if you’re a salaried W-2 employee or self-employed. If attending an event is considered ordinary and necessary for your line of work, you’ll qualify for a deduction. For example, if you’re in the business of selling widgets and there’s an annual widget expo that highlights all the upcoming widgets, attending this event would be considered ordinary and necessary for your line of work and the costs incurred to attend the event could be deductible.

Now, say this is an expo in Florida and you just happened to be considering taking the family on a vacation this summer. If you planned on attending the expo anyway, why not take the family along and spend time together in Florida? You get to attend the event, your family gets to spend time in Florida, and you’re eligible for some tax deductions.

What You Can Deduct

Attending and traveling to events like these come with many possible deductions. For starters, you can deduct the registration fees and any materials required to attend. If you need to travel, you can deduct associated costs to get you to the event. This includes round-trip airfare, car rental, mileage when using your own vehicle, public transportation, and so on. In addition, you’re allowed to deduct lodging expenses. Finally, you will be able to deduct meals, but as you may know, business meals are only 50 percent deductible.

What You Can’t Deduct

If you’re taking the family along, unfortunately their individual expenses cannot be deducted. That means if your family of four is flying, you can only deduct your personal airfare. And if you take the family to do things not related to the event you’re there to attend, those obviously cannot be deducted. Finally, you also cannot deduct expenses incurred for things that occur beyond the event schedule. If you’re attending a three day conference but stay an entire week with your family, you can’t deduct the other four days of lodging, meals, etc.

But one thing that can be a benefit is lodging. Most of the time a hotel room rate will be the same whether it’s just you staying in it or if you’ve got your entire family staying there, so in effect you could be getting a tax break while your entire family stays with you.

Planning and Record Keeping

As you can see, it is possible to turn a business trip into a family vacation that could yield some nice tax breaks while getting your family out of the house. The key is careful planning and record keeping. You’ll first want to make sure the event you’re interested in would qualify as ordinary and necessary for your line of work, and then if so, work to structure the travel so that you can maximize your time and possibly make a nice little trip out of it.

Then, as always, keep good records. Make sure you keep all receipts, log mileage, save copies of event materials, and so on.  And don’t forget to separate the expenses required for the conference or event from the non-deductible family expenses so that you’re not double-dipping. But if done right, you can get ahead professionally and enjoy some tax breaks while bringing the family along for a little leisure time away from home.

Charitable Travel

First, you have to know whether or not the organization you volunteered for was a qualified organization. No matter what you gave, be it time or money, the IRS only allows you to deduct when it’s been given to a qualified organization. The good news is that most public and non-profit private organizations are qualified, but it is up to you to find out if you aren’t sure.

Now when it comes to travel incurred while volunteering there are a few things to consider. First, the IRS says that generally you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. The good news here is that most travel expenses will qualify, but keep in mind that you can’t turn one way of volunteering into a week-long vacation with the family and expect to write off all the airfare and lodging costs.

Deductible Travel Expenses

Most common expenses related to travel are allowed. Here is what the IRS defines as deductible travel expenses:

• Air, rail, and bus transportation,
• Out-of-pocket expenses for your car,
• Taxi fares or other costs of transportation between the airport or station and your hotel,
• Lodging costs, and
• The cost of meals.

When it comes to using your own car for travel you can do one of two things. You may deduct the actual cost of gas used to get to and from the volunteer site, or you can deduct the IRS standard rate of 14 cents per mile. Unlike using your personal car for business, you cannot deduct expenses such as insurance, maintenance, or depreciation.

As always, it pays to keep detailed records regarding all expenses related to the trip. You may need to substantiate your expenses so keep a log of the miles driven, keep all receipts for meals and lodging, tolls or parking, and anything else related to your time volunteering.

What this also means is that you can mix a little business with pleasure to get a little discount on your tax bill. You can add a few days of sight seeing to the end of your business trip. You could have your spouse join you on the road and he or she can get a free room (in the event they don’t charge more for double occupancy) while you work. You won’t be able to deduct their expenses, but you get a little help with your own.

In order to deduct your trip, it has to be primarily for business. You can include a few days of “pleasure” in your business trip but the primary reason for the trip should be business if you want to deduct it. In general, if you have more days of “business” than “pleasure” on a particular trip, then you’re safe.

What Is Tax Deductible?

The general rule is anything that is related to your business and considered “ordinary and necessary.” You can usually include transportation such as airfare, lodging such as hotel stays, and meals and entertainment. If there are conferences, seminars, or workshops related to your business you check out while on your trip, those can be included as a potential write-off as well.

Transportation Costs: If the trip is considered a business trip, the entire cost of transportation is deductible. This includes airfare or train tickets as well as car rental and taxi rides if you need it. If you travel by personal car, you can deduct business mileage which is 50 cents a mile. You can also opt to deduct actual expenses but I find using the 50 cents a mile figure is easier.

If you use a frequent flyer award for the flight, you do not get to deduct the cost of the flight.

Lodging: When deducting lodging costs, you can only deduct the days when business is conducted. If you have a five-day trip and only conduct business for three of those days, you cannot deduct the other two. There are exceptions to this rule, such as if you adjusted your travel to get cheaper airfare, then you can deduct the cost of the extra nights stay, but the general rule is business day, deductible stay.

Meals & Entertainment: Business meals and entertainment are deductible at 50% of the total cost. If you spend $10 on a meal, you’re able to deduct only $5 for tax purposes, though you need to keep the entire receipt.

How do these rules change if you bring your family along? First, you can’t deduct any of their expenses. The general rule is that you can deduct everything you would normally have spent money on. With a hotel room, you can deduct the base rate but not the amount for additional guests (which may be nominal). For a car rental, you generally don’t pay per person so you can deduct the entire cost of the rental.

How Much Will You Save?

It depends on your business structure and your tax bracket. If your corporate structure is a pass through entity like a sole proprietorship or a limited liability company, then it’s your personal tax rate.

A Real Life Example

Here’s a real life example from my own life. This summer I’ll be spending a week in Lake Tahoe on vacation with my wife. For three days before the trip, I’ll be flying to San Diego for several business meetings. From there I will fly to Reno, then drive to Lake Tahoe where I will spend a week enjoying some strenuous hiking and the gorgeous views. Afterwards, we’ll fly back to lovely Baltimore. According to my business accountant, I will be able to deduct the flight to San Diego, all lodging and meals in San Diego, and the flight from Reno to Baltimore. The flight from San Diego to Reno and expenses in Lake Tahoe are not eligible.

So, I get a cheaper (tax free) flight out to the West Coast and a cheaper flight back home from Tahoe, but the San Diego to Reno leg is on my own dime. All in all, it’s not a good way to mix some business with pleasure without annoying the missus.