It can be challenging to get away on vacation when you own a business or you’re self-employed. That’s one reason why you may jump at the chance to travel when the trip offers both business and personal pursuits. If you plan to claim tax deductions for travel, it’s important to understand what does and doesn’t qualify as a legitimate write-off under Internal Revenue Service (IRS) law.
Is the Trip Primarily for Business or Pleasure?
If you’re planning a combination business and personal trip in the future, it’s a good idea to make sure that you spend more of your time pursuing business activities if you would like to claim a deduction. This is due to the IRS regulation that allows business owners and the self-employed to deduct 100 percent of their transportation costs if they spend more of their time on business pursuits. For IRS purposes, transportation costs include airline tickets, taxi or personal car service fees, or the cost to rent a car or drive your own.
It’s safe to assume that any day of your trip that you spend conducting business counts towards the number of business days. The IRS will also allow you to claim the transportation deduction if some of your business days include standby days when you might need to attend to business or weekends and holidays if it’s impractical for you to return home on one of those days.
Don’t Deduct Costs for Family Members Unless They’re Actual Employees
It can be fun and reduce your travel costs when family members accompany you on a business trip. You just need to remember that you can only deduct your own expenses associated with the trip and not the cost of your family member’s flight, activities, meals, and other costs. Some people have tried to get around this by claiming their family members work for them. This caused the IRS to pay closer attention to these deductions to ensure their legitimacy.
The IRS also imposes an ordinary and necessary clause to any business travel deductions claimed by business owners and self-employed individuals. That typically includes the following:
- Lodging
- Meals
- Rental car
- Seminar and convention fees
- Shipping of luggage and other baggage
- Travel and transportation costs
Maintain Good Records for Costs You Want to Deduct
Although the IRS doesn’t require you to submit receipts for expenses under $75, you should still plan to document the date and time of each purchase as well as a description. We recommend keeping hard copies of receipts and documentation in a safe storage place in case you’re ever subject to an IRS audit.
Schedule a Consultation for More Small Business Advice
The bottom line with combination business and pleasure trips is that you can deduct certain expenses if you spend more than half your time engaged in business pursuits. Perhaps that answers one accounting question for your small business, but you still have several more. Doerhoff & Associates CPA is happy to assist your company to become as profitable as possible. We invite you to learn more about our services and then contact us to request a consultation.
