Our experienced accountants and other professionals at Malloy, Montague, Karnowski, Radosevich & Co., P.A. provide a full range of tax preparation services to help businesses and individuals succeed. Reducing your tax bill by maximizing deductions is always one of our objectives. Certain travel expenses are deductible. But considering summertime is here, you may wish to mix a beach day in with your business symposium and yet deduct some or all of the trip’s expenses. What are the rules? Here is some helpful guidance to keep the IRS off your back.
1.) General Rule. The general rule is that business travel expenses are potentially deductible if the travel is within the United States and the expenses are “ordinary and necessary” and directly related to the business. (Stricter rules apply to foreign travel.). Keep in mind that only business owners and self-employed persons may deduct travel expenses.
2.) Primary Reason. Transportation costs to and from the location of your business activity may be 100% deductible if the primary reason for the trip is business rather than pleasure. On the other hand, if vacation is the primary reason for travel, generally no travel costs are deductible. The number of days spent on business vs. pleasure is the key factor in determining whether the primary reason for travel is business. Happily, travel days count as business days, as do weekends and holidays — if they fall between days devoted to business and it would be impractical to return home. Generally, a trip’s primary reason should be considered as business if business days exceed personal days.
3.) Examples of Deductible Expenses. Deductible travel expenses include: travel to and from your departure airport, airfare (even first class tickets), baggage fees, tips, cabs, and similar expenses. At the destination, out-of-pocket expenses for “business days” are fully deductible. Examples of these expenses include lodging, meals (up to 50%), seminar and convention fees, and cab fare. Expenses for personal days aren’t deductible. Expenses for accompanying family members are non-deductible unless they are employees or their presence is for a valid business reason.
4.) Burden of Proof. Taxpayers have the burden to prove the trip’s business purpose. Documentation is critical. Keep receipts and a daily diary of your activities identifying who you were with and the purpose of the meeting or other event.
Conclusion: Subject to certain rules, you can mix some personal pleasure into a business trip and still have substantial deductions. At MMKR, our professionals provide effective and ethical tax return preparation services to individuals and businesses. Contact us today for an appointment.
Topic Number 511 - Business Travel Expenses (IRS Pub. Mar. 2019).
IRS Publication 463 (2018).
“Can I Deduct That As A Business Expense?” Forbes (2019).