How to Get a Tax Write Off for Your Summer Trip

With summer in full swing, millions of people are leaving behind the daily grind - hitting the road bound for out-of-town destinations. Unfortunately, profit hoarding oil companies, amusement parks, hotels and other recreation service providers take full advantage of the increased travel demand by routinely charging higher prices. However, with a little planning, the savvy traveler can get help with the costs of a summertime trip from an unlikely source - the IRS. The help comes to travelers that strategically combine business and pleasure, because business travel expenses may be deductible under certain circumstances even when the trip contains a large number of pleasure activities.

Whether or not the business travel deduction is available for your summertime retreat depends upon whether the primary purpose of the trip is business or personal. If the trip is primarily for business, travel costs such as plane fare, a cab to the airport, and lodging can generally be deducted. If the trip is primarily personal, none of your travel costs are deductible. Some allocations may be required if the trip is a combined business/pleasure trip. For example, if you fly to a location for five days of business meetings, and stay on for an additional period of vacation, only the cost of meals, lodging, etc., for the business days are deductible-not for the personal vacation days. But as long as the trip is primarily for business, the travel costs will still be deductible.

So how do you know if your summer trip is primarily business or personal? One important factor is the amount of time spent on each type of activity, although this isn't the sole factor. When the number of "business days" are greater than the number of "personal days" your travel is generally considered primarily for business. The IRS also gives you a break when counting the number of days spent on business by allowing you to count travel days as business days.

For example, assume you went on a trip to Florida and spent one day getting there, one day getting back, three days attending a legitimate business seminar, and four days completely and totally focused on recreational venues. Under IRS rules, you would have spent five days on business (two travel days plus three seminar days), and four days on personal activities. Your trip would be considered primarily for business purposes because five out of nine days of your trip would be for business purposes. Assuming you travel early the day you depart for your destination, and leave late on the day you return, you will have even more time for personal activities. Likewise, just because you spend four days focused on business, with careful planning you can still enjoy many evening and early morning recreational activities during your three days of business.

Now let me give a word of caution. Although the IRS may help a little with the costs of your travel this summer, you must follow their rules and plan carefully. There are many expenses that are not deductible even if your trip is primarily for business. For example, personal expenses you incur at home as a result of taking the trip, such as the cost of boarding a pet while you are away, are not deductible.

Additionally, no deduction will be allowed for meals or lodging to the extent the expense is "lavish or extravagant." Although this term isn't defined in the tax rules, it has been interpreted to mean "unreasonable." Likewise, personal entertainment costs on the trip are never deductible.

The rules on deducting the costs for your spouse if they accompany you on a business trip are also very restrictive. No deduction is allowed unlessyour spouse isan employee of yours or your company, and their travel is also for a business purpose.

Be sure to keep the documentation necessary to prove the expense such as receipts and credit card statements. You should also be very careful to save all material helpful in establishing the business or professional nature of your travel. Be aware that when the business purpose is attending a convention or seminar, and not the normal conduct of your business operations, the IRS may check the nature of the meetings carefully to make sure they are not vacations in disguise. Remember, the burden will be upon you to prove both the business purpose of your travel, and the expenses you deduct.

Taxpayers that are self-employed or own their own business will likely find it a bit easier to take advantage of the business travel deductions when they plan their summer trips. This is because employees are typically reimbursed for business travel. However, the tax treatment would be the same for an employee with unreimbursed travel costs. But the down side is that if you fall into this category, the deduction would be a miscellaneous itemized deduction, and may be less valuable due to other limitations.

There may not be a lot of ways to save when you go on a vacation this summer, but with good planning, careful record keeping, and careful observance of the IRS rules, combining business and pleasure may put money back into your pocket. This is intended for general interest and not as specific legal or accounting advice for anyone. You should consult your tax advisor to get more information.

Scott Jensen, CPA is a public accountant practicing with Bailey Saetveit & Co, P.C. in Greenwood Village and resides with his family in Parker. He can be reached at 303-799-4100, or sjensen@baileysaetveit.com with comments or questions.