Exploring The Tax-Saving Secrets Of Combining Summer Business And Personal Vacation Travel After Tax Reform

Summer is well underway, and you may be considering combining a business trip with vacation plans, or may have already traveled for both business and pleasure purposes. Although business is business and pleasure is pleasure, the tax code does not always adhere to absolutes or logic. With a little planning, improved tax deductions may be available for out-of-town business-travel expenses, both domestically and internationally. Wouldn't it be nice to be able to check out the Grand Canyon after that business convention in Phoenix, or the Mayan ruins after that business meeting in Belize? This Alert discusses a few strategies to help you achieve the greatest tax benefit from properly combining and documenting business and personal travel.

Combine Business and Vacation Domestic Travel

When some vacation days are added onto a business trip within the United States, business-travel expenses are typically deductible. Transportation expenses are deductible for out-of-town business trips. This includes travel to and from the departure and destination airports; cab fares; the airfare itself; baggage fees and tips; and so forth. Costs of rail travel or driving a personal vehicle also fit into this category. The bottom line: Domestic transportation costs are 100 percent deductible, as long as the primary reason for the trip is business rather than pleasure. On the other hand, if vacation is the primary reason for travel, no transportation expenses are deductible.

Although the Internal Revenue Service does not specify how to determine if the primary reason for domestic travel is business, the number of days spent on business versus pleasure is a determining factor. Travel days count as business days, as do weekends and holidays if they fall between days devoted to business, making it impractical to return home. "Standby days," when physical presence is required, but work is not necessarily performed, also count as business days. Any other day principally devoted to business activities during normal business hours is also counted as a business day, as are days when work was expected but not possible, due to reasons such as local transportation difficulties, power failures, etc. Additionally, a businessperson who is on an extended travel assignment may deduct the cost of a weekend trip home up to the amount the individual would have spent on lodging and meals at the out-of-town business location.

Travel does not necessarily need to involve the actual conducting of business to qualify as a business trip. If the primary purpose of a trip is to attend a convention or seminar, travel expenses are deductible if attendance benefits or advances your trade or business. It is essential to save all material helpful in establishing the business or professional purpose of the travel, as the IRS, upon audit, often reviews the nature of the meeting carefully to ascertain they are not vacations in disguise. Attendance at...