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Tax Benefits of Pleasure in Business Travel 

Jun 7th 2018
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The summer months often mean business travel and if the destination is a city with a historic downtown or near a beach or lake, your clients may want to tack a few vacation days onto the end of the trip.

In the case of mixing in leisure time with business travel, you can still write off the majority of your expenses while you’re away, as long as you do it the right way. However, if the IRS declares a business trip to actually be a vacation in disguise, they could loss the write-off completely – even if they spend some of the time away on business matters.   

The Basic Tax Deductions

For travel within the U.S., the basic tax deductions are relatively straightforward. If the primary purpose of travel is related to business, you can deduct 100 percent of your qualified expenses – including airfare or other costs for getting there and back – plus 50 percent of business meals. Although the new Tax Cuts and Jobs Act (TCJA) eliminates the 50 percent deduction for entertainment and meal expenses allowed under prior law, most tax experts believe this repeal doesn’t apply to your own meals while traveling away from home on business.  

Note that other special rules apply to travel to foreign countries. In this limited space, we’ll stick to a discussion of domestic business trips.

As far as tax deductions go, the number of days spent on business versus pleasure is critical. (A day still counts as a “business day” if you’re tied up for eight hours in office meetings and then relax with a dinner and show afterwards).

If you record more business days than personal days, you should be OK. However, to be on the safe side, arrange a clear majority of business days compared to personal days. For instance, if you’re gone on business five days and then take a long three-day weekend for R&R, you qualify for deductions.

In addition, both days traveling back and forth can be counted as business days for a trip that is primarily business. So, do weekends and any intervening holidays you stay at the business destination because it would be impractical to return home. And add on days where your clients are asked to stick around in case they needed or days intended to work, but can’t because they or someone else is ill.

What Expenses are Deductible?

Besides the aforementioned airfare (or other travel expenses) and 50 percent of meals, you can write off reasonable lodging expenses and incidentals. This might include cab fare, Uber or Lyft charges or other transportation from the hotel to the business location, dry cleaning and luggage handler tips.

Of course, your client might do some sightseeing or engage in other amusement or recreation while they’re in the city or near the water. Go ahead, but just be aware that the expenses attributable to the pleasure part of the trip are nondeductible.

Finally, spouses or a significant others may accompany them on the trip. Although the expenses allocated to a traveling companion can’t be deducted, a special rule allows you to deduct the amount it would have cost to travel alone – even if that’s more than half of the actual cost.

For example, say if it costs $300 a night for your client and their spouse to stay in a double occupancy room at the hotel and a single room runs $250 and the business stay is seven days. In this case, you can deduct a total of $1,750 (7 x $250) for the business part of the trip, instead of half of the cost of your room, or $1,050 (7 x 150). Make sure your client keeps records of the rates for their stay.

And what if the spouse is also a company employee and is helping out on the business trip? Even better, the entire business cost of the travel for both is deductible.

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