Traveling for business this summer? Let Uncle Sam chip in
Mixing business with pleasure can have several benefits if done the right way. As long as the trip was undertaken primarily for business reasons, the entire airfare is tax deductible in addition to the cost of lodging and 50% of meals while on business status. So if Penny Pincher, a self employed information technology specialist, flies from New York to Los Angeles on a 5 day business trip and wishes to go sightseeing for 3 days afterward, she can deduct the entire airfare and now her mini-vacation is, in effect, subsidized by the tax break.
Is It “Primarily For Business”?
There is no hard-and-fast rule for when a trip is considered to be primarily for business reasons. Each case has to be judged based on its own circumstances. One important factor is the way travelers split time between their business and personal pursuits. The concept here is to piggyback a personal vacation onto a business trip, not the other way around.
Get a Free Vacation
Although an employee’s out-of-town business chores conclude on Friday, he may extend his business trip to take advantage of a low-priced fare requiring a Saturday night stay over, where the savings in airfare are higher than the costs of the weekend meals and lodging. The employee doesn’t pay tax on the reimbursement for his Saturday meal and lodging expenses. In this case, the IRS said that under a “common sense test,” payments to the employee for the Saturday stay were deductible if a “hardheaded business person would have incurred such expenses under such circumstances”.
Stop On the Way
Not interested in your business destination? No problem – you can make a stop wherever youdesire, whether en route to or from your business destination, and still deduct the amount the travel would have cost without the stopover. To illustrate, suppose Sam Surfer, a business owner who always wanted to visit Hawaii must travel to Hong Kong for 6 days for business purposes. The airfare would have been $1,400, but with a 3 day stopover in Hawaii would amount to $1,700. The $1,400 would still be deductible despite the fact that he would be stopping over. It is important to keep a record of what the round-trip travel costs would have been without the personal stop.
Should I Bring My Spouse?
Although the expenses of a spouse or other companion accompanying a traveler are not deductible (unless (1) the spouse/companion is an employee of the taxpayer and is also traveling for business, and (2) his/her expenses would otherwise be deductible), a tax benefit may still be salvaged from traveling together. The rule is that any travel expense that would have been incurred had the traveler been alone is deductible no matter what. So if, for example, Lora Lonely would have paid $200 a night for a room at the hotel but instead brought her spouse and paid $150 per person, she would still be allowed to deduct $200 a night. Similarly, if she rented a car to get to the hotel and brought along her spouse she would be able to fully deduct the car rental expense.
Plan Your Getaway
So as you plan your summer business travel, don’t forget to consult with your tax advisor at Urbach & Avraham to see how much Uncle Sam can help you out with your summer vacation.