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How to Make Your Vacation a Tax Deduction

How to Make Your Vacation a Tax Deduction

There are many ways a family vacation can be turned into a partial tax deduction if the travel expenses are ordinary and necessary expenses for your job or business.  Travel expenses are also deductible if looking for a job, even if you do not get the job.

In order to deduct the cost of a trip, the trip must be primarily for business and within the U.S.  The trip must be over 75 percent business in order to deduct the cost of travel if traveling internationally for more than a week, if not, a proration of your travel costs must be made.  It is important to consider the length of time spent at each location of your trip.  If personal days are added to a trip before or after the business portion of the trip, this will not disqualify you from any deductions; however the meals and lodging for those personal days will not be deductible. 

If the family is coming along on a business trip, this will not disqualify you from any write-offs.  Bringing the family with could be advantageous because you can still deduct a substantial portion of the trip’s cost.  The cost of a hotel room will still be deductible, but only up to what a single room would cost.  For example, if a single room at a hotel would cost $150 and a family room costs $200, then only $150 would be deductible.  The cost of a rental car for the family will be fully deductible since the cost is the same regardless of how many people are in the car, however if public transportation is used, any separate costs incurred by family members are not deductible (same rule for meals).

Travel expenses for conventions are deductible if you can show that your attendance benefits your trade or business.  Also, travel expenses paid or incurred in connection with a temporary work assignment away from home can be deducted.  However, travel expenses paid or incurred for any work assignment in excess of one year are not deductible.

Deductible travel expenses while away from home include the following:

  1. Travel by airplane, train, bus, or car between your home and your business destination and while at your business destination. 
  2. Meals (50% deductible) and lodging
  3. Fares for taxis and other types of transportation from the airport or train station to your hotel and the work location, and from one customer or place of business to another.
  4. Tips you pay for services related to any of the above expenses.
  5. Other ordinary and necessary business expenses related to your travel, such as seminar and conference fees, dry cleaning and laundry, business calls, computer/internet fees, etc. (personal entertainment costs are not).

Travel expenses, meals, and lodging while looking for a new job are deductible.  The new job however must be in your present trade or business.  These expenses are not deductible if you are searching for a new job in a different trade or business.  Job search costs incurred if you are unemployed and there is a substantial break (not defined in the tax law) between the time of your past work and the time you are looking for work are not deductible. 

When traveling it is very important to keep documentation regarding your business activities in case an audit ever arises.  It is not only important to keep receipts to verify expenses, but itineraries, schedules, and programs are also useful to verify the number of days of your trip.  It is also important to be practical when deducting travel expenses.  No deduction is allowed for meals/entertainment and lodging expenses that are “lavish or extravagant,” such as renting a Lamborghini or staying at the Ritz-Carlton, as those may not be ordinary and necessary expenses when traveling for business. 

Please call our office if you have any questions regarding how a business trip/vacation will affect your taxes. 

John Wojcik
Senior Tax Accountant

 

 

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