Is Your Working Vacation Tax Deductible?

August 03, 2017 : Eli Colmenero

Would it not be nice to take a fantastic trip to a big city with endless things to do, and have the IRS let you take a  tax deduction for it? In fact, with careful planning and detailed record keeping, the “bizcation” dream could easily be made a reality.

If your trip is primarily for business reasons and the stay is long enough to require sleep to continue business activities, transportation expenses are generally fully deductible. On the days where you conduct business, you are able to deduct 50%  of your business-related food and entertainment costs and fully deduct other ordinary and reasonable expense incurred to do your business — i.e. lodging, taxis, rental cars, etc.

Planning Your Work Trip Is Key

The key to maximizing the business travel deduction is to plan meetings wisely to schedule in some “me” time to do some sightseeing. Travel days count as business days. Weekends and holidays falling between business days also count as business days. So if you fly in early on Thursday to get a lower airfare or another common-sense reason not merely to extend your stay for personal purposes, you have a fully deductible business day to enjoy a nice city. A work meeting on Friday and another on Monday would mean that the weekend nights are business days for purposes of deducting lodging and meals. Staying longer than the work days will not allow additional deductions for lodgings or meals for those personal days, but the transportation cost to the city would still be fully deductible.

With Working Vacations, The Proof is Always in the Pudding

It’s very important that you substantiate the business justification for deducting any expense on your taxes. However, travel and entertainment deductions are often abused and closely scrutinized by the IRS. You should retain any and all documentation that provides insight into the business activity you conduct while on your trip. Receipts are just the bare minimum here — keep itineraries, meeting agendas, and the like. If you have a smart phone, there are many applications that make it easy and simple to keep detailed information on your phone while on the go.

Bringing the Family Along

If you want to bring your significant other or maybe even your kids, you have to do a little extra planning. The key here is that you are only able to deduct expenses that only you would deduct if you traveled alone. Only your airfare is deductible, you may not deduct the travel costs of family. However, if you drive, the expenses associated with that drive are deducted because the expenses would be the same if you did not have a car full of family. Additionally, only your meals and business entertainment and those of business associates are eligible for the fifty percent deduction.

The bottom line is that you must be reasonable when claiming travel and entertainment deductions and keep meticulous records. If contested, you should be able to show that your “bizcation” remained primarily for business purposes and did not co-mingle personal expenses with deductible business expenses.

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Eli Colmenero

Eli Colmenero

The Tax Institute, H&R Block

Eli is a tax research analyst specializing in real property as well as oil, gas and natural resources. He attends the University of Missouri-Kansas City School of Law.

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