With summer now in full swing, the itch for some vacation time is surely getting stronger. For those who are in need of a few days of rest and relaxation and don’t mind combining work with play, the IRS offers a helping hand, but only to those who follow the rules.
In 2002, the IRS ruled that it “will not assert that any taxpayer has understated his federal tax liability by reason of the receipt or personal use of frequent flier miles or other in-kind promotional benefits attributable to the taxpayer’s business or official travel.”
Essentially, the IRS has no problem with business owners deducting legitimate expenses; such as travel expenses that typically include hotels, meals, entertainment and round-trip travel to meet with existing or potential out-of-town clients. You can write off these expenses as long as the travel benefits or advances your business.
Herein lies the loophole, if you tack on your vacation days at the beginning or end of a business trip, you are still able to deduct travel costs as legitimate expenses. However, be sure that you don’t extend your personal stay too long.
In order to deduct your transportation costs when combining business with vacation, your trip must primarily be for business. You do get to count your travel days as business, but carefully calculate the overall work-to-pleasure ratio and remember that accurate documentation (receipts, ticket stubs, etc.) will help you substantiate your legitimate business travel claims in the event an IRS auditor asks you some questions about your expenses.
So keep this in mind as you plan your next business trip and reward yourself with a few days in the sun.
JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.