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TAX TALK: How You Can Partially Deduct a Family Vacation as a Business Expense

Hal Zemel, CPA, J.D., LL.M. 06.13.2016 | TAX TALK

If you are planning on turning a business trip into a family vacation, you may be able to deduct a portion of the costs as business expenses.

Reasonable and necessary
Generally, you may deduct travel expenses (or exclude from your taxable income if your employer is paying the expenses or reimbursing you through an accountable plan) if the primary purpose of your trip is business. Reasonable and necessary travel expenses generally include:

  • Air, taxi and rail fares,
  • Baggage handling,
  • Car use or rental,
  • Lodging,
  • Meals, and
  • Tips.

Expenses associated with taking extra days for sightseeing, relaxation or other personal activities generally aren’t deductible. Nor is the cost of your spouse or children traveling with you, unless you can adequately show that their presence on the trip has a bona fide business purpose (incidental services are not sufficient).

Business vs. pleasure
Determining whether a trip is related primarily to business depends on the facts and circumstances of each trip. The amount of time spent during the trip on personal activities compared to time spent directly on your business activities is an important factor. Some personal days may be treated as business days.

For example you may have to attend business meetings on Thursday, Friday and Monday and the travel location is too far away to come home for the weekend. Because you must remain in the location for business reasons, the weekend days should be treated as business days for which the expenses are deductible (subject to the 50% meals limitation).  

You also may be able to deduct certain expenses on personal days if tacking the days onto your trip reduces the overall cost. For example, if the reduced cost of airfare for a Saturday night stay over is more than the additional costs of meals and lodging for the Saturday night stay over, you may be able to deduct the costs of the Saturday night stay over.

Expenses incurred while at a destination which are property allocable to your business are deductible even though the travel expenses to and from the destination are nondeductible personal travel expenses (not primarily a business trip). Therefore, during your trip, it’s critical to carefully document your business vs. personal expenses. Also keep in mind that special limitations apply to foreign travel, luxury water travel and certain convention expenses.

Maximize your tax savings
For more information on how to maximize your tax savings when combining business travel with a vacation, please contact me at HZemel@berdonllp.com or your Berdon advisor.  In some cases you may be able to deduct expenses that you might not think would be deductible.

Hal Zemel, a Tax Principal at Berdon LLP, New York Accountants, has more than 20 years in public accounting and advises businesses in the real estate, service, and manufacturing sectors.