The summer is starting to wind down and kids are headed back to school…so why is it a great time to call your accountant? To discuss if those family trips you took this summer really are tax deductible.
As with anything, planning ahead for your vacation deductions is always the easiest way to ensure the most savings. But, if you did not plan ahead, your accountant can still help you make sure you are getting the most deductions out of your trips as possible.
The first thing to do is determine the primary reason for your travel – was it business or pleasure? If the primary purpose was business, then all of your transportation costs (plane fare, car rental, etc) can be deducted. If the primary purpose or majority of the time was not business related, then transportation cannot be a deduction, however your “daily living” or “on the road” expenses may be deductible. So, things like meals (at the standard 50%), laundry, lodging, phone calls, computer rentals, etc. could be covered.
A business day can be defined as a day where you spend at least 4 hours on business, a day where you have pre-scheduled an appointment regarding business, or a day that you are traveling to or from your business destination. If you are able to show and document pertinent business activities on a Friday and a Monday, then you may be able to write off the weekend as business as well.
The next step is to separate your expenses between vacation days and business days, since only expenses on business days may be deducted. If you are going to use Actual Expenses, you will need receipts for everything. If you did not keep receipts from your trip, then you might want to speak to your accountant to see if you are eligible to use the IRS’ Per Diem Allowance. Be aware that if you use the Per Diem Allowance once, you must use it for all your trips.
Spousal and family expenses cannot be written off unless they are a partner or employee of the business. Your lodging is covered, but the difference for a larger room upgrade or incidental costs (such as cot rentals) may not be.
The most important thing for writing off a business trip is to document everything related to business. Make a Trip Folder with documents including: any emails or correspondence regarding setting up business appointments for the trip, calendars with appointments, notes or photos from meetings attended, conference materials and sessions attended, any follow up business activities.
So, if you took a vacation this summer where work was involved, or are planning to take a trip, check in with your accountant to see the best ways to document and save.