Your next vacation may qualify for tax deductions, depending on what you do and how you work. It all depends on where and why you take a vacation, and it has to be done very carefully, but you can do it. (Just be sure to check with your accountant before you race to the beach with your laptop.)
We’ve written in the past about bleisure travel, and how it’s a great way to tack a small vacation onto the beginning or end of a business trip.
You can do some sightseeing in a city you’ve always wanted to explore, but might not normally get to. Bleisure travel means taking a couple days off, or scheduling your business trip over the weekend, and paying for your added hotel and food costs yourself.
But what we’re talking about this time is a little different. Unlike bleisure travel, you’re tacking a little bit of work onto your vacation, not the other way around.
Before we say any more, here are two warnings:
- This is not professional tax advice. Talk with an accountant to make sure you know exactly what is deductible and isn’t. And be sure to save the appropriate receipts.
- You won’t be able to deduct your whole trip, so don’t plan an extravagant trip thinking you can write the whole thing off.
1. Part of your trip must be related to work.
For example, attending a conference or a business meeting sometime before, during, or after your vacation. For example, a salesperson could attend a 1-day sales conference in Orlando and then spend a week there on vacation. A professional writer could research a particular city for her next novel. A building contractor could spend a week repairing and building houses for his church’s missions trip. Even a high school theater teacher could go to Chicago or New York to watch professional plays as part of their professional development.
Basically, if you are doing an activity that helps improve your work skills, helps your business, or expands your knowledge, that can be tax-deductible.
Taking a vacation closely related to your work also qualifies. This is sometimes referred to as a busman’s holiday, which is a vacation spent following or practicing one’s usual occupation.
In the days of bus conductors and bus drivers, a busman might spend a day off riding on a pal’s bus or even take the bus to get to his holiday, hence the name.
So a travel agent could take a cruise in order to “test out” a new cruise line for their clients. A historian could attend historic reenactments. Or a coffee shop owner could go to Italy and visit several espresso bars. Tax deductions can be fun!
2. Schedule your business appointments before vacation starts.According to Quickbooks,
. . .you must have at least one business-related appointment set up before you leave. It’s not possible to deduct any expenses if you leave with the idea that once you arrive, you will meet contacts and conduct business on the fly. The IRS expects you to establish a “prior set business purpose,” and keep a copy of your correspondence and books showing the scheduled appointments.
So, schedule all meetings and events before your departure date. Put them on your calendar and save any emails related to scheduling. This way, you can show the meeting was set before you ever left.
3. Traveling on a weekday can count as business travel.
If you’re attending a conference or taking business meetings, travel during the week, there and back. If your trip is used primarily for business (that is, you’re not taking a two-week vacation with one day of business meetings), you can deduct your transportation costs, whether it’s airfare or mileage. You can also deduct expenses on business days, like lodging, taxis/ride-sharing, and your food.
(The normal tax deduction on food is 50%, but the Treasury Department and the IRS have added a temporary exception to the 50% limit.
4. Keep track of everything.
According to the IRS, you don’t need to keep receipts for anything under $75, but you do need to keep track of when everything happened.
Any work-related events or meetings should be tracked in a journal or in your electronic calendar. Keep track of all appointments, travel times, meals, conference sessions, and so on. This way, you can show that you’ve made legitimate charges and aren’t trying to pull a fast one.
You can also keep electronic copies of your receipt, such as taking photos and storing them in a cloud-based folder like Google Drive, Microsoft OneDrive, or Evernote.
5. You can only deduct your portion of the business expenses, not your family’s.
So that means your plane ticket is deductible, but not the others in your family. But if you drive, the mileage is deductible for you, but everyone else got to come along for the ride. Also, remember, you can only take a tax deduction, not an expense. So if your employer normally reimburses you for gas, you can’t also take a deduction on it.
It’s the same with food (only your meal cost is deductible) or your hotel room (if you need two, only yours is deductible). And you can’t deduct any entertainment expenses unless that’s your actual job, and even then, only your expenses are deductible.
While you won’t be able to cover your entire vacation with tax deductions, you can at least reduce the cost a little bit. Even if it’s just a few hundred dollars, it’s always worth trying to save where you can. Just remember to speak to your accountant first, so you know whether that 3-week Alaskan cruise is actually covered. (It isn’t.)
Do you combine your vacation and business travel? Have you ever tried getting tax deductions for your vacation? Tell us about it on our Facebook page, or on our Twitter stream. You can also find us on our Instagram page at @TravelproIntl.