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Mixing Business With Personal Travel Expenses

The general rule is that business travel expense deductions are only available to business owners, but don't count yourself out of those deductions just yet.   Let's explore the ins and outs of the business travel deductions to ensure you make the most of every business trip.

To start out with, the IRS provides details on business travel tax deductions in IRS publication 463, and the the rules allow a variety of travel expenses to be deducted, including:

  • Airplane, train, bus, or car travel between your home and business destinations
  • Transportation costs like taxi fares from airports to hotels
  • Shipping of baggage and business materials
  • Use of a personal car for business purposes
  • Lodging and meals (subject to the 50% rule for meals)
  • Dry cleaning, laundry, business calls, and tips related to these expenses
  • Other similar expenses deemed ordinary and necessary

As with all tax deductions, maintaining detailed records of your expenses is key, including bank and credit card statements and receipts which is vital to substantiate your deduction during an audit. (And remember that statements do not by themselves constitute proof.  You need to keep the receipts to show why it is a business expense.)

How to define a business trip

A trip is considered business related if its primary purpose is business, which is self-explanatory.   And it is critical to document the business reasons for your travel, particularly when combining personal activities or family time. The IRS audit guides provide examples of good documentation, including keeping minutes of meetings and maintaining schedules of conferences attended.

But what if you bring your family with you? Unfortunately, travel expenses for family members are generally non-deductible unless they’re employees of your business and their travel has a business purpose. If sharing a hotel room, the cost remains fully deductible as there’s no additional expense.

Mixing business together with pleasure

When you combine business with leisure, like attending a conference in Orlando, you must separate the expenses. The travel costs for the conference are deductible, but personal activities, like a day at Universal Studios, are not.

Non-business (investment) owners

If you don’t own a business, your tax deduction opportunities for travel are limited.  One example of these travel deductions is to invest in rental properties at popular destinations. Travel expenses for managing these properties, like visiting a rental condo in Orlando for maintenance check-ins or association meetings, are typically deductible.

Of course, the myriad of tax laws can be complex and vary by individual situation and individual states.  This is one area that consulting a tax professional for advice tailored to your specific circumstances, especially for complex travel deduction scenarios could pay for itself.

Remember, every journey offers opportunities, not just for business growth but also for tax savings. Plan your trips wisely, document meticulously, and consult professionals as needed to fully leverage the tax benefits of business travel.