Mixing business with pleasure while traveling this summer? Some of it might be tax deductible, but the rules are tricky. Your ability to deduct travel expenses depends on these six factors:
- Where you go. The IRS treats deductible travel expenses within the U.S. differently than travel expenses incurred internationally. When traveling abroad, for instance, individuals may be able to fully deduct the trip even if it includes personal time, as long as the trip meets specific criteria.
- How you travel. Travel by ocean liner, cruise ship, or another form of luxury water transportation for business purposes (like for a conference or a board meeting) includes a daily limit on the amount that can be deducted.
- What you do. The IRS pays attention to the main reason you’re traveling – is it primarily for business or for personal reasons? For international travel lasting more than one week, you must spend less than 25% of your total time on nonbusiness activities, for example.
- Who you are. How you deduct unreimbursed travel costs and what you can deduct depends on whether you’re self-employed or the owner of a pass-through entity versus an employee or corporate business owner.
- What your expenses are. Recent tax changes have altered many itineraries. The 50% limit on deducting non-reimbursable meals, for example, applies while traveling as does the new rule deeming entertainment expenses as non-deductible.
- What you organize with employees. If you’re a business owner concerned about deductions for covering employee travel expenses that aren’t all business, the rules have changed. Everything from transportation fringe benefits to corporate retreat expenses should be reevaluated.
Before you book a little fun with your business travel (or vice versa), find out how mixing the two will affect your tax deductions. Take a look at what the IRS has to say and feel free to contact us.
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