How to determine whether the costs of your next trip are tax deductible.
If you're lucky enough to get away this season, consider making vacation plans that will enable you to deduct some of your travel expenses. The only way to do this is to include certain activities in your trip.
Combine business with pleasure. Take a meeting for business in a distant location and all of your airfare is a deductible business expense even though you spend some time on your personal activities. As long as the primary purpose of the trip is business within the United States, transportation and lodging costs and 50 percent of meal expenses on business days can be written off. If you drive instead of fly, you can deduct 56.5 cents per mile, plus parking and tolls.
However, there's no red line for determining whether the primary reason for your trip is for business or pleasure. Clearly, if you spend more days on business than personal activities, it demonstrates a business need for the travel.
The key to nailing down a deduction for business travel is good record keeping. Be sure to carefully follow the rules outlined on IRS.gov so that if your return is questioned, you can back up your claims. Consider using an app like Expensify to keep track of your business-related travel expenses.
If your significant other accompanies you, there may be little or no added expense (other than the cost of meals). The cost of a hotel room is typically the same for one or two people. And if you drive your car or use frequent flier miles. the travel costs are covered.
But don't expect to turn a sightseeing trip into deductible travel by claiming it's research for a book you might write someday – the IRS won't buy it. Similarly, you can't deduct travel costs for attending an investment seminar.
Note: When it comes to traveling abroad, different rules determine whether some or all of your airfare is deductible.
Learn something. Enrolling in a business-related seminar or continuing education program while traveling can be a tax-deductible way
to learn something and unwind. As long as the course relates to your job skills, you can deduct your travel costs and the cost of the education. Again, keep careful records and be sure to sign in for the classes you take.
Lend a hand. If you do volunteer work away from home, your expenses can be deducted as an unreimbursed charitable contribution as long as you itemize your deductions. You must be able to show there's no significant element of pleasure, recreation or vacation in the travel. Spending a few hours working on an archeological dig may not suffice to make travel costs deductible if the balance of the day is devoted to vacation activities. Meanwhile, participating in a Habitat for Humanity volunteer program, for example, may entitle you to deduct your out-of-pocket expenses. If you drive to the location of your charitable work, you can deduct car expenses at the rate of 14 cents per mile, plus parking and tolls.
Get healthy. Costs for maintaining or improving general good health are not deductible, but if you suffer from a certain medical condition like obesity, a stay at a health spa for the purpose of losing weight may be a deductible medical expense. Be sure your doctor advises the treatments are for a medical condition. If you drive to the spa, deduct car expenses at the rate of 24 cents per mile, plus parking and tolls. Only total medical expenses in excess of 10 percent of your adjusted gross income (7.5 percent if you're 65 or older) are deductible, and you must itemize.
Final thoughts. Expedia.com, Priceline.com and Kayak.com may help you find good travel rates, but they can't determine for you whether the costs are tax deductible. Talk with your tax adviser to find out whether you can use any of these tax breaks to shift some of the financial burden of your summer vacation to Uncle Sam.
Barbara Weltman is an attorney, advocate for small businesses and entrepreneurs and the publisher of Idea of the Day and the monthly e-newsletter “Big Ideas for Small Business” at www.barbaraweltman.com. You can follow her on Twitter @BarbaraWeltman.