With summertime in full swing, you may be considering some much-needed time away from home (and we don’t blame ya). Whatever your travel plans, you might want to consider whether or not you’ll be able to take tax breaks for your time off. Believe it or not, there’s a chance that you’ll be able to take some tax deductions for that much-needed vacation.
Mix Business and Pleasure
The best way to maximize your tax savings when you’re on the road is to incorporate your job into your travel plans; or, perhaps more accurately, squeeze pleasure time in between work activities. Your plane fare, lodging, and even meals can be written off if the expenses are made under working conditions. So, just because you have to meet with clients doesn’t mean you can’t enjoy a dip in the hotel pool.
Passive vs. Active Business Trips
There are two types of common work-related trips: passive and active. A passive trip is educational in nature, such as a software training or an industry conference. An active venture involves actual work functions, like business meetings or factory inspections. Expenses for both passive and active trips may be deducted on your taxes – but just make sure that you’re actually paying the bill for these items. In other words, don’t try to write off expenses that your company is covering.
The Acceptable and the Unsuitable
The IRS will allow some tax deductions while rejecting others. Examples of acceptable tax deductions while you’re out of town for work include:
- Your rental car
- Luggage fees
- Hotel wifi service
If you’re combining your vacation with work, you can still take the above deductions if they’re for work activities. What you don’t want to do is attempt to write off expenses for your friend, companion or relative as work-related (unless he or she is a legitimate co-worker). Here are some examples of what not to include:
- Mom’s pedicure while you’re meeting with potential clients
- The kids’ theme park tickets while you’re on conference calls
- Family dinner after your seminar
If your family is tagging along and sharing your hotel room while you’re on the clock, that’s completely acceptable, but don’t try writing off obvious leisure and non-work items. Most importantly, don’t forget to keep receipts for every individual item you write off. While you want to take every deduction you can, you also want to avoid making a fatal error on your return.
How to Play It Smart
It’s a good idea to ask for help when you’re writing off vacation expenses. If the IRS sees anything they perceive as questionable, you might be in for an uncomfortable discussion about your return. A licensed tax professional can help you prevent any IRS issues from mistaken deductions or resolve an existing tax issue.