SMALLBIZ BUILDER July 2012 PADGETT BUSINESS SERVICES® Vol. 10, No. 7
Part 3 of 3
Tax Deductible Vacations:
If the trip doesn't involve the actual conduct of business but is for the purpose of attending a convention, seminar, etc., IRS checks the nature of the meetings carefully to make sure they are not vacations in disguise.
Be careful to save all material helpful in establishing the business nature of this travel. Meticulous recordkeeping and thorough planning are necessary. Transportation Costs. The cost of traveling within the US is 100% deductible as long as the primary purpose for the trip is business. In contrast, no travel deductions are allowed if the main reason for a trip is personal.
Meals and Lodging. Once at your destination, expenses for such items as lodging, hotel tips, local cab fares, and 50% of meals are deductible when related to business days. However, these same types of expenses aren’t deductible for non -business days. Additionally, no deduction will
be allowed for meals or lodging to the extent the expense is “lavish or extravagant.” Although this term isn't defined in the tax rules, it has been interpreted to mean “unreasonable.”
Personal entertainment costs on the trip aren't deductible (such as a sightseeing tour), regardless of the day on which they fall. But business-related costs such as dry-cleaning, phone calls, and computer rentals are.
Taking Your Spouse. The rules on deducting the costs for a spouse accompanying you on a business trip are very restrictive. No deduction is allowed unless your spouse is an employee of yours or your company and his or her travel is also for a business purpose. This means you can't deduct the travel costs of a spouse, even if his or her presence has a bona fide business purpose, unless your spouse is a bona fide employee of your business.
If your spouse is your employee, and if his or her presence on the trip serves a bona fide business purpose, then you can deduct his or her travel costs. Merely having your spouse perform some incidental business service - such as typing up notes from a meeting - isn't enough to establish a business purpose. In general, it isn't sufficient for your spouse’s presence to be “helpful” to your business pursuits—it must be “necessary.”
If your spouse’s travel is not deductible, you can still deduct your own travel and meals; however, a shared cost - as with lodging - is deductible only at the single rate.
Not sure whether your travel expenses will be deductible? Take a few minutes to give our office a call.
Need more information: Craig E Waldron, EA
Richard Lamoreaux, CPA
9500 S 500 W, Suite 206, Sandy, UT
Send Mail to: PO Box 2468, Sandy, UT 84091
Voice (801) 565-9878
Voice (801) 565-9878
FAX (877) 313-1879
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