A Family Trip That is Deductible? It Can be Done

You keep your business finances and your personal finances completely separate, don’t you? Of course you do, because that is the only way to keep on top of things, and to muddle them up can lead to all sorts of problems. But sometimes there is a way to take advantage of business tax breaks that will also benefit your family, perhaps on a vacation.

A Word of Warning

Nobody wants a visit from the Internal Revenue Service, so be absolutely certain that everything is completely above board when combining business with pleasure. It’s always a good idea to run your plans past your accountant. While you are away, keep all your receipts and records and file them on your return. Technically, you don’t need to keep receipts for transportation items under $75 but you do need all accommodation receipts, whatever the amount, so it is easiest to keep everything and file it all together.

What is Deductible?

To be tax deductible, your expenses must be “ordinary and necessary business-related expenses.” That means that:

• the primary purpose of your travel is for business (at least 50% of your working days must be for business purposes)

• the expenses you incur are ones that would normally be involved in the course of your business

• the business activities will actually benefit your business (your business plans must be made in advance, with appointments scheduled)

You can claim for your necessary travel costs, including transportation, accommodation and 50% of meals.

What is Not Deductible?

You cannot claim for any expenses that arise out of having your family with you, unless your spouse, for instance, is an employee or director whose presence is required on this particular trip.

Suppose you are flying to Baltimore and are staying at the Marriott Inner Harbor Hotel.

• You cannot claim the full cost of the room if it is bigger than the one you would normally book for yourself. If you can fit your family into the same space, then you would still be able to claim.

• You cannot claim for your family’s plane tickets. If you need a bigger taxi than normal to get from the airport to the hotel, you can only claim for what it would have cost if you were alone.

• You cannot claim for any travel that was not required for your business needs. If you make a diversion to visit relatives on the way home from Baltimore, for instance, the extra cost is not deductible.

• You cannot claim for any living expenses incurred on non-working days (weekends count as working days for this purpose) if, for instance, you take a day off to explore the city.

Bottom Line

There are certainly ways that you can enjoy some benefits from your business travel by combining it with a short family vacation. If you stick with the rules and are scrupulous with your record-keeping, you can profitably and legally enjoy time with the family in some great locations.