As the summer break begins to wane and we look at our August calendars approaching school and Labor Day, here's a quick look at taxes and business travel expenses when work is involved. In other words, a summer work trip that may also simultaneously double as a vacation in some way, shape or form. As always, your set of facts and circumstances will come into play on things, but the IRS provides plenty of information on the subject so you can deduct (per eligibility) your expenses appropriately.
First, travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. You cannot deduct expenses that are lavish or extravagant or that are for personal purposes. From here and copying from IRS Publication 463, Travel, Entertainment, Gift and Car Expenses, jump to the part that offers a bit more on business trips and personal trips:
"Trip Primarily for Business. You can deduct all of your travel expenses if your trip was entirely business related. If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct only your business-related travel expenses. These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination."
On the other hand:
"Trip Primarily for Personal Reasons - If your trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. However, you can deduct any expenses you have while at your destination that are directly related to your business. A trip to a resort or on a cruise ship may be a vacation even if the promoter advertises that it is primarily for business. The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip."
There are various other things to think about such as your tax home, determining your place of business, type of travel expenses incurred, expenses reimbursed or not, are you an employee or self-employed and so much more. So what are some expenses that may be deductible, you ask? Here from IRS Tax Topic 511 Business Travel Expenses:
Deductible travel expenses while away from home include, but are not limited to, the costs of:
- Travel by airplane, train, bus, or car between your home and your business destination. (If you are provided with a ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero)
- Using your car while at your business destination,
- Fares for taxis or other types of transportation between the airport or train station and your hotel, the hotel and the work location, and from one customer to another, or from one place of business to another
- Meals and lodging
- Tips you pay for services related to any of these expenses.
- Dry cleaning and laundry.
- Business calls while on your business trip (This includes business communications by fax machine or other communication devices)
- Other similar ordinary and necessary expenses related to your business travel (These expenses might include transportation to and from a business meal, public stenographer's fees, computer rental fees, and operating and maintaining a house trailer)
Instead of keeping records of your meal expenses and deducting the actual cost, you can generally use a standard meal allowance, which varies depending on where you travel. The deduction for business meals is generally limited to 50 percent of the unreimbursed cost.
So, as you can see, there is a lot to think about. To that end, here are more resources available at IRS.gov:
- IRS Tax Topic 305 - Recordkeeping
- IRS Publication 583 - Starting a Business and Keeping Records
- IRS Publication 535 - Business Expenses
- Deducting Travel, Entertainment and Gift Expenses - IRS Fact Sheet
