By A.J. Gross
The holidays are great for spending time with family and friends. The holidays may also mean travelling long distances to meet with family and friends. Business owners and self-employed individuals may take advantage of this opportunity to deduct the cost of travel as a business expense. I recommend understanding the rules for business travel before taking the business deduction.
You are planning a trip to Florida for 7 days. You plan to spend 3 days with family and friends. 2 days will be spent at Disney World. Finally, there will be 2 days of traveling to and from Florida. You were told that if you schedule a business meeting or two then you can write-off the cost of the trip. For example, schedule a lunch with one of your friends and talk about business the entire lunch. Not only are you going to enjoy a fun vacation in Florida, you will be able to write-off the trip as well. What a deal! This is a good deal unless you are audited by the IRS. The IRS will disallow this deduction and potentially charge a 20% accuracy penalty.
Before you write-off a trip to Florida, you must ask yourself a question. Is the trip to Florida primarily for business or personal reasons? If your plan is to spend 7 days in Florida and the only business activity are two business lunches, then the primary reason for the trip is for personal reasons. You are not allowed a deduction for travel if the primary reason for the trip is for personal reasons. However, you may be able to write-off the business portion of the trip. You did schedule two business lunches. The business lunch may be deductible as a meal expense.
You may be able to write-off travel if the primary reason for the trip is business related. The 7 day trip to Florida consists of spending 4 days attending a business conference, 2 days of travel and 1 day going to Disney World. The cost of traveling and all expenses associated with the business conference may be deductible. The costs associated with going to Disney World are not deductible.
The information provided in this article is related to travel within the United States. There are different tax rules for traveling outside the United States. For more information on business travel, you can read IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses.
A.J. Gross, C.P.A., E.A. is President of ALG Tax Solutions. A.J. Gross can be contacted at AJGross@algtaxsolutions.com or www.algtaxsolutions.com.
This article was printed in the November 1, 2015 - November 14, 2015 edition.