What Is It?
Expenses incurred on business trips where you also vacation are deductible, subject to limitations on the deductibility of all business expenses and subject to the following additional limitations.
Combined Business-Vacation Trips within the United States
If you take a business trip during which you also vacation, you can take allowable deductions for costs as long as the main purpose of the trip is for business. If the main purpose of the trip is personal, you may not deduct any of the costs of the transportation.
Caution: In keeping records of the cost of business trips during which you also vacation, be sure to carefully document why the trip was primarily for business purposes.
Caution: If the trip is for business purposes but you extend your stay or take a side trip for personal purposes, the expenses related to the extended stay or side trip are not deductible.
Example(s): Say you travel from Boston to Miami for a week-long business trip and then decide to stay for an extra three days. You may take allowable expenses for the week in Miami (including your return airfare), but you may not deduct the costs of the extra three days you spent in Miami.
Tip: If you extend your stay over a weekend to take advantage of cheaper airfares, this is considered a business purpose, so you may deduct allowable expenses for the extra days.
Combined Business-Vacation Trips outside the United States
The rules for combined business-vacation trips outside the United States are the same as similar trips within the United States, as long as the following conditions hold true:
- You did not have control over the arrangement of the trip or a personal vacation was not a major consideration in making the trip
- You are not a managing executive of the company, do not have more than a 10 percent stock interest in the company, and/or are not related to your employer
Caution: The fact that you had a say in the timing of the trip does not constitute control over the arrangement of the trip.
Deductibility of Expenses If You Are A Managing Executive, Own More Than A 10 Percent Stock Interest In The Company, And/or Are Related To Your Employer
In these cases, you can deduct allowable costs of combined business-vacation trips outside the United States if:
- The portion of the trip abroad was for less than a week (not counting the day you leave)
- The time abroad lasted more than a week (not counting the day you left but counting the day you returned) but less than 25 percent of your total time was spent on nonbusiness activity
Tip: If the trip abroad lasts for more than a week, if you spend 25 percent or more of your time on nonbusiness activity vacationing, and if you cannot prove that vacationing was not the main purpose of planning the trip, you may allocate your expenses between days spent on business and days spent vacationing and deduct the portion of allowable expenses allocated to the days spent on business. In doing so, you may count the days traveling to and from the destination as business days.
Example(s): Say your office is in Boston and you travel to Montreal on Wednesday to conduct business. You have business meetings scheduled in Montreal all day on Thursday, Friday morning, and on Monday. You return to Boston on Monday. Even though you spend Friday afternoon and all day Saturday and Sunday sightseeing, this time is not counted as time spent on nonbusiness activity, because the portion of the trip abroad was less than one week.
Business Convention Expenses
Because business trips taken to conventions, business seminars, and investment seminars are often held at vacation or resort areas, deducting the costs of attending these is given very close scrutiny by the IRS, especially if you take your wife or other family members with you. Accordingly, be prepared to carefully document that the convention or seminar is closely connected to your business and/or job. The convention need not be specifically related to your job. Rather, attendance at the convention must be shown to benefit your trade or business.
What Expenses Are Deductible?
If you take a business convention trip that is primarily for business purposes, you can deduct all costs for travel to and from the convention, lodging, tips, "display" costs, and meals and entertainment of business clients (subject to specific limitations on meals and entertainment). The Tax Cuts and Jobs Act has eliminated the deduction for the costs of entertaining clients and customers, for amounts paid or incurred after December 31, 2017. Food and beverages provided during entertainment events are not considered entertainment if purchased separately from the event. Taxpayers may still deduct 50% of the expenses for business meals.
Caution: You cannot deduct expenses for sightseeing and personal entertainment when attending a business convention.
Caution: If the only "business-related" portion of a business convention trip is your receiving a videotape that you can review whenever you like, you cannot deduct the costs of the trip.
What If You Cannot Demonstrate Primary Business Purposes?
If you cannot prove the major reason for a business trip was for business purposes or if you attend a business convention as a delegate and cannot show that your attendance was for the purposes of your business (as opposed to your business or professional association), the trip will be considered personal, and you will only be able to deduct expenses for those parts of the trip specifically related to business.
Fraternal Organization Conventions
Trips taken to conventions given by fraternal organizations are not considered to be for business purposes. Accordingly, costs related to these trips are not deductible.
Expenses of a Spouse or Family Member
You cannot deduct costs for a spouse or a family member who accompanies you on a business trip or to a business convention unless he or she is your employee and he or she has a justified business reason for going on the trip (i.e., he or she could have claimed a business travel deduction had he or she gone on the trip by himself or herself).
Tip: You can deduct certain costs related to your spouse's or family member's participation in deductible business-related entertainment.
Expenses of Attending Business Conventions outside the United States
Deductibility of the costs of attending a business convention outside of the United States are subject to the same restrictions set for business vacation trips outside the United States. In addition, if the convention is held outside of the United States or North America, it must be demonstrated that it was reasonable for the convention to be held there.
Caution: For the purposes of business convention cost deductibility, North America is not defined strictly on geographic grounds. Check with the IRS for a list of exactly what locations do qualify as being in North America for this purpose.
Cruise Ship Conventions
The costs of attending a business convention held on a cruise ship cannot be deducted in excess of $2,000 per year. Moreover, amounts less than or equal to $2,000 per year can only be deducted if all the ports of call on the trip are in the United States (or its possessions) and the ship is registered in the United States.
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