How to Take a Tax Deduction for Your Next Vacation

Plan Your Vacation Right and Take a Tax Deduction
Summer’s here and while some are planning staycations, other savvy professionals will combine business and pleasure to cut costs. Plan right, and you can take a healthy deduction come tax time.

Here’s how it works: Convention and business travel expenses are fully deductable, and can include fees, hotels, meals, entertainment and travel to and from the event. And if you can establish a business purpose, your spouse may be deducted also. The catch is that the convention or seminar must relate directly to your profession (read: you cannot deduct trips for investment, financial planning events or annual stockholders meetings if you’re a shareholder).

If traveling stateside, the IRS will allow you a travel cost deduction if the trip is primarily for business. If it’s for pleasure, no expenses can be deducted. So, establish that you have a primary business motive before the trip. Save convention materiel relating to subject matter and the location, or if you’re visiting a client, send an email beforehand confirming what will be discussed.
The key is how much of the trip is spent on business and how much is spent on personal time. Typically, you want to have a five to three ratio, meaning if five days are spent on business and three are spent sightseeing, you can deduct all your travel expenses. Switch that around, and you get no deduction. But even if you spend more personal time on the trip, any expenses you incur that are business related – meals, lodging, incidental expenses – can be deducted.

There’s a reason why so many conventions are held in New York, Las Vegas and Miami. Plan right this year and the IRS may foot part of the bill for you and the family to attend one.

For more information on planning a tax deductable vacation, or other tax planning questions, please contact an associate at Wendroff & Associates at 703-553-1099. Also, please look out for our Online Entrepreneurship Series in Spring of 2009, which will include educational webinars, our online Ask a CPA series and podcasts with leading entrepreneurial minds around the country. The programs will all be free and online.