Is This a Business Trip?
Was that trip really a business trip? Read the article below to learn more about what constitutes a business trip.
Requirements to Substantiate a Deduction
In order to substantiate the deduction, have the following on hand:
- All lodging expenditures require a receipt
- All non-lodging expenditures over $75 require a receipt
- Keep a contemporaneous tax diary in which you record explanations of all expenditures including:
- Schedules of amounts spent
- Dates of departure and return
- Number of days spent doing business
- Details of places traveled
- Explanation of business reason for travel
- Most taxpayers will benefit from retaining all receipts, even those under $75, since receipts will remove doubt.
What Makes Travel Deductible?
Transportation expenses include the cost of getting to and from your destination. Transportation costs relative to a business trip are deductible whether or not you stay overnight.
Other expenses incurred during the course of a business trip, such as meals and lodging, are deductible when you are required to be away from home overnight (or long enough to require sleep).
Meals required as a result of overnight travel are deductible, but only at 50% of the actual cost of the meals.
What is a Business Day for Travel Purposes?
A business day includes the following:
- A day when substantial business activities are conducted
- A day spent traveling to a business destination in a reasonably direct route
- A weekend or holiday that is sandwiched by business days
- A weekend stay-over required to save transportation costs
What is a Business Trip?
For domestic travel, a business trip is one for which business is the primary purpose. Time spent conducting business is an important factor and when 50% or more of the days are deemed to be business days, the taxpayer can be reasonably assured that the trip has a business purpose. Transportation costs are totally deductible for a business trip and totally non-deductible for a personal trip (except for specific costs related directly to a business meeting).
For international travel of less than a week, the rules are basically the same. For international travel of more than a week, 75% of the days must be spent on business, or the costs must be allocated to business and personal based on the number of days attributable to each.
Traveling with your family
No deduction is allowed for travel expenses with respect to a spouse or dependent, unless: a) the spouse or dependent is an employee of the taxpayer; b) the travel is for a bona fide business purpose; and c) the expense would otherwise be deductible.
If a family member is traveling with you and their travel is not deductible, then your deductible cost is the amount that would have been spent had you been traveling alone. For example, automobile travel would be deductible in full since the second passenger does not add cost. If a motel costs $75 for a single and $90 for a double, then $15 would not be deductible.
Opportunities to combine pleasure trips with business trips
- Out of town seminars
- Job hunting
- Repairs to rental property
- Management of rental property
- Meetings with business colleagues and business prospects