When you mix some pleasure with business while away from home on business, the deductions are fairly generous.
For example, you can deduct all of the round-trip transportation costs as long as the trip was done primarily for business reasons. The cost of lodging plus 50 percent of the meals for days doing business is deductible. If Joe, a self employed business owner, flies to a business location for five days of business meetings and he also takes three days more for personal pleasure, the full airline costs are deductible.
If Joe takes his spouse or a companion with him on that trip, he gets another break even if the spouse or companion is not along for a bona fide business reason. If his hotel room costs $149 per night for a single person and it costs $200 per night for double occupancy, he can deduct $149, not 50 percent of the $200.
Also, when Joe travels out of town on business and rents car, the entire cost of the rental car is deductible, even if his spouse or companion accompanies him for non-business purposes. The cost would be the same, whether or not someone went with him.
Sometimes what seems like a personal, non-business day is treated as a business day.
Suppose Joe does an away-from-home business trip that straddles a weekend. The weekend days (Saturday and Sunday) are counted and treated as business days because he remains at the location for business reasons. He has business meetings on Friday and Monday, for example. The expenses are deductible subject to other tax rules (50 percent of meals, 100 percent for other expenses).
The facts and circumstances determine if the trip is done primarily for business. However, the way a traveler splits the time between business and personal pursuits is an important factor.
What if Mary works in Reno and travels to Denver on business and stops in Laramie to visit her parents? She travels nine days away from home and spends $2,200 for travel, meals, lodging and other travel expenses. But if she had not stopped in Laramie, her trip would have cost only $1,900, she can deduct $1,900 for her trip, including the cost of a round-trip transportation to and from Denver. The 50 percent deduction limit still applies on her meals while in business status. The personal part of the trip does not need to occur at the business destination.
The main bother is to keep complete records as time goes by for all travel expenses. Also it is important for Mary to keep records of what the round-trip transportation costs would have been if she had not done the stop for personal reasons.
It is mainly a “Who? Where? How much cost? How is it business related?” kind of records that are needed. IRS seems to look closely at travel expenses because in the past, many travelers did not observe the various allocations between business and personal costs.
Did you hear? “When opportunity knocks, some people are in the backyard looking for four leaf clovers.” — Polish Proverb
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.