For many small business owners and entrepreneurs, taking time off between Christmas and New Year’s Day is an annual tradition. With the holidays quickly approaching, you may already be planning to take a much-needed break.
If your plans include a trip that mixes business with pleasure, you may be surprised to learn that your year-end getaway could be considered a business expense.
Of course, the IRS has definitive (and somewhat confusing) rules about what you can and can’t deduct when you combine a vacation with business. But don’t let that stop you from taking advantage of the potential deductions available for small business travel. Here are some tips:
Make sure the majority of your days are business days.
The IRS says you can deduct transportation expenses if business is the primary purpose of the trip. Make sure the majority of days are dedicated to business activities; otherwise, you cannot make any transportation deductions.
Book your business appointments before you go.
Simply handing out business cards is not enough to make a trip deductible. In order to establish the “prior set business purpose” required by the IRS, you must have at least one business appointment scheduled before you leave for your trip.
Your travel must be business travel.
The IRS states that travel expenses are 100% deductible as long as 1) your trip is business related; 2) you are traveling away from your regular place of business longer than an ordinary day’s work; and 3) you need to sleep or rest to meet the demands of your work while away from home. If you have a good reason for sleeping at your destination, you could live a couple of miles down the road and still be on business travel status.
Deduct your on-the-road-expenses for each day you’re away.
You can deduct 100% of lodging, tips and car rentals, as well as 50% of your food costs, for every day you are on business travel. And except for lodging, the IRS does not require receipts for travel expenses under $75 per expense.
Bracket your weekends with business days.
If you have a business day on Friday and another one on Monday, you can deduct all of your on-the-road expenses during the weekend.
Be sure to check in with your tax professional beforehand to be on the safe side. And enjoy your trip!
