Running your own business is time consuming and doesn’t leave much time for a real vacation – which, if you’re anything like me, you desperately need! The only time you travel is when you’re attending a conference or meeting away from home.
So why not make that next work trip a workcation?
Workcations are quickly becoming the way of the future. With conferences and meetings held around the world, from Las Vegas to Paris, it’s easy to see why people add a few personal days to their business trips.
Here are some simple rules to make sure the “work” portion of your workcation is tax deductible:
Keep your travel primarily business related.
What does that mean? You need to spend more days working than playing.
What counts as a work day? Great question!
Travel days to and from your destination automatically count as work days, as do weekends between work days. In order for additional days to count, you need to spend the majority of the day working. If you have a noon luncheon with a client and you’re lounging poolside for the rest of the day, it’s not a work day.
Schedule work events prior to leaving for your trip.
The IRS requires that you have a “prior set business purpose.” That means you need to book at least one meeting, conference, or appointment before you embark on your trip.
Make sure the location isn’t be unreasonably far away or exotic. (Darn!)
The IRS takes into account whether there was a similar conference or seminar closer than the one you attended. If you were planning to attend a conference in the Caribbean when you could have attended a similar conference in Dallas, the IRS will disallow the business deduction for the entire trip. Bummer!
Only write off tax deductible items.
- Airfare to and from (or bus far, train fare, etc.)
- Lodging fees (for work days only)
- Seminar and convention costs (only when business related)
- Meals – 50% is the rule whether at home or traveling
- Taxis, subways, buses, etc., to and from the airport, hotel, and any business related meetings or conferences
- Any other “ordinary & necessary” expenses
What’s ordinary and necessary for one business or industry can vary greatly from what’s ordinary and necessary for another industry. For instance, a fashion designer might purchase fabric and notions while traveling, which would be an abnormal expense for many other industries.
Dry cleaning, telephone and internet fees, postage and shipping, and baggage fees are also common business expenses that are tax deductible.
Keep family expenses separate.
If you’re planning to bring your family on workcation, be prepared to keep exceptional records proving what your business expenses were. Your family’s airfare, lodging, and meals are not deductible. If you have a shared hotel room, only expense the amount you would have spent on the room if you were traveling alone.
Keep detailed records.
You don’t need to keep receipts for expenses under $75, with the exception of lodging. However, you still need to keep a detailed record of your expenses, including what you purchased, when you purchased it, and for how much, or it won’t be deductible.