How To Write Off Your Vacation the Right Way Even With Personal Activities
Where are you traveling this summer?
Maybe to Las Vegas to see a show?
Wherever you are planning on going or wanting to go, I want to show you how to make your entire trip a tax write off, even though you’ll be having fun and enjoying your vacation time.
This strategy is awesome because you’re getting the two birds with one stone affect. The best of both worlds.
You’re already going on vacation, do a few things right and you’ll get to deduct the whole trip. Remember we are you tax guides to help you live a better life and keep a lot more money in your pockets. If you start getting in the habit of acting like a business then I guarantee you’ll start keeping thousands more dollars every year.
So, for a tax deduction to be legit it needs to fall under the deduction test:
Are Your Tax Deductions Bullet Proof?
The IRS says for a tax write off to be deductible it must be ordinary and necessary. Let’s start with ordinary:
Ordinary– Expenses that are common and acceptable in your trade of business.
You could probably spit out a quick list of items that are common in your industry. That is what this prong is meaning.
Necessary-Expenses that are helpful and appropriate.
Again, think of some of your expenses that help you run your business that would fall into this side of the test. This is the simplest test you can use to understand if your deductions will pass the audit test.
Now to get a little more specific into the traveling expenses and what needs to happen in order to make those legit I’ll give a few more rules that you need to be aware of.
There are two types of travel expenses when you are actually traveling.
Living Expenses-These are the types of cost that sound just like that. The ones that keep you alive, like food and shelter
Transportation Expenses-These types would be your transportation like airfare, taxi, etc..
I know were getting a little nerdy here with all the definitions, but I guarantee you if you follow these key elements, understand a little more on the backend then you’ll be much more confident and creative with your deductions-which will allow you to keep much more money year after year!
The last verbiage I need to tell you about is your travel status and what is a business day. The travel status is simple, when you’re sleeping away from home for business you’re in travel status and the deductions are legit. The business day goes like this. If you conduct business and are meeting with someone for a business reason, then whole day is a business day regardless of the time spent.
Deduct or Not?
Now we have our baseline on how we justify tax deductions. So let’s talk “vacation” and traveling. I want to do something different this article and play a game.
I’ll write out a scenario and then you will have to decide if the trip is a Deductible or Nondeductible travel expense.
I’ll do two scenarios and hopefully ingrain the ideas and how you need to plan out your vacation trips this summer. Plan these right and enjoy fun vacations while keeping more money in your pocket.
- SCENARIO #1) You own a CrossFit gym and decide you’re going to Vegas to see a show. It’s Celine Dion and you just love her heart stopping performances. I mean you can’t pass this up. You head down for a few days and plan on doing a few more things like going out to dinner with your high school friends and maybe go golfing or have a spa day. You get to Vegas and have some time to spare so you look up the local gym and call the owner and they tell you to come check out their box. You work out and ask about some of their programming and excursions they run. You go to the Celine show and love her so much. Day two you go golfing and grab some lunch with some friends and talk about CrossFit and why they should join. Day three you go to the Spa and talk to the masseuse about why CrossFit is so beneficial to your, muscles, health, and mobility. Your sister and her family also live there so you stop to visit with them for a bit. You head home.
- SCENARIO #2) You own a CrossFit gym and decide you’re wanting to research how the Vegas community is with CrossFit and talk to one or more of the local gym owners. You contact one of them and schedule a time to come workout and talk to him a little about what he has going on. You also want to know how CrossFit would help golfers perform better and score lower, so you plan to go golfing with your friends, grab lunch, and get some feedback. You then decide to schedule a massage with a spa that is close to a CrossFit gym and ask if they work with any of that gym’s members. You plan to tell the owner how they could position themselves to help out the CrossFit community. Incidentally there is a show in Vegas the first day you’re there. It’s Celine Dion and you just love her heart stopping performances. I mean you can’t pass this up. You go to the Celine show. It’s AMAZING! You also go golfing, stop at the spa, and see your sister and her family who live there. You head home.
Which Scenario is Right?
You have two options. If you read these fully it’s not a trick, they both are the exact same thing. Both have the same activities, but one fundamental element is different.
What is your final answer Regis Philbin..?
Scenario #2 is the right answer.
In order to make your traveling deductible you need to have prearranged meetings and business purpose scheduled. The business meetings do not need to be a specific amount of time to count. If you met with someone for 30 minutes that day is still a business day as long as it was prearranged. Whatever secondary activities you do after or before doesn’t matter, because you’ve just made your day a business day and everything is now deductible! BOOM!
Also make sure you keep your receipts and write down notes of the meetings and emails of all the arrangements you’ve made ahead of time. Remember make sure your trips have premeditated and planned business involved to have them be bullet proof.
Make Any Trip Deductible With Planning
Look we’ve just given you a general base line for having a fun vacation while saving more money in the end. The tax code is long and full of exceptions depending on the situation.
You should always consult with a tax genius about your specific situation so you can get the most beneficial guidance.
If you’d like us to analyze your trip, and give you some further advice, shoot us a quick email at [email protected]