School is out, the sun is shining, and your kids want to go to an amusement park, possibly in Southern California. You’re also a small business owner and you need to take advantage of every tax deduction you can. So how do you mix business and pleasure? Well, if you’re trying to plan a family vacation and last minute add a couple things so you can write off a business trip for tax purposes, that’s not going to work. You can however plan a business trip and turn it into a mini vacation.
What’s the difference?
The difference is, in order to write off a business trip, the pre-determined purpose of that trip needs to be business, and you will need to prove that to the IRS if you are audited.
In other words, you must first decide to take a business trip to California. Whether it’s to meet with a client or go to a seminar, it doesn’t really matter. Just make sure you have a record to show when the decision was made to travel, like sending an email to the client or reserving your spot at the seminar.
OK, so now that you’ve got your proof the business trip was planned first, you can start planning the few extra days to spend with your family. And while you’re planning that, keep in mind some of the “cans and can nots” of writing off a trip that is necessary for your business (and just happens to include your family).
Extending Your Trip
You can extend your business trip to include extra days to spend on personal time. That includes sight-seeing, visiting a long-lost friend, and yes, Disneyland with your family.
Your personal days cannot exceed the number of days spent for business. More than 50% of your trip needs to be business-related.
Now, the good news is if you spend Friday and Monday on business then the weekend automatically counts towards your business days. Hint: schedule your client meetings for Friday and Monday, then spend Saturday and Sunday with your family. That still counts as 4 business days.
Whatever your favorite mode of transportation is, whether it’s planes, trains, or automobiles, you can deduct your travel expenses. The key word here is “your”.
If you drive, that includes all of the gas spent traveling to and from your destination. If your family happens to be in the car with you, that’s fine, you would have spent the same amount of gas if you were traveling by yourself.
You cannot deduct the gas spent while sight-seeing.
You also cannot deduct your family’s air fare. Your airfare or train ticket is considered a business expense, but not your family’s (unless they are an employee of your business).
Another hint: Your travel days are counted toward your business days.
You can deduct your hotel costs. The key word here again is “your”.
You cannot deduct your family’s portion of the hotel room (unless they are an employee of the business).
Obviously, you are not going to stay in a separate room from your family. Or maybe you could. After 2 days on the road with your kids you might want some peace and quiet. But if you plan on buying each kid a souvenir you might want to save the money and get just one hotel room. So just ask (or email so you have proof) the front desk what the single occupancy rate is for that room and that’s the amount you can deduct for your accommodation.
The same concept applies to food. You can write off the cost of all the food you eat. Your health is necessary to run your business.
You cannot however write off the $20 you just spent on churros and cotton candy for your kids. This also applies to your traveling days. All the food you eat while driving or flying is deductible as well.
Remember the good ol’ days when your dad would say, I took my client to the golf course today and I can write off the whole day? Well, those days are gone my friend. As of 2018 the IRS sucked the fun out of business travel, so entertainment is no longer considered a business expense. So unfortunately, you cannot take your client to Disneyland with your family and write it off.
To successfully write off a business trip it’s all about pre-determination and having some sort of proof in case of an audit. So, instead of thinking how you can turn a vacation into a business trip, ask yourself how you can have more business trips.
Click below for a free list of some commonly missed business expense write offs.
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