Ever since taxpayers have begun traveling for pleasure, they have longed to know how to qualify that same travel expense as a business deduction when Uncle Sam comes around. It's not surprising that many have failed, but you may be to learn from their mistakes.
What's Personal and What's Business?
It's important for business travelers to educate themselves on which travel expenses may typically be allowed as legitimate business expenses and which ones are more likely to be considered purely personal expenses, especially if you're taking a trip that combines both.
Of course a good starting point for any business travel is understanding basic business travel deductions, which you can do by reading this overview of business travel deductions. It provides some context and tips for business travelers to understand which business expenses are deductible. But in addition to basic expenses, business travelers that mix business and pleasure trip also need to learn which expenses might be disallowed as business expenses.
To understand the difference between what the IRS might allow as a reasonable business travel expense and what it might not, it's helpful to keep in mind a fairly basic questions, especially when you've embarked on a trip that involves both personal and business activities. The starting point for determining if an expense is an allowable business expense is the question: "was the “travel experience” primarily for business or primarily for pleasure?"
Learning from Failure
Court decisions are replete with the taxpayer who went to a convention or seminar (or similar event) in a posh resort town, spent a few hours a day in seminars or meetings and played the rest of the time. As often as these endeavors are advertised as business trips, it is equally surprising how many times taxpayers have failed to qualify for business travel deductions. And where did they go wrong? Time Management!
In other words, there are 24 hours in a day. Reasonably, you are in bed from 8:00 p.m. to 8:00 a.m. That leaves 12 hours remaining in your day for which to account. To qualify for business travel deductions, you want to show that you spent at least the majority of your waking hours engaged in business activities. If you can't do that, your trip was 100% personal pleasure and is non-deductible. You may still deduct expenses directly related to your business, like seminar or conference fees. However, all other travel expenses will be personal and non-deductible, so don't be fooled and fall where countless others before you have fallen.
Note, to qualify for business deductions, you don't have to show that most of your expenses were for business, as opposed to personal. You just have to show that most of your time was spent on business activities, as opposed to personal activities, like entertainment, sight-seeing, or other similar activities.
Other Factors to Consider
Now other factors besides just your time management can be taken into account as well. For example, if your whole family accompanied you on the trip, then the more your trip appears to be personal, but again, the actual time spent on business activities will weigh more heavily in your favor. If your trip is to a well known resort area, then again, this makes your trip appear to be for pleasure, but again, time spent on business activities will weigh more heavily in your favor.
So this year, steer clear of promotions for exotic seminars and conferences where, from the promotional literature itself, it appears that the majority of your waking hours may be spent on personal activities.
