What could be better than having an awesome vacation and getting to take tax deductions on that trip?
It’s doable. You just have to know the rules.
Pass the tests - Generally, a travel expense is a deductible business expense if it meets three tests. Your travel must have a business purpose. Expenses must be ordinary and necessary.
And you must spend more than 50 percent of each work day on business matters, says Tom Wheelwright, CPA and author of “Tax-Free Wealth.”
For travel to be deductible for spouses and children, they must be actively involved in the business, and there must be a business purpose for them coming along.
Watch Your Costs - The cost of travel for the business owner, accommodations, meals and other work-related purchases may be deducted on your tax return.
If your family members aren’t part of the business, you can still benefit. For example, the cost of a hotel room is deductible, but only up to what a single room would cost.
“If a single room at a hotel costs $150 and a family room costs $200, then only $150 would be deductible.
The cost of a rental car will be fully deductible since the cost is the same regardless of how many people are in the car,” says Michael Atias, director of tax services at Online Trading Academy in Irvine, California.
Avoid Mistakes - Do not claim personal expenses like shopping or spa treatments.
Be sure to keep all receipts. Warns Atias, “Lavish or extravagant expenses like staying in a luxury suite may not be ‘ordinary and necessary’ when traveling for business.”