It’s almost summer, which means vacation time for most people. Wouldn’t it be great if everyone could take a deduction for vacation expenses? Well, if you are a small business owner, you can. It’s absolutely legal to deduct your vacation. Below are examples of how to do it (but remember to contact your tax professional to get the most complete information). 

To qualify for this deduction, you have to meet the following criteria:

1. If you are self-employed or own a small business
2. If, on your next trip, you combine business with personal.

In terms of a  small business, this includes any type of self-employment, full or part-time, home-based or bricks and mortar. The deduction refers to any type of small business: sole proprietorships, partnerships, corporations, and limited liability companies.

To deduct a U.S. trip, you are allowed to combine business with personal, but the main reason for the trip must be business related. The IRS defines a trip taken for business purposes as the number of business days must be more than the number of personal days. Also, time of travel is considered part of the business days.

If the number of business days are more than 50% of the total vacation days, then  you can take the deduction. This is what you are allowed to deduct: 100% of your transportation expenses and 100% of the expenses for your days on the road, including hotel, cab fares, rental car, business related fees, dry cleaning, laundry and meals.

Meal expenses are subject to the 50% rule. When 100% of your on-the-road expenses, including meals, are for the business days, they are deductible, and the actual amount of the meal deduction will be 50% of the meals cost. Basically, you are only allowed to deduct 50% off of your meal expenses.

Transportation expenses include air fare to and from, if you take a plane. If you drive, you are able to deduct the actual cost of gas or take the deduction that is the current IRS-approved mileage rate.

The IRS has made a list of all of the allowed deductions on their website. Below is an example of what is and isn’t deductible.

Trip Primarily for Business:  See the IRS website for full details at irs.gov. 

You can deduct all of your travel expenses if your trip was entirely business related. If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct your business-related travel expenses. These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination.

To make sure you get the maximum amount of deductions on your vacation, and so you take the correct deductions, please consult with a tax professional for help.

Daniel Stoica Accounting Professional