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The Tax Benefits of Vacationing

I know what you are thinking, what is this guy talking about being able to get tax breaks for taking a vacation? While this comment in itself is not entirely true, there are many ways in which you can mix business trips with pleasure and still reap the tax benefits.

For example if the trip was originally set up for business purposes, the airfare and other roundtrip transportation costs are fully deductable. This is also true for anything paid out of pocket for lodging as well fifty percent of any meal costs while conducting the business portion of the trip. So let’s say that you are self-employed and take a five day business trip across the country, but at the end of the business portion of the trip you decide to stay a few extra days for some relaxation. Since the entire airfare or transportation costs are fully deductable, then in essence your personal days on the trip would also be tax deductable. However any lodging and meals after the business portion is complete, is not deductable.

This same concept is also true for an employer that sends an employee on a business trip and reimburses the employee for the out of pocket expenses paid by him or her. Only the business portion paid by the employee that is reimbursed by the employer is deductable, however it is an extra perk that neither FICA tax or income tax withholdings are required to be paid on the reimbursement. Now let’s say that you are an employee and the employer reimburses you for the entire trip, including the personal portion. While the portion that is not business related would become taxable income to the employee, it would still be fully deductable to the employer because they are in concept deductable wages.

Another example of a tax break when mixing business trips with pleasure is when the business portion of the trip is on a Thursday, Friday, and the following Monday, however on Saturday and Sunday it is not feasible to travel back home. In this situation the lodging and fifty percent of meals paid on Saturday and Sunday are also deductable because they fall under the Internal Revenue Code’s “Common Sense” rule, even though business was not conducted on those given days.

There are really no cut and clear rules on what is considered a business trip versus a personal vacation, and rather taken on a case by case situation based on the facts and circumstances of each case. However it is must to document, document, document, this way there is no guessing involved when taking certain deductions. This article just briefly touches some of the benefits of mixing business trips with pleasure, if you have any questions or concerns feel free to contact me or any of our tax professionals at Willis & Jurasek.