Thursday, June 1, 2006
By: Chuck Chuckuemeka
The IRS says you can deduct expenses for taking a business trip or business convention. And there’s no reason the trip shouldn’t coincide with your vacation.
Pack a laptop with your bathing suit on your next vacation.
There is no law prohibiting you from combining a business trip with a vacation. And if you do mix and match, don’t forget to keep your receipts.
The Internal Revenue Service concedes that you’re entitled to deduct expenses for taking a business trip or attending a business convention.
While such trips must benefit or advance your business to qualify as a tax deduction, there’s no reason why the trip or convention couldn’t coincide with your vacation. Why do you think that most large conventions are held in cities like New York, Las Vegas and Miami?
Convention and business travel expenses are deductible both to employees and the self-employed. Such expenses would include convention costs, hotels, meals and entertainment, and travel expenses to and from the convention. If a business purpose can be established, the expenses of your spouse may also be deductible. The business conventions or seminars must specifically relate to your business or profession. This rule could be called the "resort investment seminar" rule.
While you can deduct seminar and convention costs so long as they relate to your profession or business, the IRS doesn’t allow you to deduct the expenses for attending an investment or financial planning seminar in a resort area — or, say, a cruise ship. Likewise, you can’t deduct the costs of attending an annual meeting of stockholders if you’re a shareholder. These the IRS considers personal business.
Rules Vary On Domestic, Foreign Travel
The deductibility rules differ depending on whether the trip is within or outside the United States, and whether it’s a foreign convention or a cruise convention. Let’s have a look at each.
If your business-vacation trip is within the United States: Your transportation expenses will be deductible only if the trip is primarily for business. If the trip is primarily for pleasure, no transportation expenses can be deducted. This means that you have to establish a primary business motive for making the trip: for example, you’re going to attend a convention in that city, or visit a client or potential client who is based there.
I would recommend that if you’re going to visit a client, you should write to this person and receive in return a letter confirming the planned visit to discuss business matters. That letter validates the business purpose of your trip.
Chuck Chuckuemeka is managing partner of Chuckuemeka & Associates, a nationally focused CPA firm specializing in Accounting, Auditing, Consulting and Tax Advising.
Visit them at www.chuckcpa.com