How would you like to take a tax-deductible vacation this summer? That can’t be possible, can it? Well, there is a way that you could embark on some travel or a vacation and end up saving money come tax time if you are self-employed. Although you can’t fly your family down to Disney World for the week and deduct the entire trip, there are certainly ways to maximize a trip’s tax benefits with careful planning.
If you are aware of any conferences, trade shows, or other events that you plan to attend to support and grow your business, you probably understand that these trips can be deductible business expenses. So, why not combine a business-related trip with pleasure? For example, if you have an annual industry conference on the other side of the country, you could plan your trip carefully so you get to attend the conference and possiblymake a family vacation out of it. This certainly doesn’t mean the family can tag along tax-free, but here’s how it works.
You can deduct expenses that are “ordinary” and “necessary” for your trade or business if you are self-employed. If you’re self-employed, and attending an event is considered ordinary and necessary for your line of work, you’ll qualify for a tax deduction. For example, if you’re in the business of selling widgets and there’s an annual widget expo that highlights all the upcoming technology, attending this event would be considered an ordinary and necessary expense for your line of work, and the costs incurred to attend the event could be deductible.
Now, say this is an expo in Florida. If you’re already planning to attend this event, why not bring the family along for a summer vacation? You get to attend the event, your family gets to spend time in Florida, and you’ll possibly be eligible for some tax deductions.
What You Can Deduct
For starters, you can deduct the registration fees and any materials required to attend. If you need to travel, you can deduct associated costs to get you to the event. This includes round-trip airfare, car rental, mileage when using your own vehicle, public transportation, and so on. In addition, you’re allowed to deduct lodging expenses. Finally, you will be able to deduct meals, but as you may know, business meals are only 50 percent deductible.
What You Can’t Deduct
If you’re taking the family along, their individual expenses cannot be deducted. If your family of four is flying, you can only deduct your personal airfare. In addition, f you take the family to do things not related to the event you’re there to attend, those costs obviously cannot be deducted. Finally, you also cannot deduct expenses incurred for things that occur beyond the event schedule. If you’re attending a three-day conference but stay an entire week with your family, you can’t deduct the other four days of lodging, meals, etc. Also, most entertainment expenses are not deductible at all.
The biggest possible benefit is lodging. Most of the time a hotel room rate will be the same cost whether it’s just you staying or if you’ve got your entire family staying there with you. This situation could make you eligible for a tax break on your lodging expenses.
Planning and Record Keeping
As you can see, it is possible to turn a business trip into a family vacation that could yield some nice tax breaks while getting your family out of the house. The key is careful planning and record-keeping. You’ll first want to make sure the event you’re interested in would qualify as ordinary and necessary expense for your line of work. Though travel expenses for conventions can be deductible for self-employed individuals, you must show that your attendance benefits your trade or business. Special rules apply to conventions held outside the North American area.
As always, make sure to keep good records, including all receipts, log mileage, event materials, and so on. Don’t forget to separate the expenses required for the conference or event from the non-deductible family expenses so that you’re not double-dipping. If planned right, you can advance professionally, benefit from some tax breaks, and still be able to carve out some vacation time with your family.
