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. While you can’t simply fly your family down to Disney World for the week and deduct the entire trip, if you plan carefully, you may be able to find a way to get a tax break on part of your trip.
If you are aware of any conferences, trade shows, or other events in line with your business, you probably understand that these trips can be deductible. So, why not combine a business-related trip with pleasure? That’s right, if you have an annual industry conference on the other side of the country, you could plan your trip carefully so that not only do you get to attend the conference, but also make a family vacation out of it. This 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 deduction. For example, if you’re in the business of selling widgets and there’s an annual widget expo that highlights all the upcoming widgets, attending this event would be considered ordinary and necessary for your line of work, and the costs incurred to attend the event could be deductible.
Now, say this is an expo in Florida, and you just happened to be considering taking the family on a vacation this summer. If you plan on attending the expo anyway, why not take the family along and spend time together in Florida? You get to attend the event, your family gets to spend time in Florida, and you’re eligible for some tax deductions.
What You Can Deduct
Attending and traveling to events like these come with many possible deductions. 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, unfortunately, their individual expenses cannot be deducted. That means if your family of four is flying, you can only deduct your personal airfare. And if you take the family to do things not related to the event you’re there to attend, those 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.
But one thing that can be a benefit is lodging. Most of the time a hotel room rate will be the same whether it’s just you staying in it or if you’ve got your entire family staying there, so in effect, you could be getting a tax break while your entire family stays with you.
Also, most entertainment expenses are not deductible at all.
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 for your line of work, and then if so, work to structure the travel so that you can maximize your time and possibly make a nice little trip out of it. Though travel expenses for conventions are deductible for self-employed, you must show that your attendance benefits your trade or business. Special rules apply to conventions held outside the North American area.
Then, as always, keep good records. Make sure you keep all receipts, log mileage, save copies of event materials, and so on. And 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. But if done right, you can get ahead professionally and enjoy some tax breaks while bringing the family along for a little leisure time away from home.