Combined Business and Vacation Travel Can Be Cost Effective

By Dale K. Geeslin, CPA, CFE

Technology has reduced the need for business travel but sometimes a face to face meeting is best. Business travelers may be able to add on a short vacation to a business trip and make part of the travel expenses deductible with a little planning. In these situations, a taxpayer may be able to deduct 100% of the round-trip transportation costs as long as the trip was undertaken primarily for business reasons. There is no hard and fast rule to determine if a trip is untaken primarily for business purposes. However, the IRS does say that the way a traveler splits their time between business and personal pursuits is an important factor. The personal part of a trip need not occur at the business destination but can take place anywhere in between.

Although an employee’s out-of-town business concludes on Friday, he may extend his business trip to take advantage of a low-priced fare requiring a Saturday night stay over, where the savings in airfare are higher than the costs of the weekend meals and lodging. The IRS has ruled that under a “common sense test” the meal and lodging expenses incurred by the taxpayer for the Saturday stay were still deductible.

The expenses of a spouse or other companion accompanying a business traveler are not deductible unless (1) the spouse or other companion is an employee of the taxpayer and travels for a bona fide business purpose, and (2) the expenses would otherwise be deductible by the spouse or other companion. Even if the spouse’s or other companion’s travel expenses are not deductible, a tax benefit may still be available because the business traveler’s deduction is not based on 50% of the trip expenses but is based on what it would have cost the taxpayer to travel alone.