Money & Policy

Make Your Summer Vacation Tax-Deductible

It's not as hard, or as unrelaxing, as it sounds

(This article appeared previously on MarketWatch.com.)

How would you like to take a fabulous trip to the destination of your dreams — and have Uncle Sam give you a great big tax deduction? It can be done.

One of my clients traveled throughout China and Hawaii, wrote off the entire trip and won the resulting audit.

So let’s talk about this summer. How do you turn your dream vacation into an honest-to-goodness tax deduction?

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Passive Business Events

First, decide where you’d love to go. Next, decide how you want to be able to write off your trip, either by making this a passive or active business trip.

If you want to make this a passive event — one where the business purpose happens to you — then find a conference, convention or course related to your business, profession, union, job or career. Anything that improves your professional skills and knowledge can be treated as a business expense or job-related expense.

Beware, though, if your trip trains you for a new business or profession, you won’t be able to deduct it.

How can you find such events? Contact your professional association, trade association, union or other organization related to your profession. Or even Google your request. There’s always something going on somewhere.

For instance, in the accounting world, there are education providers such as Western CPE, NAEA, and even the IRS, that host courses in resort areas like Las Vegas, Disney World, Hawaii and New Orleans.

Once you select your event, schedule your time so you spend at least four hours a day participating in the event or course. Keep time logs or sign-in information to prove your participation. You can spend the rest of the time with your family or friends.

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Schedule the trip within the U.S. so you arrive on the day before the event and leave a day or two after it. Your airfare will be deductible. So will your room for the nights of the event. If your spouse or companion shares the room, it’s still fully deductible during the event, and night before or after.

But when it comes to meals, only yours are deductible — not those of your companions.

If your spouse, children and/or companions work with you in your job or business, and they also attend the event, then their costs will be deductible, too.

So, here you are, in a delightful resort area, stress free…and most, or all, of your trip is deductible.

Active Business Events

Suppose you want to vacation and be more active in your business pursuits? There are ways to do that, too.

Get an assignment to do something that requires you to visit your favorite place. My client Mary got a contract to be a set decorator for an upcoming movie taking place in Asia. She visited China and Hawaii, taking thousands of photos of places, buildings, interiors, layouts, personal items, fabrics, plants, and more. Mary made some excellent contacts with people she could reach out to later to ensure her sets were authentic.

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Mary and a friend spent nearly two months on the trip; 100 percent of her costs were deductible and survived the audit.

Why? Because Mary did such a good job documenting everything. These days, it’s easier than ever to take photos or keep good records of information, products, research, etc. on small portable devices. In fact, you can upload all the research nightly and preserve it all against loss.

Watch the Rules

When you travel outside the U.S., you will need to count your business days. You may have to prorate your airfare if you have several personal days during the trip. But if you read the IRS guidelines on what days count as business days, you can plan your trip to maximize those business days and write off as much of your expenses as you can.

As with convention travel, your companions’ expenses will only be deductible if they are directly involved with your job or business. Just being there to take notes? That doesn’t fly any longer.

Read IRS Publication 463 for the details of the kinds of expenses that are deductible and the specific rules.

Eva Rosenberg is a tax columnist for MarketWatch. You can follow her on Twitter @TaxMama. Email Eva at [email protected].

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