| It is perfectly legal to deduct your next vacation. Here's | | | | Business Days = 6 (2 travel days + 4 seminar days) |
| how to do it. | | | | Personal Days = 4 (doing theme parks) |
| To qualify for this deduction, you must meet the | | | | So, are the number of business days greater than |
| following two criteria: | | | | 50% of the total days? Yes. So here's what you get |
| 1. You are self-employed or own a small business | | | | to deduct: 100% of your transportation expenses |
| 2. On your next trip, you combine business with | | | | (even though 40% of your days were personal days) |
| pleasure. | | | | and 100% of your "on-the-road" expenses for the 6 |
| The first requirement is pretty cut and dried. By "small | | | | business days, including hotel bills, cab fares, rental car, |
| business" we are including any type of | | | | seminar fees, dry cleaning, laundry and meals. |
| self-employment activity, full-time or part-time, | | | | Keep in mind that the meal expenses are still subject |
| home-based or "bricks and mortar". This deduction | | | | to the 50% rule. In other words, when we say that |
| applies to any type of small business entity: sole | | | | "100% of your on-the-road expenses" (including meals) |
| proprietorships, partnerships, corporations, and limited | | | | for the business days are deductible, the actual |
| liability companies. | | | | amount of the meal deduction will be 50% of the |
| The second requirement is somewhat trickier and will | | | | meals cost. |
| be the focus of this article. | | | | Also realize that transportation expenses include air |
| To deduct any U.S. trip, you can combine business and | | | | fare to and from your destination (if you take a plane). |
| pleasure, but the primary purpose of the trip must be | | | | If you drive to the vacation spot, you can deduct the |
| business. And here's how the IRS defines a trip taken | | | | actual cost of gas or take a deduction based on the |
| primarily for business purposes: the number of | | | | current IRS-approved mileage rate (for 2009 the rate |
| "business days" must be greater than the number of | | | | is 55 cents per mile). |
| "personal days". To complete the definition, travel days | | | | The on-the-road expenses for the 4 personal days |
| are considered "business days". | | | | are not deductible. But you're still getting a great tax |
| Here's an example to clarify the rules: You take a | | | | break here. Assuming you spend $1,000 for |
| 10-day "vacation" to Orlando. You spend one day | | | | transportation and the 6 business day expenses, a |
| getting there and one day getting back. You spend 4 | | | | sole proprietor in the 35% tax bracket (15% federal |
| days attending a seminar. The other 4 days are spent | | | | tax + 15% self-employment tax + 5% state tax) saves |
| with Mickey Mouse & Company. | | | | $350. |
| Let's tally up the days: | | | | |