NEW YORK (MainStreet) — Once the tax filing season ends I enjoy traveling. My itinerary often includes totally tax-deductible domestic vacations - I attend the national conferences of various tax preparer membership organizations, held each year in a different American city. Over the years I have visited Anaheim, Calif.; Atlanta; Boston; Corpus Christi, Texas; Minneapolis; Orlando, Fla.; San Antonio; San Diego; San Francisco; Washington, D.C. and other locations as a conference registrant, and deducted every penny of my hotel, meal and travel expenses.
You can deduct expenses that are “ordinary” and “necessary” for your trade, business or profession, whether you are an employee or self-employed. This includes the cost of education that maintains or improves skills required in your current trade or business. Related round-trip travel expenses are also deductible for those trips. Here’s how to do it.
First, you must be able to show that your attendance at a conference or convention benefits your trade or business. If it is for investment, political, social or other purposes unrelated to your trade or business, you cannot deduct your expenses.
The conference agenda or program generally outlines the purpose. You can show your attendance benefits your trade or business by comparing the agenda with the duties and responsibilities of your position. The agenda does not have to deal specifically with your official duties and responsibilities; it will be enough if the agenda is so related to your position that it shows your attendance was for business purposes. In my case I prepare tax returns for a living, and the conferences I attend provide education, information and resources on the preparation of tax returns.
Deductible expenses include:
- The registration fee for the conference or convention and the cost of books and materials.
- Airfare, train fare or bus fare, or the Standard Mileage Allowance for business travel if you drive, and related tips.
- Taxi fares to and from the airport, train or bus station, to your hotel and to other business locations while away.
- Hotel or motel lodging expenses, including tips to bellman and maids and the cost of laundry services.
- All meals (although, as with any business meals, only 50% is actually deductible).
You have the option of deducting the actual out-of-pocket cost of meals and “incidental” expenses or claiming a federal “per diem allowance” that is determined by the location of the trip. If you claim the per diem allowance you do not have to save receipts for actual expenses. The per diem rates are available on the Government Services Administration website.
The per diem rate for meals and incidental expenses includes tips given to porters, baggage carriers, bellhops, hotel maids (the “incidental” expenses) – so the actual out-of-pocket expenses for these incidentals are not deductible if you claim the per diem. On the first and last day of a business trip you claim 75% of the per diem amount, unless you can show you leave before breakfast on the first day and return after dinner on the last.
You can decide whether to deduct the meals and incidental per diem rate or your actual expenses on a trip by trip basis, but you must use the same method for all days within any single business trip. You can use the actual expenses when attending a business conference in New York City in May and the per diem rate for an August convention in Las Vegas.
After I deduct all my travel expenses, I often save enough in taxes to cover the registration fee and some of the travel expenses! I get a free quality education, which benefits my practice, and I save on the actual cost of the trip.
If you are traveling with your family, only your expenses are deductible. Airlines often offer discounts for accompanying family members, and a hotel room is generally the same price regardless of the number of people in the room. You can deduct what it would cost if you were traveling alone. There are special rules if your spouse also works for your business.
You cannot deduct auxiliary sightseeing expenses while at the conference or convention, such as guided tours or travel to and from attractions, unless you were attending with a client or colleague and the activity qualified as deductible business entertaining.
As with any other business expense you must keep detailed records and receipts. Use a credit card for all meals, get receipts from taxi drivers and keep a copy of the detailed hotel bill in addition to the charge card receipt. And be sure to save the conference or convention agenda and schedule.
Make sure to schedule your trip so that it remains 100% business. Let’s look at an example. Registration for a conference begins on Sunday, with activities running Monday through Thursday. You would want to arrive on Sunday and leave on Friday. This way you have no “personal days.” However, all you need to do on Sunday is register, leaving the rest of the day to do whatever you want.
Travel extended to get a reduced airfare (such as a Saturday or Sunday night stayover for domestic travel) is allowed, even though there is no business activity on the extra day, if the extra cost of the stayover is less than or equal to your airfare savings.
So you have always wanted to visit San Francisco. Find a conference or convention related to your business that is being held there and take a deductible vacation!
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