Between the barbecues and the trips to the beach, you can spend a bundle on summer fun. But while you can't always avoid traffic jams and sunburn, you may be able to get a tax break for some of your out-of-pocket good times.
Can You Deduct the Family Vacation?
If you have to travel to meet a client or attend a professional seminar, and the meeting happens to be in the Cayman Islands or some other wonderful place, consider bringing your family along and spending a few extra days. At a minimum, you've got your own airfare covered.
While you can't deduct the cost of your family's expenses, you may be able to deduct some of your expenses provided the main purpose of your trip is for business.
All business-related expenses that are not reimbursed by your employer are fully deductible to you. So if your employer does not reimburse you for your airfare, take a full deduction for it. You also can deduct your hotel costs, your transportation to and from the airport, any business-related phone calls and tips. In addition, all your business-related meals are deductible, although as with most meals and entertainment costs, you're only allowed to deduct 50% of the cost.
All your business-related expenses should be reported on
-- Itemized Deductions
and must exceed 2% of adjusted gross income to be deductible, says Joe DiMatteo, tax research and training specialist at
Big note to the self-employed: All your travel expenses are fully deductible on
-- Profit or Loss From Business
. You don't have to worry about that 2% limitation.
If your employer pays for your kids' rooms, flights or other travel expenses, that technically is taxable income to you because your kids are not there on business, says Bob Trinz, editor at
, an information provider to tax professionals. That extra money is like a bonus so it should be included in your taxable wages.
What About the BBQ?
So you can't deduct the whole family vacation, but what about the blowout picnic you're planning for the Fourth?
If you can prove that your picnic has a legitimate business purpose, then you can deduct the associated costs. But you must prove that the purpose of the picnic is to obtain or maintain business, says DiMatteo. Remember, as with all meals and entertainment costs, your deduction is limited to 50% of the cost. If you invited some of your friends and family to your "legitimate-business BBQ," only deduct the costs that pertain to your business guests.
If, on the flipside, you have a Fourth of July bash each year and decide to invite some co-workers, you cannot take a deduction for any of those costs.
As a self-employed person, if you have the team over for a little weekend bonding, you can deduct the barbecue as a business expense on Schedule C, says Trinz.
Check out the
Internal Revenue Service's
-- Travel, Entertainment, Gift and Car Expenses
for more details.
Take a Vacation From Your Vacation Home
Do you have a vacation home? If you do, consider renting it out for a few days.
If you rent the place for 14 days or less, there are no tax consequences. You can pocket that tax-free money.
But, if you rent the place out for more than two weeks, you must claim that rental income on your tax return. There's an upshot though. As long as you use your vacation home for more than 14 days or 10% of the number of days the home is rented out -- whichever is greater each year -- and you rent for fair market value, you can deduct rent-related expenses up to the amount of your rental income.
So be sure to include a portion of your utilities, maintenance, mortgage interest, real-estate taxes and insurance that relate to the rental period along with the related rental income on
-- Supplemental Income and Loss
You can also deduct depreciation relating to the rental use. Depreciation is an accounting thing. Over time, natural wear and tear brings down an asset's value. So accounting folks deduct a portion of the asset's cost each year. On paper, the asset will eventually be worthless.
But by taking a deduction for depreciation, you are decreasing the asset's value. So you must subtract that depreciation amount from your original cost basis. For more on depreciation, see this previous
These deductibility rules apply to any of your summertime activities. Whether you spend a day on the golf course or take a deep-sea fishing trip, if the occasion has a legitimate business purpose and your employer does not reimburse you for the costs, then you can deduct them.
But with any business-related event, you need to keep comprehensive documentation, reminds DiMatteo. Keep track of the details such as when the event happened, where it was, and who was invited to justify your business purposes. That way, Uncle Sam doesn't come back and rain on your summer fun.
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