Is Mixing Business and Pleasure Tax-Deductible?

This week we hear from Sue in Owings Mills:

Dear Alice,

Last year I went to Atlanta for a business trip.  I was there for a convention and then I stayed an extra day and enjoyed the sights.  Can I deduct all of my expenses?

Sue in Owings Mills

Dear Sue,

It sounds like your trip was mostly business and only part recreational.  Here’s how business travel works: If the trip is undertaken solely for business reasons and in the United States, reasonable and necessary travel expenses, including travel fares, lodging, meals and incidental expenses are usually deductible on your federal return (subject to the 50 percent disallowance for meals and entertainment).  

The tricky part is when you mix business with pleasure. The proper treatment on your tax return depends on how much of the trip was actually business-related.  The following general guidelines should be helpful in determining your tax deduction:

• If the trip was mainly for business, your deductible travel expenses include the costs of getting there and back and any business-related expenses while you are out of town.  Personal expenses while out of town will not be deductible.

• If the trip was mainly for personal reasons, visiting family or vacation, the travel costs to get there and back as well as other personal expenses are not deductible.  However, any business costs incurred while at the destination will be tax-deductible since they relate to your business activity while out of town.

Sounds like most of your costs (with the exception of your extended hotel, meal and incidental costs incurred during your extra day in Atlanta) can be written off.  Not a bad deal for taking care of business, especially when it’s in a fun place. 

If you are an employee, the deductible expenses you incurred out-of-pocket will be deducted on Schedule A under "Miscellaneous Deductions," subject to a 2 percent limitation and the 50 percent limitation for meals and entertainment; if you have a business they will be deducted on your business tax return or schedule subject to the 50 percent limitation for meals and entertainment.

Many Happy Returns!

Alice A. Reid, EA

Editor's Note:  The nature of taxation is complex and information used to complete your personal tax return is dynamic – meaning that one area of your tax return can affect others. While our goal is to provide you with good general information, IRS may require certain documentation or substantiation to support any tax position you take on your tax return.  If your issue is complex we recommend you talk to a tax professional who can better understand your entire tax situation and advise you appropriately.