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Deducting Your Vacation

September 13th

While holiday budgets are decreasing, companies are cutting back on employee vacation benefits. However, it is still possible to take that dream vacation without committing tax fraud or falling victim to any IRS audits.

Tax Deduction Rules

The rules for declaring business expenses during a combined personal and business trip are complicated. It takes close attention and possibly the assistance of a qualified tax lawyer, but the deductions can be made. By following these simple tips, you can ensure that your business deductions fall within legal limits so that you won’t end up paying back taxes with interest.

1. Transportation Guidelines. If the trip is primarily for business purposes, domestic U.S. transportation costs are fully deductible, both ways. However, for international journeys, the trip must be a minimum of 75 percent business in order to qualify for travel deductions.

2. Family Expenses. Unfortunately, you may not deduct expenses for anyone who is not directly involved in the business portion of the trip. In order to deduct family expenses, look for places where family needs coincide with business-related needs. For example, if you need to rent a car for both your business tasks and for the family vacation, it may be deducted from your taxes.

3. Meals. While on a business trip, the meals of you and your business associates are tax deductible at a rate of 50 cents to the dollar. However, this tax deduction does not extend to any meals enjoyed exclusively by the family.

4. Document Everything Very Carefully. The IRS has been cracking down on incidences of tax fraud, with a particular focus on itemized tax deduction claims. In order to avoid audit or charged with a bill for back taxes, including penalties and interest, be certain to keep meticulous records of your expenses. This means keeping track of not just receipts, but official itineraries, agendas, or anything else that shows a record of your business-related activities.


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