The Risks of Confusing Business and Personal Travel

Imagine the day when COVID-19 restrictions are lifted.  You will have a little more freedom to dine out, visit friends, and take the kids on that postponed vacation. As you dream of this getaway, you might be prompted to ask a question along the lines of, “If I drive by a prospective client’s facility, or work on a proposal while away, can I write off our Disney trip as a business expense?”  As with many tax-related questions, the answer is, “It depends.”  You will want to make sure you understand the IRS rules on travel before making decisions based on deductibility.  Let me explain why.

The IRS has found that the people who cheat on their taxes frequently inflate certain types of expenses.   Business travel is one of them.   Therefore, travel is one of the expenses that is subject to special documentation rules and extra scrutiny. 

Deductible travel expenses are the ordinary and necessary expenses you incur while away from home pursuing your trade or business.   The standard list of legitimate travel expenses includes:

  • Air, rail, and bus fares
  • Baggage charges
  • Hotel expenses
  • Meals while traveling
  • Transportation costs (e.g. personal vehicle mileage, rental car, rideshare, subway fare)
  • Administrative charges (copies, conference space rentals)
  • Tips on eligible expenses (airport skycap, rideshare driver, doorman)

However, when claiming these travel expenses, if you don’t have adequate records, the deduction will be completely disallowed.

Now, back to the question at hand – writing off that trip to Disney (or Hawaii, or South Africa). If you travel to a destination and engage in both business and personal activities, you can deduct your travel expenses only if the trip is primarily related to your business.  If the trip is personal in nature, you cannot deduct any of your airfare, hotel, or other trip expenses.  This is true even if you engage in some business activities while you are there.  Furthermore, travel expenses for spouses and children are only deductible if they are partners or employees of your business.  Their travel must also be for a bona fide business purpose.

If you are trying to decide if a trip is deductible, an important factor to consider is the amount of time you will spend on personal activities vs. business activities while away.  Using that yardstick, you probably won’t be able to write off that Disney trip, but if you can afford to pay for it with your personal money, take it!  I’m sure you and your family could use a break.

Be sure to get a copy of my book Business Blueprint 2.0: A Guide to Starting & Running Your Business The Right WayChapter 5 gives an overview of acceptable tax deductions.

Bernadette L. Harris on FacebookBernadette L. Harris on InstagramBernadette L. Harris on LinkedinBernadette L. Harris on PinterestBernadette L. Harris on TwitterBernadette L. Harris on Youtube
Bernadette L. Harris
Forensic Accountant at By The Book Accounting
Bernadette L. Harris is a Forensic Accountant, Certified Fraud Examiner, Expert Witness, Keynote Speaker, and #1 bestselling author who has helped hundreds of business owners put systems in place to protect their businesses and prepare for growth.

Her latest books, Business Blueprint 2.0 and Did You Hire a Fraud? can be purchased at: Shop.BernadetteHarris.com.

She speaks to audiences across the country about entrepreneurship and fraud prevention. Follow her on social media @TrustBernadette