The cost of a pure business trip is 100% deductible. Unreimbursed hotel, airfare, car expenses, cleaning, telephone, tips, are all 100% deductible as well. Up to 50% of the cost of meals are deductible. In general, travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job.
What if you add on a few "vacation days"? After all, here you are in Paris, are you going to skip the Louvre? If the trip is an international one, the travel cost is 100% deductible if the trip is at least 75% business. Less than 75% and then the deductible portion of airfare is generally pro-rated based on the number of business days compared to the total number of days. If the business trip is within the United States, the airfare is 100% deductible as long as the primary purpose of the trip was for business. Lodging and meal expenses for business days are deductible, not for vacation days.
With smart phones, laptops and other new-fangled technology, if you spend most of your time at the Louvre answering e-mails and taking phone calls (say 4 hours) - arguably that's a business day as well. A business day is any day you are traveling to or from the business destination, a day when you have a pre-scheduled business appointment (regardless of how long), or a day when you spend at least 4 hours on business.
If the trip is before and after a weekend and it is impractical for the traveler to go home and come back over the weekend, then those weekend days are treated as business days. One hundred percent of the hotel and 50% of meals are still deductible for those weekend days. You can deduct the standard meal allowance instead of keeping track of the cost of meals if you choose. To deduct the weekend expenses you must be able to prove business activity on Friday and Monday.
If your airline offers a special fare for a stay including Saturday night, and the savings on the fare is greater than the Saturday meals and hotel cost, then the Saturday costs are deductible.
Did you ever see those advertisements for trade associations or professional associations putting on seminars in seaside resorts? Those travel expenses are most likely 100% deductible. The seminar or conference fees are deductible as well.
If the trip is primarily for vacation, then you cannot deduct hotel and travel expenses. The IRS says that the "scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip." On the other hand, if you have actual business expenses (for example, business phone call expenses) while on the vacation, they can be deducted.
If you bring your spouse or a companion along on the trip, their expenses are not deductible unless the spouse or companion is an employee of the taxpayer and travels for a bona fide business purpose and the expense would otherwise be deductible by the spouse or companion. You can't deduct expenses for anyone who is along who is not involved in the business. This may not be such a problem. If you rent a car, the whole price is deductible whether your spouse rides along or not. If you rent a hotel room, the whole cost is deductible even if you spouse occupies the room with you.
A business cruise? To be deductible, it has to be on a U.S. registered ship and avoids foreign ports. The limit to the deduction is $2,000 annually.
It is very important to keep records. Keep receipts and a log of your travel and activities. More detail is better.
Be reasonable. Hiring a luxury limo and driver on the trip when you drive yourself in a used car at home is not reasonable.
If you are an employee, deductible travel deductions are claimed on Form 2106 and are miscellaneous itemized deductions for which you receive a tax benefit only to the extent they exceed 2% of adjusted gross income. If you are self-employed, expenses are deductible on Schedule C or the appropriate business return. You can get more information in IRS Publication 463: Travel, Entertainment, Gift and Car Expenses.
