Is My Beach Vacation Tax Deductible?
It’s no secret that coronavirus has everyone going stir crazy.
If you’re considering a little working vacay to get away for a bit, you’re probably wondering if your trip is tax deductible.
If so, you’re in the right place!
Is My Vacation Deductible?
The short answer (and probably one of my favorite phrases!): it depends.
First, let’s consider what the IRS considers as being “away.”
For travel expenses to be deductible, you have to be traveling away from your “tax home” for substantially longer than a day’s work. Your tax home is the city or town where you do most of your business, regardless of where you actually live.
So if you live in New Jersey, but travel to NYC for work every day, your tax home is NYC. If you travel to another state for work, that would be deductible. But your mileage between your home in Jersey and your office in New York is not.
I’m Self Employed and Work from Home. Where is My Tax Home?
If you work mostly from home, then your tax home and house home are one in the same.
I’m Self Employed and Location Independent. Where is My Tax Home?
First, you’re living the dream, so congrats!
But there is a “but.”
If you don’t have a main office and you don’t live in one specific place, the IRS considers you to be an “itinerant,” or transient. In this case, your tax home is wherever you work. This means you cannot claim any travel expenses on your taxes, because, well, home is where the heart (or laptop) is.
Post continutes below.
I’m Traveling Away From My Tax Home. What Else Do I Need to Consider?
You also have to consider what you’re actually DOING while you’re away from home. If you’re attending a trade conference or convention, your expenses are deductible if you can prove attendance benefits your business.
But here’s the caveat.
You also need to prove that the majority of your time was spent in the pursuit of business. For example, let’s say you’re attending the Find Your Brilliance Leadership Conference (FYBLC) in Honolulu. (FYBLC isn’t real. But it should be.)
From 7 AM to 8 PM, you’re in meetings, seminars, and networking sessions. When you have a few minutes, you steal away to the beach bar for a quick Mai Tai. But as soon as you’re done, it’s back to Finding Your Brilliance you go!
This conference improves your business by expanding your network of potential clients and sharpening your leadership skills. In this case, you are free to claim your travel, hotel, meals, tips, and other similar expenses. But make sure to keep excellent documentation of how you spent your time, i.e. flyers from your conference, email or call logs showing you were working.
There’s No Conference, But I’m Having a Business Dinner While Vacationing in Hawaii
Sorry, no dice. If your trip is primarily for leisure, then the trip itself is nondeductible. But you CAN deduct any expenses that are directly related to your business while traveling.
Was your dinner with a client who directly supports your business? Were you discussing “businessy” things? The whole time? Deduct away!
Talk To a Pro
If you want to gain a deeper understanding of how to make the IRS tax code work for you (and your vacations!), talk to your trusted tax pro. Ultimately, hiring a professional will give you more time to invest in what matters most to you, whether that’s booking client meetings OR enjoying mai tais on the beach!
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