With summer vacation season almost upon us, people’s thoughts often turn to travel, and we thought it would be a good time to review the rules for deducting the costs of a business trip where you also take a vacation ("mixing business with pleasure"). These costs may be deductible, but are also subject to limitations. We will discuss these limitations below.
Mixing business and vacation trips within the United States
If you take a business trip during which you also vacation, you can take allowable deductions for travel expenses (i.e., airfare, hotel, cab fare, meals - subject to limitation, etc.) as long as the main purpose of the trip is for business. If, however, the main purpose of the trip is personal, you can't deduct any of the costs unless you identify and pay for those expenses that are directly related to your business, which is deductible.
To support these deductions, it is very important that you keep complete records supporting the reason the trip was primarily for business purposes. Proper recording will entail keeping a log of who you met with, where the meeting took place, and what was discussed.
If you decide to extend your business trip or take a side trip, these expenses would not be tax deductible. Assuming you travel from Cleveland to San Francisco for a week-long business trip and then decide to stay for an extra three days. You may take allowable expenses for the week in San Francisco (including your return airfare), but you may not deduct the costs of the extra three days you spent there afterward.
However, there is an exception to this rule. If you extend your stay over a weekend to take advantage of less expensive airfares, this is considered a valid business purpose, and you may deduct allowable expenses for the extra days.
Mixed business/vacation trips outside the United States
The rules for mixed business/vacation trips outside the United States are generally the same as similar trips within the United States, as long you didn't have control over the arrangement of the trip, or a personal vacation was not a major factor in making the trip. It's important to note that even if you had a say in the timing of the trip, it would not constitute control over the arrangement of the trip. Finally, you cannot be a managing executive of the company, cannot own more than a 10 percent interest in the business, and/or are may not be related to your employer.
If you do meet one of the above criteria, you can still deduct allowable costs of mixed business/vacation trips outside the United States, if the portion of the trip abroad was for less than a week, not counting the day that you depart. These costs may also be deductible if the time abroad lasts for more than a week (not counting the day you left but counting the day you return) but less than 25 percent of your total time was spent on nonbusiness activities. If this applies to you, but you cannot prove that vacationing was not the main purpose of planning the trip, you may allocate your expenses between business and vacationing days, and deduct the portion of allowable expenses allocated to the days spent on business. In performing this allocation, you may count the days traveling to and from the destination as business days.
For example, assume that your office is in Cleveland, and you travel to Vancouver on Wednesday for business. You have business meetings scheduled in Vancouver all day on Thursday, Friday morning, and on Monday. You return to Cleveland on Monday evening. Even though you spend Friday afternoon and all weekend sightseeing, this time is not counted as time spent on nonbusiness activity, because the trip abroad lasted for less than one week.
Seminar or convention expenses
Business trips taken for the purpose of attending a seminar or convention are often held at resort areas. The IRS tends to scrutinize these costs very closely, especially if you take your spouse or other family members. Make sure that you carefully document that the convention or seminar is closely connected to your job and/or business. The seminar/convention doesn't have to be specifically related to your job; however, attendance at the event has to benefit your trade or business.
If you attend a seminar/convention that is primarily for business purposes, you can deduct all costs for travel to and from the event, lodging, tips, display costs, and meals and entertainment of business clients, the latter of which are also subject to a 50% limitation. Keep in mind that you can't deduct expenses for sightseeing and personal entertainment when attending a business convention. Finally, if you cannot prove the major reason for a business trip was for business purposes, or if you attend a seminar or convention and can't prove that your attendance was for the purposes of your business, the trip will be considered personal, and you will only be able to deduct expenses that are specifically related to business. As is the case with proving any deduction ("iffy" or not), keep good documentation, and then some!
A trip taken to attend a convention given by a fraternal organization isn't considered to be for business purposes; therefore, the costs related to this type of trips are not deductible. You also can't deduct costs for a spouse or a family member who accompanies you on a business trip or to a seminar or convention, unless they are your employee and have a valid business reason for going on the trip. It's a good indication of a valid business reason if they could have claimed a business travel deduction had they gone on the trip by themselves.
The same rules that apply to business trips outside the United States apply to the cost of attending a business seminar or convention held outside of the country. Also, if the convention is held outside of the United States (or certain areas of North America), you have to prove that it was reasonable for the convention to be held there.
Finally, the costs of attending a business seminar or convention held on a cruise ship cannot be deducted more than $2,000 per year. Also, amounts less than or equal to $2,000 per year can only be deducted if all the ports of call are in the United States (or its possessions), and the ship is registered in the United States.
As you can see, there are many restrictions and limitations in deducting business trips that aren't all business. If you are planning one of these excursions and need some advice as to what amount may be tax deductible, contact us at info@zinnerco.com or 216.831.0733. We're ready to have a no-cost, no obligation conversation. 
