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The Tax Prophet Newsletter   Issue # 38 July, 2006


In This Issue:
Bus. Travel
Bus. Days
Audit Tips
Sat. Night

Deducting Personal Travel


Self-employed individuals are notorious for deducting personal expenses as business expenses, from the cost of their clothing, to full-use of their cars, to family dining and vacations.

Often these taxpayers are either ignorant of the tax laws or they decide to play audit roulette and hope they never get caught.

However, with an understanding of the rules and a little planning, personal vacations may be combined with tax-deductible business trips. Here's how:

Business Travel

Travel in the U.S. is totally deductible, provided the "primary" purpose is business. This is an easy standard to meet. "But for my business meeting with Ms. Aloha, I never would have traveled to Hawaii." A trip is primarily for business when your business travel days exceed your personal travel days, so plan a couple of business meetings on successive days.


Travel for business includes all of your transportation expenses (plane tickets, costs of getting to and from the airport, and luggage handling tips). These same rules apply if you travel by train or car.

All out-of-pocket expenses (e.g. hotel bills, cab fares, seminar fees, car rentals) for business days during your trip are deductible. Out-of-pocket costs for personal days are generally not deductible.

Remember: The general 50% limitation on meals applies to business travel meals as well.

Business Days

Business days include travel days, days when you spend the majority of your time working during normal business hours, weekends and holidays that fall between business days (as long as it is impractical for you to return home during those days), standby days (days when your client asks you to stick around in case they need you, regardless of whether or not you actually work) and days you intended to work, but could not do so for reasons beyond your control (e.g. power failure, your customer gets sick).

Audit Tips

Count all eligible business days. Keep written records, including dates, time and length of your business activities (notations in your paper or electronic calendar will suffice). Make notations on credit card slips as you receive them or on your monthly credit or debit card statements describing the business purpose for the expense.

Tip: Use a separate charge or debit card for business activities, rather than combining personal and business activities on one card.

Saturday Night

Use the Saturday night stay-over rule for larger tax savings. If you can reduce the airfare for your business trip by staying over on a Saturday night, you can deduct the out-of-pocket costs of staying the extra time, even if you spend it vacationing, provided the extra cost of the stay-over is less than or equal to your airfare savings. You can also deduct your lodging and meals (subject to the 50% limitation on meals) during the weekend.

Family Travel

You may deduct the cost for your travel, even if your spouse and children accompany you. For instance, if you travel by automobile, there is no additional cost for your spouse and children to travel in the car with you. Of course, if you travel by plane or train, the cost of separate tickets for your spouse and children is not deductible.

You may deduct the cost of the hotel room at the rate for a single person.

Tax Tip: Make your spouse an employee of your business and deduct airfare and other travel costs.

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All contents copyright 1995-2006 Robert L. Sommers, attorney-at-law. All rights reserved. This newsletter provides information of a general nature for educational purposes only and is not intended to be legal or tax advice. This information has not been updated to reflect subsequent changes in the law, if any. Your particular facts and circumstances, and changes in the law, must be considered when applying U.S. tax law. You should always consult with a competent tax professional licensed in your state with respect to your particular situation. The Tax Prophet is a registered trademark of Robert L. Sommers.