Combining Personal and Business Travel

If you run your own company and travel for business, you may be tempted to combine work with pleasure. That's okay, as long as you don't trip up on the tax rules. Your tax professional can advise you as to what you can or cannot do.

Tax-Smart Travel

Business owners know that travel expenses related to work can offer significant tax deductions. Generally, businesses can deduct the cost of airfare, lodging, car rentals and meals from taxable income when used for legitimate business purposes.

When you combine personal and business travel, it gets a little more complicated. You can still deduct transportation costs for you, but not for any family traveling with you who don’t have a business reason to take the trip.

Also, you may only deduct the reasonable cost of lodging, which in this case would be single or double occupancy instead of a suite. You may also deduct the cost of shipping materials needed for business, your dry cleaning and even tips. You can’t, however, deduct a family golf outing, tennis lessons or massage.

Separate Expenses

It’s important to keep detailed records, with the days, locations, time involved, names of people you meet and your purpose of business. Know that the IRS won’t likely allow deductions for a day when you have a 15-minute meeting and spend the rest of the day with your family at a theme park.

You will have to allocate all of your expenses for tax purposes. For example, you may deduct the cost (including gas) of renting a car only during those days when conducting business. So, if you spend $500 for a 10-day rental and you put in five days for business, you deduct half of that as a business expense.

Finally, you will have to recognize the personal expenses paid by the company as an owner’s draw and part of your income.

Be Prepared

As with any travel, hope for the best and prepare for the worst. If you have a small travel-date window and live in an area with frequent airline delays and cancellations, consider travel insurance, and make sure you have the appropriate health insurance if traveling overseas.