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Are
you planning a vacation this
summer? Two-thirds of Americans have at least one
leisure trip planned this summer, according to a
recent poll by Harris Interactive, a Nielson
Company. That's 2 percentage points higher than last
year's poll and 6 points higher than 2012. AAA
expects 2014 to be the busiest travel season since
2000, thanks to economic improvement and pent-up
demand.
Leisure Travel Trends
Beaches are the most popular destination, attracting
44 percent of summer travelers. The average leisure
traveler plans to spend $1,779, up more than $100
from last year ($1,665).
Road trips remain popular, despite relatively high
gas prices. In addition to being less expensive than
air travel, many travelers see road trips as a way
to tune in to their families.
Combining Business with Pleasure
On the flip side, the Harris poll revealed that
business travel is declining. Only 14 percent of
respondents have a business trip planned this
summer, down 3 points from last year and 9 points
from five years ago. Many budget-conscious companies
rely less on business travel and more on telephone,
video and Internet conferencing these days.
If you're bucking that trend and planning a business
trip, consider turning it into a personal getaway
this summer. You may be able to save substantial
costs compared to a leisure-only trip.
Most companies will pay for an employee's airfare,
hotel, rental car and meal expenses. So, solo
travelers will find most major costs covered. If the
employee chooses to bring along his or her family,
incremental costs are generally paid by the employee
personally -- or the employee reimburses the company
later on.
 Example. A
family extended Mom's three-day business trip to
Orlando into a Disney getaway. The employer paid for
mom's ride to the airport ($80), her airfare ($300),
three-night's stay at an Orlando hotel within
driving distance to the parks ($750) and a car
rental for three days ($120). Mom was also able to
expense her company's per diem allowance for meals
($25) on the two nights that she wasn't dining with
clients. The total was $1,300.
Employees can also use business
travel to build up reward points with preferred
hotels and airlines. Reward points might be able
to be converted to free hotel stays and plane
tickets for personal use. Business travelers should
select preferred brands and sign up for rewards
programs. Points add up quickly -- and are easy to
redeem.
Opportunities for Business Owners
The cost savings may be even more substantial
for self-employed people due to tax deductions, but
business owners must be careful to follow the rules
to ward off the IRS.
Federal tax law allow self-employed individuals to
deduct 100 percent of their transportation costs for
business travel within the United States.
Transportation expenses include plane tickets, the
cost of getting to and from the airport at both ends
of the trip, and luggage handling tips. The same
rules apply if you travel by car or rail, rather
than by air.
The
catch. The
primary reason for your trip must be business,
rather than personal pleasure. If vacation is the
primary motivation for your travel, you can't deduct
any of your transportation expenses, even though you
may conduct substantial business during the trip.
How do you determine if the purpose of a trip is
primarily for business or pleasure? There are no
concrete rules, but you can claim a trip is mainly
for business when your business travel days exceed
your personal travel days.
Here's a summary of what counts as business days:
Travel Days. Days
that you travel to and from your destination count
as business travel days. Interim travel days to
arrive at non-business destinations don't count as
business days, however.
Working Days. These
are days that you spend the bulk of your time during
normal business hours working. You can include
weekends and holidays that fall between business
days, as long as it is impractical for you to return
home on those days.
Standby Days. When a
customer or client requests that you stick around
just in case you are needed, you can count those
"standby" days as business days, too, whether or not
you're actually called into work.
Delays and Cancellations. Days
that you intended to work, but could not for reasons
beyond your control, also count as business days.
For example, your meeting might be canceled because
the power goes out or your customer falls ill.
The payoff for all this counting of days comes when
you can plan your trips to include more business
days than personal days. As long as that basic
guideline is met, you can deduct all your
transportation costs even though you may spend a
good amount of time playing golf and hanging around
the pool.
Just remember to keep a log and carefully chronicle
all business activities, including the date and
amount of time spent on each one. If you get
audited, the IRS will want to see proof of what you
were doing during any travel you claim was for
business. Good records are your best defense.
Can you bring your family? Unless family members are
employees of your business, you can't deduct their
airfare. But in terms of the hotel bill, you can
write off the cost of what you would have paid
traveling alone.
Example. You
decide to turn your business trip to San Diego into
a romantic getaway with your spouse. The hotel
charges $250 for a double-room and $220 for a
single. You can deduct $220, rather than half of the
double rate ($125). To prove your deduction, ask the
hotel for a room rate schedule showing single rates
for the days you stay.
Saturday Night Stay-Over Rule
You may be eligible to use the "Saturday night
stay-over rule" to gain even more deductions when
you mix pleasure with business travel. Here's
how: If staying over on Saturday night reduces
the airfare for your business trip, you can deduct
the out-of-pocket cost of staying the extra time
even though you spend it vacationing. Just make sure
the extra cost of the stay-over is less than or
equal to your airfare savings.
Example. You
leave Thursday morning on a trip to attend business
meetings that take up most of that day and Friday
morning. Then you stay over the rest of Friday and
all day Saturday before returning home late Sunday
afternoon. By staying over Saturday night, you
reduce the airfare cost from $1,700 to $600 (a
savings of $1,100). Your additional out-of-pocket
costs for meals and lodging on Friday night,
Saturday, and Sunday total only $550 ($350 for the
hotel and $200 for meals).
Thanks to the Saturday night stay-over loophole, you
can deduct your meals and lodging for all
out-of-town days (subject to the 50 percent rule for
meals). And you can deduct all your transportation
costs, because the trip was primarily for business
purposes.
Rewards Programs for Business Owners
In addition to signing up for hotel and airline
reward programs, business owners can sign up for
corporate credit cards that accrue reward points
that are redeemable for personal travel
expenditures.
You can also set up employees' corporate credit
cards to accrue reward points into the corporate
account or the owner's personal account. Businesses
with large mobile sales teams and that purchase
equipment using credit cards can build up millions of
reward points each year. These reward points may
have significant value that is transferable to third
parties. In fact, some owners address reward point
programs in their estate plans -- or periodically
gift points to family members.
Consult with Your Tax Adviser
Different rules apply if you
travel outside the United States, even for part of
the trip. Contact your tax adviser for if you have
questions about deductible travel expenses.
Contact Us
For more information, please contact
Boris Benic, CPA,
at 516-248-7361,
or click here to email Boris.
He would be happy to address any questions you may
have.
Source: Bizactions
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