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How would you like to legally deduct every dime you spend on vacation this year? This financial guide offers strategies that help you do just that.
Tim, who owns his own business, decided he wanted to take a two-week trip around the US. So he did--and was able to legally deduct every dime that he spent on his "vacation." Here's how he did it.
1. Make all your business appointments before you leave for your trip.
You must have at least one business appointment before you leave in order to establish the "prior set business purpose" required by the IRS. Keeping this in mind, before he left for his trip, Tim set up appointments with business colleagues in the various cities that he planned to visit.
Let's say Tim is a manufacturer of green office products looking to expand his business and distribute more product. One possible way to establish business contacts--if he doesn't already have them--is to place advertisements looking for distributors in newspapers in each location he plans to visit. He could then interview those who respond when he gets to the business destination.
2. Make Sure your Trip is All "Business Travel."
3. Make sure that you deduct all of your on-the-road -expenses for each day you're away.
4. Sandwich weekends between business days.
5. Make the majority of your trip days business days.
All of them. Thursday is a business day since it includes traveling - even if the rest of the day is spent at the beach. Friday is a business day because he had a seminar. Monday is a business day because he met with prospects and distributors in pre-arranged appointments. Saturday and Sunday are sandwiched between business days, so they count, and Tuesday is a travel day.
Since Tim accrued six business days, he could spend another five days having fun and still deduct all his transportation to San Diego. The reason is that the majority of the days were business days (six out of eleven). However, he can only deduct six days worth of lodging, dry cleaning, shoe shines, and tips. The important point is that Tim would be spending money on lodging, airfare, and food, but now most of his expenses will become deductible.
With proper planning, you can deduct most of your vacations if you combine them with business. Bon Voyage!