8743 / Can a taxpayer deduct travel expenses for a trip that has both business and personal elements?
The deduction for otherwise personal expenses incurred while a taxpayer is away from home for business purposes is only allowed to the extent that the travel is reasonable and necessary for a taxpayer’s trade or business. However, because there have been many instances where a taxpayer attempts to deduct expenses for what essentially constitutes a personal vacation, the IRS has developed rules that govern a trip that combines both business and personal elements.
If the primary purpose behind a taxpayer’s trip is personal, no travel expense deductions for expenses incurred in traveling to and from the destination will be permitted even if the taxpayer does, in fact, engage in some business activities during the course of the trip. However, if a trip has both business and personal elements, the taxpayer may deduct those expenses that are properly allocated to the business portion of the trip even if unable to deduct the expense of traveling to and from the destination because it is found that the trip was primarily undertaken for personal reasons.1
Whether a trip is primarily business-related or primarily personal is a question of fact. Though all facts and circumstances must be considered, the IRS has provided that an important factor is the amount of time spent on business compared to the amount of time spent on the taxpayer’s personal activities.
Planning Point: If, for example, a taxpayer spends one week while at a destination on activities which are directly related to his trade or business and subsequently spends an additional five weeks for vacation or other personal activities, the trip will be considered primarily personal in nature in the absence of a clear showing to the contrary. 2
Travel expenses for the taxpayer’s spouse (or other family member) to accompany the taxpayer on a business-related trip are not deductible unless the taxpayer is able to show that there is a bona fide business purpose for the spouse or family member’s presence. This is the case even if it is found that the taxpayer’s trip is primarily business-related.3