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Is your summer vacation tax deductible?

One of the best things about the freelance lifestyle (especially if it’s your full-time gig) is the freedom and flexibility you have to work when and where you want. When summer comes, you can take full advantage of this benefit to enjoy a vacation or to combine business and pleasure by visiting a client or attending a conference or convention outside of your local domain. The extra bonus? You can deduct a good portion of the travel expenses related to your business. Here’s how to do it:

Personal and business travel expenses—keep them separated

If your trip is primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. However, you can deduct any expenses you incur while at your destination that are directly related to your business.

Here’s an example to illustrate the point: If you’re taking a trip to Martha’s Vineyard this summer and you have a client based there, you can schedule a meeting with your client and deduct your travel to the meeting and any meals you may have during the course of your business dealings, as long as you can prove that your meeting had a legitimate business purpose.

However, if you decide to stay a couple of extra days for personal reasons, then any meals or entertainment purchases you make will not be deductible.

The key to claiming such tax deductions is to keep your personal and business expenses clearly separated so that you can accurately record them.

Traveling abroad is your ticket to tax deductions

If your travel plans include a trip outside of the United States that is no more than a week (seven consecutive days, not including the day you depart from the United States), your trip will be considered entirely for business, making all eligible expenses tax deductible (even if you combine business and nonbusiness activities).

If your business trip abroad is longer than a week, but you spend less than 25 percent of your time on personal activities, your trip will also be considered entirely a business trip by the IRS so you can deduct all of your expenses.

For this purpose, you count both the day your trip began and the day it ended. If you are traveling abroad on a regular basis, you may wish to consult with a tax professional to be sure that you understand the specific tax rules related to your situation.

Planning a road trip? Gear up for tax deductions.

If your travel agenda is more locally based—perhaps a short road-trip to entertain a client at a summer activity such as a baseball game or outdoor concert—it is unlikely that your related expenses would be considered deductible by the IRS unless there was a “substantial business discussion” occurring prior to or following the event. In order to deduct your expenses in this case you don’t necessarily have to discuss your clients’ business during the seventh inning stretch, but you could take in the game before or after a business meeting and your travel expenses would be deductible.

If you and/or your client travel from out of town to attend an event and to have a business meeting, then you can still deduct a meal or entertainment expense that is incurred the day before or after your business meeting.

Explore your education options (and tax deductions) with conventions and conferences

Summer is a great time to pursue continuing education opportunities and to do some networking by attending conferences and conventions. When you attend such events directly related to your business, you can write-off your travel expenses.

As part of your documentation for the deductions you make, be sure to include a copy of the event program to prove that the event was clearly for the benefit of your trade or business. The same rules apply for conventions, seminars and conferences held outside of North America.

Bring along family or friends…just remember only your expenses are tax deductible

When it comes to having family or friends accompany you on a business trip, it is important to keep any expenses you incur for the business portion of your trip strictly separated from those that are personal expenses.

The IRS does not allow any deductions for travel and related expenses for family members or other companions unless they are traveling with you as employees of your business and are necessary to the business purpose of your trip.

As you start firming up your summer travel plans, keep these tax deduction tips (and your receipts) in mind—and remember to take time to fully enjoy the freedom of your freelance career.

Jonathan Medows is a New York City based CPA who specializes in taxes and business issues for consultants across the country. His website, www.cpaforfreelancers.com, has a resource section with how-to articles and information for freelancers.

Jonathan Medows Jonathan Medows is a NYC-based CPA who specializes in taxes for consultants across the country. His website has a resource section with how-to articles and information for freelancers.

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