In general, you can deduct "ordinary and necessary expenses" for attending business meetings and conferences when the expenses directly relate to your business, job, or profession, says the Internal Revenue Service. With certain limitations, allowable expenses include travel, lodging, meals and associated out-of-pocket costs. However, use discretion with your deductions, lest you violate the rules of good judgment. For instance, extravagant expenditures for personal purposes are specifically not allowed.
The IRS provides a clue to allowable deductions with the term "ordinary and necessary business travel expenses," a term used on the IRS website (Tax Topic 511, Business Travel Expenses). Ordinary expenses are "common" and "accepted" in your occupation. Necessary expenses are "helpful" and "appropriate" for your occupation, according to IRS instructions for deducting business expenses. Both conditions, ordinary and necessary, must apply for expenses to be deductible, says the IRS. For instance, your purchase of conference training materials such as videos and books would likely fall within the ordinary and necessary guidelines. Leasing a jet to fly to the conference as the owner of a small dental laboratory probably would not.
Mixing Business with Pleasure
If you want to take extra days for a mini-vacation, the IRS will allow you to deduct your total travel costs when the main purpose of the trip is attending a conference, according to Barbara Weltman, author of "J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line." A good rule for business days versus pleasure days, according to SmartMoney.com, is, simply, to spend more days on business than on pleasure. You cannot deduct lodging expenses for your personal days. But, if you buy a reduced-fare ticket requiring stay-over days, you can deduct lodging for your stay-over days.
Travel, Meals and Entertainment
Round-trip travel is fully deductible when mixing business and pleasure (within the parameter of spending more days on business than pleasure, as discussed above). Days spent traveling are considered business days. When traveling by car, use the standard mileage deduction that's in effect for the year of your travel. Meals and entertainment fall under the 50-percent rule. Internal Revenue Code Section 274 requires a 50-percent reduction in allowable deductions for business entertainment and meals. These deductions, however, have enough exceptions to warrant advice from tax counsel to maximize allowable deductions. For instance, if you take employees to a conference, you can deduct the full amount of their meals and entertainment, whereas the 50-percent rule only applies to you.
A Family Affair
When you take the family to a conference, you can only deduct the business-related portion of your expenses. You cannot deduct the cost of the family's hotel suite; instead, deduct the cost of a single room for yourself. In instances of your hotel having a range of single room prices, play it safe by deducting the average price of a single room at that hotel.
Allowable expenses for you that belong to family members are not deductible. But if your spouse is involved in the business and attends conference meetings, spousal expenses are deductible. Rules for travel, entertainment, gifts and car expenses are fully explained in IRS Publication 463. Because the rules can be complicated, particularly for foreign travel, you may find it helpful to download a copy from the IRS website.
- Internal Revenue Service: Topic 511 - Business Travel Expenses
- Bankrate, Inc.: Tax Help for Business, Pleasure Trips
- Accountants CPA Hartford: The Meaning of Ordinary and Necessary Expenses
- NBC News: Tax Deduction for Work on Vacation?
- CPABiz: Travel & Entertainment Expenses
- Business Owner's Toolkit: Business Related Travel Expenses Are Deductible
- Internal Revenue Service: Deducting Business Expenses
George Boykin started writing in 2009 after retiring from a career in marketing management spanning 35 years, including several years as CMO for two consumer products national advertisers and as VP for an AAAA consumer products advertising agency. Boykin mainly writes about advertising and marketing for SMBs.