Saturday night’s all right for traveling, so make it a sleepover

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in Small Business Tax,Small Business Tax Deduction Strategies

If you travel extensively on business, you probably know the drill: Both the airline and the hotel often will offer a lower rate if the stay includes a Saturday night. With oil prices still escalating, the discount is usually worthwhile for someone working through Friday.

Strategy: Stay until Sunday. Besides the discount, the cost of staying an extra day is deductible as business travel, even if the work has been completed.

Start with the basic premise that business travel costs are deductible if the “primary purpose” of the trip is business-related. The number of business days versus personal days is critical. If you qualify, a Saturday layover may provide cash savings without any tax detriment.

Example: You’re scheduled to fly into town on business Wednesday and leave Friday night. The round-trip air fare costs $1,200, but if you return on Sunday morning instead, it costs only $500. Similarly, the hotel normally costs $200 a day, but the daily rate is cut in half if you stay over Saturday night.

If you spend $100 on meals each day, the three-day business trip would cost $2,100 ($1,200 air fare + $600 lodging + $300 meals). But if you stay through Saturday and leave on Sunday, the total cost is only $1,600 ($500 air fare + $700 lodging + $400 meals). So you save $500 with just a slight change in your travel plans.

The IRS has said a taxpayer in this situation can deduct lodging costs and 50% of the meals for all four days if he or she is staying longer to qualify for discounted air fare that lowers the overall cost of the trip. It doesn’t matter if you spend the extra day on R&R.

Tip: The discounted rate, plus the cost of the additional lodging and meals, must be less than the lowest available fare (not including a Saturday layover) when you booked the flight. (IRS Private Letter Ruling 9237014)

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