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Travel in grand tax style with your spouse

by on
in Small Business Tax,Small Business Tax Deduction Strategies

Usually, you can’t deduct the cost of taking your spouse along on a business trip unless he or she is employed by the company. But that doesn’t mean you must pay the full cost out of your own pocket.

Strategy: Invite your spouse on business trips to popular destinations. The extra cost is technically nondeductible, but you still qualify for tax breaks. Reason: The tax law permits you to deduct what it would have cost you to travel alone, even if that’s more than half of what it would cost the two of you to travel together. So you can combine a business trip with a mini-vacation and still write off a good portion of it.

Example: Suppose you’re finalizing a business deal with a client located in a resort area. You and your spouse drive 500 miles to the business destination and spend a total of 10 days away from home. During the trip, you spend eight days in business meetings and two days sightseeing and relaxing with your spouse. Here’s the tax breakdown in three steps.

1. Despite your spouse’s presence, there is no difference in your auto expenses. If you use the standard mileage rate for business travel (55.5 cents per mile for 2012), you may deduct $555 for the round trip (1,000 miles x 55.5 cents) even though the gas costs only $150.

2. You can deduct 50% of your meals on business-related days plus 50% of the meals for both of you when you dine with the client. Assume your meals cost $100 a day and the tab for your spouse’s meals at seven business dinners is $560.  Thus, you can deduct $680 for meals (50% of $800 + 50% of $560 for your spouse).

3. Finally, you can deduct eight nights at the hotel at $200 a night for a total of $1,600—the cost of a single room—even though the double costs you $225 a night.  

This brings your total deduction to $2,835 ($555 gas + $680 meals + $1,600 lodging). The cost of the trip, discounting incidentals, comes to $4,400 ($150 gas + $2,000 meals + $2,250 lodging). So you’re able to write off more than half of the trip’s total cost.

Tip: The IRS says that the two weekend days between business meetings also count as business days (as do any business travel days). Therefore, if you take time off during the intervening weekend, your total deduction jumps to $3,335 ($555 gas + $780 meals + $2,000 lodging), or more than 75% of the entire cost.

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