If you travel extensively on business, you probably know the drill: Either the airline or hotel, or both, may offer a lower rate if the stay includes a Saturday night. What’s the tax perspective?
Strategy: Stay until Sunday. Besides the discount, the cost of staying an extra day is usually deductible, even if your work has been completed.
Generally, you can deduct business travel expenses if the “primary purpose” of the trip is business-related. But the number of business days versus personal days is critical. Assuming you qualify, a Saturday layover may provide extra tax savings.
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 only costs $500. Also, 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, the total cost is $1,300 ($500 air fare + $400 lodging + $400 meals). So you save $800 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 a lower total cost. It doesn’t matter if the extra day is spent relaxing.
Tip: The discounted cost, plus the cost of the additional lodging and meals, must be less than the lowest available cost (not including a Saturday layover) when you booked the flight. (IRS Private Letter Ruling 9237014)