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Three strategies for lowering your tax bill on foreign travel

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in Small Business Tax

When traveling internationally on business, a few  simple itinerary changes can help you save big on  taxes

Example: Say you’re scheduling a 10-day business  trip to London. Currently, you plan on spending  seven days on business matters and three days  sightseeing. (Your business days include the two  travel days to fly in and return home.) The roundtrip  airfare costs $1,500.

At this point, only a portion of your airfare is  deductible because you don’t meet any one of the  four tests described in the story at left. So, your  transportation deduction is limited to $1,050  (seven business days of 10 total days). The other  $450 is not deductible. Of course, you can still  deduct your lodging expenses and 50 percent of  your meal expenses for your business days.

Strategy 1: Change your plans slightly—  spend one less day sightseeing, for example—and  you can deduct 100 percent of your airfare.

If the trip lasts a week or less, the day of departure  doesn’t count as a day spent abroad. But the  day that you return home does. For a trip lasting  more than a week, both days count.

Strategy 2: Leave home at night and return  in the morning, effectively adding two business  days to your trip. Then, if you spend just one more  day abroad on business, you’ll be spending less  than 25 percent of your time (three of 13 days) on  nonbusiness matters.

Note that if your plane makes a stop on U.S.  soil, the portion of the trip within the United  States is not subject to the allocation rule (assuming  the overall purpose of the trip is for business).

Strategy 3: Book a flight that stops over  within the United States but close to your foreign  destination. Then, allocate the trip’s cost based on  mileage. You can deduct 100 percent of the cost of  travel within the United States and a percentage  of the remainder, under the rules discussed above.

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