• Home
  • About
    • Rave Reviews
  • Services
    • For Individuals
      • Estate Planning Done Right
    • For Small Businesses
    • Tax Problem Resolution
      • "Innocent Spouse" IRS Relief
      • Bankruptcy Options That Work
      • Find Out What The IRS "Has" On You
      • Non-Filed Returns--Done For You
      • Payroll Tax Protection
      • Protection from IRS Asset Seizure
      • Protection From IRS Levies
      • Protection From Wage Garnishments
      • Safeguard Yourself From IRS Liens
      • Settle Your IRS Debt for Pennies on the Dollar
    • Tax Services
      • IRS Representation For You
      • Tax Planning For Big Savings
      • Tax Preparation Done Right
    • Additional Services
  • Tools & Resources
    • Financial Calculator Gallery
    • Refund Tracker
  • Contact Us
  • Blog

Call Now: (770) 984-8008

Email E. Dennis Bridges, CPA

How Does Combining a Vacation with a Foreign Business Trip Affect the Tax Deduction for Travel Expenses of a Self-Employed Individual?

Article Highlights:

  • Primarily Business
  • Primarily Vacation
  • Special Circumstances
  • Foreign Conventions, Seminars and Meetings
  • Cruise Ships
  • Spousal Travel Expenses

 

Note: effective for years 2018 through 2025, the Tax Cuts and Jobs Act of 2017 suspended the deduction of miscellaneous itemized expenses that must be reduced by 2% of the taxpayer’s adjusted gross income. Employee business expenses, including travel expenses, fall into this category. Therefore, this discussion only applies to self-employed individuals for years 2018-2025.

When a self-employed individual makes a business trip outside of the U.S. and the trip is 100% devoted to business, all of the ordinary and necessary business travel expenses are deductible, just as if the business trip were within the U.S. On the other hand, if the trip also incorporates a vacation, special rules determine the deductibility of the travel expenses to and from the destination; when the other business travel expenses, such as lodging, meals, local travel and incidentals, can be deducted; and when they must be allocated. So, whether you are just visiting one of our neighboring countries or traveling to Europe or even more exotic locales, here are some travel tax pointers:

Primarily Vacation – If the travel is primarily for vacation and only a few hours are spent attending professional seminars or meeting with foreign business colleagues, none of the expenses incurred in traveling to and from the general business location are deductible. Other travel expenses must be allocated on a day-by-day basis, and only the business portion is deductible.

Primarily Business – If the trip is primarily for business and meets one of the conditions listed below, the expenses incurred in traveling to and from the business destination are deductible in full (same as for travel within the U.S.).

  • The travel outside the U.S. is for a period of one week or less (seven consecutive days, excluding the departure day but including the day of return). In addition, all other ordinary and necessary travel expenses are fully deductible.
  • Less than 25% of the total time outside the U.S. is spent on non-business activities. In addition, all other ordinary and necessary travel expenses are fully deductible. (If 25% of more of the total time is spent on non-business activities, a day-by-day allocation of all travel expenses between personal and business activities is necessary and only the business portion is deductible.)
  • The individual incurring the travel expenses can establish that a personal vacation or holiday was not a major consideration. In addition, all other ordinary and necessary travel expenses are fully deductible.
  • The taxpayer did not have “substantial control” over arranging the trip. (For self-employed taxpayers, who would generally have substantial control over the trip arrangements, this provision likely won’t apply.) In addition, all other ordinary and necessary travel expenses are fully deductible.

When determining what constitutes business and non-business time, business days include: days en route to or from the business destination by a reasonably direct route without interruption; days when actual business is transacted; weekends or standby days that fall between business days; and days when business was to have been transacted but was canceled due to unforeseen circumstances.

Non-business days are days spent on non-business activities as well as weekends, holidays and other standby days that fall at the end of the business activity, if the taxpayer remains at the business destination for personal reasons.

Foreign Conventions, Seminars or Meetings – Tax law does not permit a deduction for travel expenses to attend a convention, seminar or similar meeting held outside of the North American area unless the taxpayer establishes that:

  • The meeting is directly related to the active conduct of the taxpayer’s trade or business, and
  • It is “as reasonable” for the meeting to be held outside of the North American area as it is within the North American area.

The IRS defines “North American area” quite broadly and includes not just the U.S., Canada and Mexico, as you would expect, but also Bermuda, several countries in the Caribbean basin, U.S. possessions such as American Samoa and other Pacific island nations, and some Central American countries as well.

Cruise Ship Conventions – In order for a taxpayer to deduct the cost of attending a convention related to his or her trade or business on a cruise ship, the ship must be a U.S. flagship, and all the ports of call must be within the U.S. or its possessions. In addition, the maximum deduction is limited to $2,000 per attendee. Substantiation requirements include certain signed statements by both the taxpayer and an officer of the convention sponsor.

Spousal* Travel Expenses – Generally, deductions are denied for travel expenses for a spouse, dependent or employee of the taxpayer on a business trip unless:

  1. The spouse is an employee of the taxpayer, and
  2. The travel of the spouse, etc., is for a bona fide business purpose, and
  3. The expenses would otherwise be a deductible business travel expense for the spouse.

*These rules also apply to a dependent or employee of the taxpayer.

Since a spouse, dependent or other individual who is an employee will be denied a deduction for business travel expenses in years 2018 through 2025, condition #3 can’t be met. This means that “spousal” travel expenses won’t be deductible for years 2018 through 2025.

However, the law allows a deduction for the single rate for lodging on qualified business trips, and frequently, there is no rate difference between one and two occupants. Thus, virtually the entire lodging expense for an accompanying spouse will be deductible. When traveling by car, the law does not require any allocation because the spouse is also traveling in the vehicle. Thus, if traveling by vehicle, the entire cost of the business-related transportation would be deductible. This would generally also apply to taxis at the destination.

As you can see, determining the tax deduction for a foreign business trip of a self-employed individual that is combined with a vacation can be complicated. If you need additional tax guidance or help planning such a trip, please give this office a call.

More from my site

  • Dennis Bridges Reveals 5 Ways We Avoid Keeping Better Money HabitsDennis Bridges Reveals 5 Ways We Avoid Keeping Better Money Habits
  • Always helpful and friendlyAlways helpful and friendly
  • Getting Rid of Worry Over Your Small BusinessGetting Rid of Worry Over Your Small Business
  • Greater Atlanta Tax Expert on Making Sure Your 2014 Taxes Are Done RightGreater Atlanta Tax Expert on Making Sure Your 2014 Taxes Are Done Right
  • Super Fraud Checklist for Your BusinessSuper Fraud Checklist for Your Business
  • Making Money Work In a MarriageMaking Money Work In a Marriage
This entry was posted on Thursday, June 13th, 2019 at 6:09 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

New Strategy Posts for your Finances

Looking Ahead to 2019 Taxes

Looking Ahead to 2019 Taxes

You have your 2018 tax return filed, or perhaps on extension, and now it is time to look forward to [...]
Student loans --- YECH!

Student loans --- YECH!

As a general rule, most debt isn't helpful to you. In fact, I could probably state that more clearly[...]
We Love Sharing Good News: A Happy Tax Story

We Love Sharing Good News: A Happy Tax Story

Here at Team Bridges, we love cutting income taxes for you, just so you can keep a LOT more of your[...]
Four Good Reasons To Give, No Matter The Tax Deduction

Four Good Reasons To Give, No Matter The Tax Deduction

"When in doubt as to what you should do, err on the side of giving." - Tony Cleaver As often is [...]
Resisting Financial Automation

Resisting Financial Automation

What if we thought differently about autopay? What if we were to take a moment to consider the co[...]
Tweets by @EDBridgesCPA

Rave Reviews

Always helpful and friendly

December 7th, 2013

"Tim and I couldn’t be happier with what Dennis and his whole office have done for us with our taxes[...]

I saved more

December 7th, 2013

“I saved more taxes in one hour with Dennis’ strategies than I did with my previous accountant in th[...]

He saved us over $5000

December 7th, 2013

"Somebody told me about Dennis Bridges so I figured I’d give him a try. We had about the same gross [...]

He understood my situation

December 7th, 2013

“I would’ve never believed it if I didn't see it with my own eyes… I owed the IRS over $54,000 for s[...]

Latest Posts

  • Looking Ahead to 2019 Taxes
  • How Does Combining a Vacation with a Foreign Business Trip Affect the Tax Deduction for Travel Expenses of a Self-Employed Individual?
  • Student loans — YECH!
  • We Love Sharing Good News: A Happy Tax Story
  • Four Good Reasons To Give, No Matter The Tax Deduction
  • Resisting Financial Automation
  • What to Do When You’re A Saver and Your Spouse is a Spender (or Vice Versa)
  • Making Money Work In a Marriage
  • Tax Tips for First Time Return Filers
  • Ill-gotten Gains

Get our
Exclusive Free Report:

 

"The Top 5 Personal Tax-Saving IRS 'Secrets' For Surviving Tough Economic Times"

 

We'll also add you to our popular, weekly

Real World Strategy Notes

 
Interesting Image
 
 

SECURE & CONFIDENTIAL Your information will never be rented, traded or sold. We guarantee your confidentiality. We hate those spam criminals even more than you do! You will receive the promised report, as well as timely strategies for growing your personal or business finances.

E. Dennis Bridges, CPA | 234 Creekstone Ridge, Woodstock, GA 30188 | (770) 984-8008

© Copyright 2014 – E. Dennis Bridges, CPA – All Rights Reserved