Sounds great doesn’t it? Work and vacation in one, especially if you can just write off your family vacation on your taxes! So, here’s the question we’re discussing in this article: So can you write off your family vacation if you undertake training or work as a fitness professional for a session or two at your vacation destination?
The answer is Yes and No.
If you follow the rules laid out by the IRS, business owners are permitted to “write off” or deduct some aspects of their vacation expenses, even if the trip is not solely for business.
There are some key guidelines you should be aware of, in advance of your trip. One of the key takeaways from this article should be that you can’t do this in hindsight. You have to plan it!
You Must Schedule Fitness Related Business Appointments Before You Leave
For a trip to be even partially deductible, you must have at least one business-related appointment set up before you leave home. Specifically, the IRS requires you to be able to demonstrate a “prior set business purpose.” Documentation of these appointments set up in advance is essential, and you should keep a copy of your correspondence and diaries showing scheduled appointments. This is key: do not leave on your trip “hoping” to turn it into a business trip along the way. Make sure you maintain evidence that you had at least one meeting set up prior to the trip. This could be a certification course, or a paid training session where you will be coaching.
Be a Smart Scheduler
Smart scheduling on your part can optimize the deductability of the trip. A helpful equation: count of the days of your travel and make sure that the days where the primary purpose of the travel is business outnumber the vacation days. Your travel days count as business days, as do weekends, if you have a meeting on a Friday, and another on a Monday. This way your travel would be 100 percent deductible, and your out of pocket would be the expenses related to your vacation days.
Is the Travel Primarily for Business Purposes?
Keep the helpful equation above in mind as you plan your schedule. Also note that you must be traveling away from your office or place of business for longer than an ordinary day of work. Once you have been away from home for at least for one night, you can deduct 100 percent of transportation costs – whether airfare or mileage. Any layovers or stops made for personal reasons cannot be deducted.
Only Your Expenses Are Deductible
While it can be great to have your family along for the ride, you are only allowed to deduct the expenses you would typically incur if you are traveling solo. Only your ticket, for example, if you travel by air is deductible. If you travel by car, it is 100 percent deductible because you would incur the same expense alone. It should also be noted that only 50 percent of the cost of your food is deductible, along with only the lodging you would normally have occupied. In practice, this means if you typically rent a single hotel room, but you need a suite so there is room for your children, you can only deduct the cost of the room you would normally book.
What is Deductible?
There are specific rules about what you can and cannot deduct if you bring your family (including a significant other) with you on a business trip. IRS Pub 463 lays out all the details, but here is a short summary:
- For every day on your trip that is a business day, you can deduct 100 percent of your lodging, tips, and car rentals. For example, you will be able to deduct your hotel bill for those business days (but not for the extra vacation days). The cost of a hotel room will still be deductible, but only up to what the room you usually book (when traveling without family) would cost. For example, if a single room at a hotel would cost $190 and a family room costs $260, then only $190 would be deductible.
- You can deduct 50 percent of your food costs (this includes tip and tax), for every day that’s considered business.
- If Business travel includes use of your car, you can deduct business-related mileage, tolls, and parking as well. Rental car costs or taxi rides to and from work locations or the airport will be fully deductible since the cost is the same regardless of how many people are in the car.
- You can also deduct other travel-related expenses that are “ordinary and necessary” (for example, baggage fees, laundry, or dry cleaning).
- Shipping baggage and sample or display material between your regular and temporary work locations if it is necessary for your business activities. This could include fitness apparel and equipment needed for your business travel.
- Important Reminder: Any separate costs incurred by family members are not deductible (this includes meals).
Travel Outside the United States has additional requirements
The above rules only apply for travel within the United States. If you plan to travel internationally, the IRS has stricter standards when allowing for deductions. For the complete set of rules about deductions for overseas travel, see IRS publication 463.
In summary, for an international trip to be deductible it must be more than 75% business if you are traveling for longer than 1 week. If your trip doesn’t meet that threshold, your travel costs must be prorated.
Documentation is the fountain of youth.
Okay, well, maybe not; but in the case of deductibility of business travel, documentation will help you survive an audit! Keep copies of itineraries, schedules, programs, receipts, work calendars and anything else that will help verify the number of days of your trip and those days that were work days. You can use a scanner or other app to save this documentation – just be aware that a credit card receipt without an itemized receipt is not sufficient.
While the IRS does not require that keep receipts for expenses less than $75, you do need to keep a log of the time and date of expenses. In addition to the diary and pencil method, there are a number of apps that allow you to keep these records and send yourself expense reports that can be passed onto your accountant or used as you prepare your own taxes.
Whatever method you use, you need to be able to keep track of the time, place, amount and business purpose of each expense. This includes who you spoke with at what meal, the topic, and the relevance to your business. For example, if you take a client to dinner, you will need to have evidence of the name and location of the restaurant, who was present and what business was discussed to satisfy an auditor. One habit encouraged by some accountants is to write the information about attendees on the itemized receipt from the restaurant (which usually also includes location and name).
Note: Instead of keeping track of the exact cost of meals during business travel, the IRS allows for a per diem (a set amount for meals per day). Be aware that this isn’t an option for international business travel. Talk to your accountant about what makes the most sense for your fitness business.
So can I write off my family vacation if I complete a certification course or meet with a client for a personal training session at my vacation destination?
Remember that your intentions matter. Is a business trip with some vacation days as well, or a family vacation where you’re trying to get a business tax deduction? As I’m sure you’re aware, there are serious penalties if you are unable to substantiate your claim if you are audited – you not only lose that deduction and be liable for additional tax, as well as interest and penalties. Don’t mess with the IRS!
Follow the IRS’s rule and there’s no reason you can’t add a few extra days of fun when you are traveling for business as a fitness professional. Good documentation habits can pay off!