Can Vacations Be a Business Expense?
For small business owners, maximizing one’s business expenses really helps, because it enables you to reduce your tax liability — and therefore keep more of your income. But can you find ways to claim certain things — such as vacation costs — as business expenses?
Sometimes the answer is yes, but you have to be very careful, because the IRS doesn’t look kindly on schemes to make up business expenses. So determining what you can or can’t claim can be kind of like walking a fence line.
For example, as a freelance writer I might take a vacation and write a few travel articles on my destinations. But if all I do is write a restaurant review, I’ll be hard pressed to justify the plane tickets back and forth, unless going to that restaurant truly was the only reason I went.
As another example, say I have a friend in Canada and I’d like to go visit and see some of the sights. Well, just visiting the friend might not be a good enough reason to stand up under an audit, even if the friend is a colleague. If the friend is a potential client, it might work, but again that would depend on what I do while I’m there. The IRS might believe that a golf game is a valid business expense, or even a trip to attend a professional conference, but a one-week holiday in Lake Louise, Canada? Probably not.
Basically, business entertainment expenses must be valid costs of doing business. They don’t have to be indispensible, but they should be reasonable and not a stretch of the imagination. So think twice before you go claiming your Banff ski vacation as a business expense, and be sure to consult your tax attorney or accountant before doing anything too drastic!
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