Business-Vacation Trips Outside the U.S.

Travel expenses outside the U.S. are deductible if you can show:

  • The primary purpose of your trip was business and
  • You did not have control over arranging the trip.

If you're an employee that travels under a reimbursement or allowance arrangement, the IRS assumes you do not have control over the trip arrangements providing:

  • You're not a managing executive of the company
  • You're not related to your employer (e.g., employer is your spouse, parent, child, brother, sister, grandparent, or grandchild) or
  • You don't own more than 10% of the stock in the company.

If someone can override your decision regarding the necessity of the trip, you're not a managing executive.

Self-employed individuals:

A full deduction is allowed for transportation costs if:

  • The trip outside the U.S. took a week or less (not counting the day you left the U.S. but counting the day you returned).
  • If the trip lasted more than a week, and,
    • you spent less than 25% of your time, counting the days your trip began and ended, on vacation or other persona activities, or
  • Your primary purpose when planning the trip was business

If personal activities accounted for 25% or more of your time on a trip lasting more than one week, and you cannot prove that the vacation was a minor consideration in planning the trip you must allocate travel expenses between deductible business and nondeductible personal time spent on the trip.

How to allocate your time:

  • Number of days of business activities (include days of travel to and from a business destination), DIVIDED BY ...
  • Number of days spent on trip outside U.S. (including the day you left the U.S. and the day you returned), EQUALS
  • Percentage of time spent of business activities

Weekends and Holidays:

For purposes of the 25% business test, treat weekends and holidays as time spent on business for business meetings that are scheduled before and after weekends and holidays even if you go sightseeing or enjoy other personal-related activities.

For example, if meetings are scheduled for Friday and Monday, treat Saturday and Sunday as time spent of business for purposes of the 25% business test.

If you extend your business trip through the weekend in order to take advantage of lower air fares, you may deduct the additional expense of meals, lodging, and other incidental expenses.

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