June 4, 2010 12:00 am

Summertime Fun and Tax Savings

Summertime for many people means vacation time and travel opportunities. As summer rapidly approaches, recognize that the type of vacation you schedule can produce favorable tax results.

Combine Business with Pleasure

If you travel out of town on business, but tack on vacation days at the beginning or end of your trip, the business portion of the trip is deductible. This means all of the cost of the airfare is a business deduction as long as the trip is primarily for business. There is no bright line test for “primarily,” but most experts agree that the majority of days must be spent on business or there must be some special business reason for the trip.

Let’s take an example: If you fly from Los Angeles to New York City for five days of business and then spend three days relaxing in the Poconos in Pennsylvania, the cost of the trip to and from New York is deductible; the additional days in the Poconos, plus the cost of getting there, is not.

An overnight Saturday stay because of receiving a cheaper airfare is not treated as a personal travel day. Thus, the cost of meals (less 50%) and lodging for that extra day is deductible. This is so even though you spend that day sightseeing, golfing, or visiting family or friends. Of course, the cost of these activities is not tax-deductible.

Note: Special rules apply to travel outside the United States, which may bar some or all of your airfare even though you do business abroad. Travel abroad for educational purposes, such as a French teacher going to France in the summer to improve language skills or an architect traveling Europe to view buildings, is not deductible.

If you take continuing education courses to maintain a professional license and the courses happen to be given in a resort location, you can enjoy yourself while claiming a tax deduction. The key to deductibility is to register daily for the courses and keep track of your activities.

Be a Do-Gooder

If you spend your vacation days giving of your time and talents to help your favorite charity, you can write off your out-of-pocket expenses incurred for the charity. This includes:

  • Airfare, food, lodging, and other out-of-pocket expenses you pay in order to work for Habitat for Humanity or other charity.
  • Use of your car at 14¢ per mile.

You can’t deduct anything for your time or services, even if the charity would have had to pay someone for the services you performed if you hadn’t done them as a volunteer.

There are volunteer opportunities to help children, animals, Native Americans, the environment, and more. Check CharityGuide (http://charityguide.org) for vacation volunteer opportunities.

Rent Out Your Home While You’re Away

Is your home in a vacation spot? You may be able to pocket tax-free income while you’re away on vacation. Rent out your home for less than 15 days and you don’t have to pay tax on the rental income; you don’t even have to report this income.

You can deduct the usual real estate taxes and mortgage interest on your home, but maintenance and other costs related to the rental are not deductible.

Caution: In the case of renting out your primary residence, the exclusion of up to $250,000 ($500,000 for joint filers) on the sale of the home may be impacted by this “nonpersonal use.” The tax law says gain related to any nonpersonal after 2008 does not qualify for the exclusion, but the IRS has yet to issue guidance on a temporary absences for vacations or rentals under 15 days.

Tax Glossary

Ordinary loss

A loss other than a capital loss.

More terms