Kelly Bullis
I once had a client tell me that he thought the greatest benefit of owning a small business was “freedom.” That he could arrange his affairs to match his life and to minimize the amount of taxes he paid… legally.
One such great benefit involves business travel. If your spouse is able to travel with you (no little crum-crunchers in the house any longer?), and your spouse likes to participate in the running of your business, it’s time you recognized reality and make your spouse an employee of your business.
On top of now giving your spouse access to all the benefits of your other employees (retirement, health insurance and various other perks) your spouse can now travel on behalf of your business and have all their travel expenses be deductible.
So, let’s play a little hypothetical game here. Let’s say you travel periodically for your business, and your spouse usually accompanies you on those trips. Up to now, your spouse’s direct costs to travel with you have not been tax deductible. Air fare, meals, etc.
Now, instead, your spouse is an “employee” of your business, all their travel expenses just became deductible.
If you decide to mix in a little pleasure, if you work it out right, it is still 100% deductible. Let’s say you spend five weekdays on business. The air fare to travel back at peak days (Friday through Sunday) is offset by just staying a couple more nights before flying back. Up to this point, all by yourself, the entire cost of the business trip, including those two extra days to wait for lower air fares, is 100% deductible. If you took along an “employee” the 100% deductibility doesn’t change. You could still do some personal related things on that weekend while waiting for the lower cost travel day. Of course, personal-related activities, such as going to a sporting event, a show, a concert, etc., is still not deductible, but all the other costs (including meals) are deductible.
The key is to not be greedy. The majority of the time you spend on the business trip must be business-related. i.e., no taking a two-day business trip and staying an extra three days for personal purposes. That starts to cause the personal part to not be 100% deductible, even without a spouse tagging along.
It is also important that your spouse actually does business-related activities on the “business trip.” Such as having meetings with you to make plans to incorporate the ideas, etc., of the business trip into your business. Also, handling your business-related phone, emails, text messages, etc., while you are unavailable during business meetings, etc.
It is important to document the business activities of the spouse on the business trip. Keep a simple log.
Have you heard? Proverbs 1:5 says, “Let the wise hear and increase in learning, and the one who understands obtain guidance.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 775-882-4459. On the web at BullisAndCo.com. Also on Facebook.