Get ready for the ultimate real estate adventure as the BiggerPockets Conference (BPCON) 2024 heads to the tropical paradise of Cancun, Mexico, Oct. 6-8. International travel is always exciting, but knowing it can also be tax-deductible really takes things up a notch.
Traveling outside the United States for business can be a little tricky when it comes to taxes, but don’t worry—we’re here to guide you through everything you need to know.
Business Travel Basics
For business travel to be tax-deductible, you need to leave your tax home. This is where you ordinarily conduct business, and you typically have to travel far enough to warrant an overnight stay (100 miles is a good rule to follow).
The trip expenses also need to be “ordinary and necessary.” This just means that the expenses need to be reasonable and appropriate for the industry you’re in. If you are attending a conference, for example, ordinary expenses may include your plane ticket, lodging, rental car, and nonentertainment meals.
Finally, to qualify as tax-deductible, the purpose of the trip must be primarily for business. If you plan a trip to Las Vegas to attend a business meeting, for example, but you spend the majority of your time on entertainment-related activities, the trip may not qualify.
What Business Travel Expenses Are Deductible?
As you plan your trip, it’s helpful to know upfront what expenses are tax-deductible so you can be sure to record them and keep receipts.
Here are some of the most common expenses that qualify:
- Transportation: Travel by airplane, train, bus, or car between your home and your business destination
- Luggage or shipping costs
- Taxi, rideshare, or rental car
- Lodging
- Meals are deductible at 50%. There is also a standard meal allowance per day, but this isn’t allowed for business travel outside the U.S.
- Dry cleaning and laundry while you are on your trip
- Business calls and communication: Hotel or airplane Wi-Fi, a daily travel plan to use your phone outside the U.S., or a mobile hotspot
- TSA precheck/global entry: May be deductible if over 50% of your annual travel is for business. Some travel credit cards offer these programs, so check your card benefits.
- The cost of attending the business event
- Other: All ordinary and necessary expenses related to your business travel
What Expenses Are Not Deductible?
Although you may be tempted to deduct all the expenses you incur on a business trip, not everything will qualify. Personal and entertainment expenses, for example, are not tax-deductible.
It’s common for people to bring their spouses or children with them on business trips. Travel expenses for your family members are ordinarily not tax-deductible. They may be, however, if your spouse or child meets each of the following criteria:
- Is also an owner or employee of the business
- Has a bona fide business purpose for traveling with you
- Would qualify to deduct the travel expenses if they were attending on their own
Travel Outside the United States
Business travel outside the United States has a few unique tax stipulations that are different from domestic travel. Conferences held outside North America have stricter tax requirements, but since BPCON will be in sunny Mexico, you don’t need to worry about that.
For international travel, there are two separate considerations. The first is whether your travel/airfare costs are fully deductible. According to the IRS, this expense is fully deductible if your trip is entirely for business.
There are five ways your trip may qualify as being for business:
1. The travel did not have any nonbusiness time.
2. You have no substantial control over the trip: An example is an employee being sent by their boss.
3. You are outside the U.S. for no more than a week: This means seven consecutive days. You do not count the day you leave the U.S., but you do count the day you return to the U.S.
4. You spend less than 25% of your time on personal activities: You are outside the U.S. for more than a week, and 25% of the time is spent on nonbusiness activities. For this test, you count both the day your trip began and the day it ended.
5. Vacation is not a major consideration: This one may be hard to prove with bonus personal days at a resort in Mexico, for example.
The second consideration for international travel is whether your expenses during the trip are fully deductible. This depends on whether travel days are considered business days. Weekends and holidays are typically considered business days if they fall between regular business days.
BPCON Travel Examples
I recommend flying to BPCON on Oct. 4, if possible. This gives you Saturday as a bonus day because it’s sandwiched between two business days. If you fly home from BPCON on Oct. 9, all expenses incurred for the trip will be deductible since you won’t have any nonbusiness days.
Let’s walk through two examples of how this can impact your trip to BPCON on Oct. 6-8, 2024.
Example 1
You will be flying from your home to Mexico on Friday, Oct. 4, and returning on Friday, Oct. 11. Your airfare and travel expenses are fully deductible since you are spending less than seven days outside the U.S.
In this example, your lodging, meals, and taxi or car rental are fully deductible for Oct. 4-8 and Oct. 11. The expenses for Oct. 9-10 are personal and nondeductible.
Example 2
You will be flying to BPCON on Friday, Oct. 4, and returning on Saturday, Oct. 12. Since you are outside the U.S. for more than seven days, you need to spend less than 25% of the time on nonbusiness activities for the travel costs to be fully deductible. Three of the nine days are nonbusiness, which puts you at 34%. This means 34% of your airfare/travel costs are nondeductible.
In this example, your lodging, meals, and taxi or car rental are fully deductible for Oct. 4-8 and Oct. 12. The expenses for Oct. 9-10 are personal and nondeductible.
With a little planning, you may be able to convert another day into a business day. You could do this through networking, recording, attending events, and having meals with colleagues, for example. This would help you bring the average down to 22% and make the airfare/travel fully deductible.
Final Thoughts
Keeping detailed records of your travel expenses is vital for tax purposes and to protect you in case you are audited. Make sure you save all your trip-related receipts and document all of your business activities. Whenever you take a business trip, it’s also a good idea to work with a real estate tax strategist to help you plan everything to ensure as much of the trip as possible is tax-deductible.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
