Abstract: A company owner who travels on business, accompanied by his or her spouse, may be able to deduct all the travel expenses incurred by the spouse. However, the rules are restrictive, starting with the requirement that the spouse must be a bona fide employee of the company. Failure to meet that rule is the reason why, in most cases, a spouse’s travel costs aren’t deductible.
Can you
deduct the costs of a spouse on a business trip?
If you own a company and travel for business,
you may wonder whether you can deduct all the costs of having your spouse
accompany you on trips. It’s possible, but the rules are restrictive.
First, your spouse must be your employee. If
that isn’t the case, then even if your spouse has a bona fide business purpose
for making the trip with you, you won’t likely qualify to deduct all of his or
her travel costs. In fact, this requirement prevents tax deductibility in most
cases.
A spouse-employee
If your spouse is your employee, then you can deduct
travel costs if his or her presence on the trip serves a bona fide business
purpose. It isn’t enough for your spouse to merely be “helpful” in incidental
ways, such as by typing your meeting notes. Your spouse’s presence must serve a
necessary business purpose.
In most cases, a spouse’s participation in
social functions, for example as a host or hostess, isn’t enough to establish a
business purpose. That is, if his or her purpose is to establish general
goodwill for customers or associates, this is usually insufficient. Further, if
there’s a vacation element to the trip (for example, if your spouse spends time
sightseeing), it will be more difficult to establish a business purpose for his
or her presence on the trip. On the other hand, a bona fide business purpose
exists if your spouse’s presence is necessary to care for a serious medical
condition that you have.
If these tests are satisfied in relation to
your spouse, the normal deductions for business travel away from home can be
claimed. These include the costs of transportation, meals, lodging, and
incidentals such as dry cleaning and phone calls.
A non-employee spouse
Suppose your spouse’s travel doesn’t satisfy
these requirements. You may still be able to deduct a substantial portion of
the trip’s costs. This is because the rules don’t require you to allocate 50%
of your travel costs to your spouse, but only any additional costs
you incur for him or her. For example, in many hotels the cost of a single room
isn’t that much lower than the cost of a double. If a single would cost you
$150 a night and a double would cost you and your spouse $200, the disallowed
portion of the cost allocable to your spouse would only be $50. In other
words, you can write off the cost of what you would have paid traveling alone.
To prove your deduction, ask the hotel for a room rate schedule showing single
rates for the days you’re staying.
If you drive your own car or rent one, the whole
cost will be fully deductible even if your spouse is along. Of course, if
public transportation is used, and for meals, any separate costs incurred by
your spouse won’t be deductible.
Contact us if you have questions about this or other
tax-related topics.
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