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Business travel with your spouse

By: Julian Block

The Tax Adviser

Some kinds of deductions always trouble the tax takers. For instance, baleful bureaucrats become suspicious and demand a detailed accounting when business travelers journey to meetings or conventions at plush resorts or exotic locales and (gasp!) decide to combine work with play and take their spouses along.

Consequently, IRS regulations set stringent guidelines for deductions of a spouse's travel expenses. Worse yet, legislation enacted in 1993 included a little-noticed measure that imposes far stricter requirements.

To be sure, the IRS grinches have to allow you to deduct part of the tab for the cost of tending to business chores. All is not forfeited just because your mate tags along for no reason other than to see the sights, although, in that event, strict limits are placed on what and how much qualifies as a business-travel deduction.

The key requirement is to show that your attendance at, say, a convention is primarily for business. Then, there should be no problem about a write-off for what you spend to get to and from the convention, as well as outlays for hotels and meals during the meeting. Travel and hotel expenditures are 100 percent deductible, but meals are only 50 percent deductible.

Previously, the IRS balked at any deduction for the portion of the outlays attributable to your spouse's travel, meals and lodging unless you could show a genuine business reason for his or her presence at the convention.

Those expenses did not become deductible merely because your spouse performed some incidental services -- for instance, typing notes or accompanying you to and remaining awake throughout convention gatherings. According to IRS regulations, what counted was whether your spouse's presence was "necessary," as opposed to "helpful," to the conduct of your business, though in a number of cases, the courts ruled against the agency.

Now, there's no deduction whatsoever for travel expenses of your spouse. It makes no difference that he or she goes along for business reasons.

This blanket prohibition is subject to a limited exception, one that will allow relatively few travelers to salvage write-offs for a mate's travel expenditures. The exception kicks in only if these requirements are satisfied. First, the spouse (or dependent, or any other individual) accompanying you on business travel is a bona fide employee of the outfit that pays for the trip. Second, the spouse undertakes the travel for a bona fide business reason. Third, the spouse is otherwise entitled to deduct the expenses.

Some frequently-missed tax relief remains available for lodging costs, notwithstanding your spouse, significant squeeze or some other person tagging along just for fun. The law authorizes a deduction for lodging that reflects the single-rate cost of similar accommodations for you, not half the double rate you actually paid for the two of you.

To illustrate, you and your spouse journey by car to a business convention in Orlando, where the two of you stay at a hotel that charges $250 for a double and $220 for a single room. In addition to a deduction for the entire round-trip drive (the driving costs the same whether you are accompanied by your spouse or not), claim a per-day deduction of $220 for the room, rather than just $125, half of $250. To make it easier to preserve the deduction in the event of an IRS challenge, remember to have the hotel bill specify the single rate, or get a rate sheet.

Even better, some of your spouse's meals might pass muster as deductible dining. Suppose your convention schmoozing includes dining with a business associate and the associate's spouse. Because of the presence of the associate's spouse, your spouse attends on a business basis.