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Here's my complicated situation. My wife is an author, and when her first book came out in January 2013, she, I and our two kids went on a 7 month book tour. This was an extreme but totally legitimate business trip: she did book signings in over 150 bookstores, dropped in to introduce herself in perhaps another 200 stores, visited book clubs, libraries, festivals, etc. to support her career (which, by the way, it really did).

My question is: how do I estimate the percentage of the trip and expense that was dedicated to business? Most of it was, but we did take some days here and there to rest and have a little fun. I don't argue that these should be deductible, but I'm not sure how to count them.

More tricky is that we also had the whole family on the trip. I legitimately function as my wife's manager, navigator, tour planner, etc., and so maybe my expenses are part of the trip. The children did add to the expense, and while they actually do help with the tour, I wouldn't try to argue that their expenses should be deductible too.

So how could I take an expense and indicate what percentage of that money is deductible? Is there any guidance from the IRS on this? Is there a worksheet where I could tell them that I think a $100 hotel bill would maybe have only been $70 without the kids, or that a $50 meal would only have been $30 without the kids, and pro-rate my deductions accordingly?

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Unfortunately this is something that should have been determined prior to the book tour. Your tax advisor or accountant could have assisted you in making sure you collected the documentation you needed.

You are going to have to sit down with your advisor with the documentation you have and determine what you can prove.

  • I'm not unclear how to prove the charges, I just don't know how to allocate the charges to business and non-business. – Joshua Frank Oct 13 '14 at 12:01
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Worksheets/ Documentation: (From my experience filing my business deductions through several tax preparers.) Keep all your calculations, but only submit the calculations and worksheets requested by the tax form. Most travel deductions are just a category total. If the IRS wants more info, it will ask for it.

Information from the book Home Business Tax Deductions (from Nolo) (2012):

Traveling with kids: In chapter 9 ("Leaving Town: Business Travel"), in the section "Taking People With You", it specifically discusses your situation. Paraphrasing, it says that you can deduct the amount any eligible expenses would have cost you if you were traveling without your kids. So, you can deduct the cost the smaller hotel room that you and your wife would have normally rented if you were alone.

  • My opinion: I think if you did not write down the cost of a smaller hotel room at the time you stayed there, you can estimate what the cost would have been by printing out the current price difference is between their smaller and bigger rooms from the hotel website and applying the percent difference to what you spent.

How your side trips affect your business deductions: According to the book, since you spent 50% or more of your time on business activities while traveling in the U.S.:

  • all of your transportation expenses are deductible
  • you can deduct your hotel and non-business meal expenses only during "business days". The book provides guidelines for how to determine if a "day" is business or personal. I think you will find that even some of your relaxation days are considered a business day because of the "sandwitch" rule. Here's a short article by Nolo that explains some of those rules: http://www.nolo.com/legal-encyclopedia/combine-work-pleasure-still-deduct-travel-expenses.html

Deducting meals shared with your kids: You can deduct meals as either entertainment or travel expenses.

  • If deducting as an entertainment expense, the book is very clear on how to treat non-business guests: multiply the total cost of the meal by the percentage of business guests. So, if you have 3 kids, 2/5 of the meal is deductible. Then apply the 50% rule on top of that.
  • If deducting as a travel expense, it does not give a concrete example, but I would assume the "if you were traveling without your kids" rule applies here. It would be easiest for you to use the standard allowance rate for you and your wife, which would solve your issue. I think you may be able to estimate the percent of each meal eaten by your kids if have something to support your calculation in case of an audit - perhaps a series of meal receipts with and without your kids at the same restaurant, showing how much they normally add to your cost.

I would recommend you buy one of Nolo's books on deductions, as it goes into much more detail than I do here.

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