If you travel outside the U.S., your deductible expenses will depend on whether the trip was entirely for business. If it was, and you spent all your time in business activities, you can deduct all your travel expenses. But even though there were certain personal elements involved in your trip, it may still be considered to have been entirely for business if:
You did not have substantial control over arranging the trip.
You were outside the United States less than a week, including business and non-business activities.
You spent less than 25% of the time in non-business activities.
Vacation was not a major consideration on the trip.
If you qualify for one of these exceptions, you do not have to allocate your travel expenses between business and personal purposes. You can deduct the total cost of getting to and from your destination. But if you do not qualify for an exception and your trip includes both business and personal elements, you will need to allocate your travel expenses.
Business Days and Personal Days
If your trip is primarily for business, but also includes personal elements, you must allocate your travel time on a day-to-day basis, between business days and personal days. You can deduct the business portion of the trip to and from your business destination, based on the percentage of business days outside the U.S. in relation to the total number of days of travel outside the U.S.. The days you depart from and return to the United States are counted as travel days outside the U.S..
In calculating this percentage, business days include:
Transportation days – days you spend traveling to and from a business destination. Extra days for personal side-trips or non-business activities do not count as business days.
Days when your presence is required at a particular place for a specific business purpose.
Days spent on business, when your principal activity during working hours is your trade or business.
Certain weekends and holidays, if they fall between business days. In this case, a weekend or holiday is considered a business day even if you use it for personal activities.
Vacation Included In Trip
You also have to allocate your travel expenses if you take a vacation or have other non-business activities on your way from the U.S. to your business destination, or on the way back to the U.S. In this case, the part you have to allocate is what a trip would have cost from your departure point in the U.S. to your non-business destination, and your return to the point in the U.S. where your trip outside the U.S. ends. You prorate this amount according to the percentage of personal days outside the U.S. in relation to the total days outside the U.S. The result is the amount allocated to personal travel and therefore not deductible.
If you take a side trip for a vacation or other personal activity at, near, or beyond your business destination, you would have to allocate your travel expenses in a slightly different manner. In this case, you would use the same percentage as above (personal days outside the U.S. divided by total business days outside the U.S.), but you would apply this percentage to the cost of the trip from your departure point in the U.S. to your business destination and back to the U.S. The resulting amount would be a non-deductible personal expense.
If your trip outside the U.S. is primarily for personal purposes, none of the travel cost is deductible. If you do any business while on the trip, you may be able to deduct the related business expenses you incur, but not any part of the cost of the trip itself.