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Recent Blog Articles
How an Outsourced CFO Can Help You Establish Accounting Practices To Minimize Risk and Maximize Profit
An outsourced CFO can provide your small business with the accounting services and financial management advice you need to successfully navigate from your break-even point, so you can maximize profits and boost ROI.Read more
Leveraging the Expertise of an Accounting and Advisory Firm to Support and Optimize Your Accounting System
This fourth article in our series outlines the benefits of partnering with an external advisory firm in optimizing your business finances. We look at the comprehensive services offered by outsourced accounting specialists and how they can support your in-house teams and processes toward ideal results throughout the work year. Bookkeeping is an essential aspect of […]Read more
Lagerquist’s third part of an in-depth blog series explores how partnering with a reliable external accounting and advisory firm can help your company avoid five of the biggest pitfalls faced by businesses. External accounting specialists provide extensive real-world experience that help companies navigate the most significant financial challenges with minimal guesswork.Read more
Is it a Course or a Cruise? The Tax Deductibility of Education on Vacation
Posted by Sylvia Lagerquist, CPA
One of the great challenges of being a small business owner is finding time to take a break. Your business needs you every day, it seems. When could you possibly find time for a vacation? On the other hand, you need to stay abreast of changes in your industry, learn new strategies and continue your own education as a CEO.
Maybe, just maybe, you could combine the two…on a cruise.
In addition to the benefits of “killing two birds” with one proverbial stone, you might be able to deduct part of the cost of your trip to boot. It is possible, and if you plan accordingly, doing so could be a smart business strategy. However, IRS regulations have been tightened due to abuses in prior years.
Here is what you need to know if you elect to engage in professional development while on a cruise:
- The IRS allows a deduction of up to no more than $2,000 pear year, per person.
- You must follow specific per diem requirements when reporting applicable expenses (for example, your deductible expense is limited to double the highest federal per diem rate).
- The educational or business program (meeting, event, seminar, convention) needs to be directly related to your business.
- The cruise should not exceed a week or, if it does, non-business activity must not constitute 25% or more of the travel time (as defined by the IRS).
- The cruise ship must be registered in the United States (Note: Many ships that travel to and from U.S. ports are not registered here).
- The ship’s ports of call during your itinerary must be in the U.S. or U.S. possessions. Keep in mind that U.S. possessions include a long list of destinations, from the U.S. Virgin Islands to Guam.
Note: There is an alternate approach that allows for deduction of a trip that takes place within the “North American Area” which includes, for example, Canada, Bermuda and the Bahamas – but different eligibility requirements may apply.
You must prepare a written statement with specific details required by the IRS – and a second one from the event’s sponsoring organization – and include then with your tax return.
The IRS does not view a business event on a cruise ship in the same way as it views a business event on land that you attend by traveling there on a cruise ship. There are advantages and disadvantages to these two scenarios, but you must select and plan your trip around one or the other (i.e. you cannot deduct the cruise as both a travel/transportation cost and as a hotel/lodging cost).
The most important priority for any business owner considering taking a cruise for which they intend to seek an applicable tax deduction is to plan and document accordingly, from the moment you select the business event until the time you return home after the trip.
To learn more about this and other tax strategies for business owners, contact the award-winning team at Haines & Lagerquist CPAs today by calling (301) 249-0703 or via email to email@example.com.
For additional information:
Tax Rules to Follow When Cruising for Business Purposes
How to Deduct Your Cruise
Cruising for Tax Deductions
Business or Pleasure? Tax Traps
Image Credit: pmarkham (Flickr @ Creative Commons)
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