You receive that glossy brochure from your trade association that sounds so appealing. The seminar is being held in a very nice resort area or on a cruise ship. The association’s brochure says that the seminar may be tax deductible and in the fine print it states that you need to consult with your tax advisor for guidance. While you realize that your tax professional provides both tax preparation and tax planning services and is a phone call away, you are lured by the words “may be tax deductible”. You act on impulse, tell your spouse to pack his/her bags, and are confident that the IRS will be paying part of the cost of the trip. Wow, a vacation paid in part by the IRS. Can life be any better?
When pondering such a trip, you need to understand the IRS’s rules to determine if any portion of the trip is tax deductible. Some important considerations include:
· The convention must be connected to your business and the primary purpose of the trip must be business related. The IRS looks at how much time is spent attending business functions vs. time spent relaxing on the beach. The preponderance of time (> 50%) needs to be spent on business activities to have any chance of deducting some of the costs. If the trip is primarily personal, nothing is tax deductible. So if 20% of the trip is business related, you are not allowed any tax deduction.
· If you do excursions while on the business trip, those are considered personal and not tax deductible.
· If you are attending a seminar related to personal investments, financial planning, or other income-producing property activities, those costs are not tax deductible.
· You cannot write off the cost of bringing along your spouse or other family members unless they are employees of your company and have a bona fide business purpose for attending the convention. The IRS requirements regarding family members are quite rigid and difficult to meet and you thus need to consult with your tax advisor.
· Cruise seminar deductions are stricter than those for a land convention. First, the cruise must be held on a U.S. flagship. Assuming you can even find a U.S. flagship, all ports of call must be within the U.S. or its possessions.
· Cruise ship conventions are limited to $2,000 per year and you must include a statement to your tax return that includes certain facts about the convention.
· You will need to maintain copies of all convention brochures, its programs and agenda as such documentation is needed to show the purpose of the convention and how it benefited your business.
If you want to learn more about your personal or business tax situations, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.