Deduct your cruise ship vacation by knowing tax write off rules

By Jeffrey Brooks, CPA, CFP, MBA for Jbrooks Wealth Advisors, PC, a Professional CPA and CFP Firm  jeff@jbrookswa.com  602-292-2009  Please consult with your professional tax CPA regarding your specific circumstances!

  1.  If you travel by cruise ship, you are able to deduct more  dollars than the airfare and hotel on land. The new 2013 Tax Act rules improve the after tax effect of cruising.
  2. The luxury water-travel limits that apply for each day of your travel to a destination are much better than flying to your destination.  The water transportation daily limit varies from a low of $620 to a high of $734 per day this is double the highest rate of per diem for other mode of travel.
  3.  Where did the $620 to $734 come from?
  4.  For water transportation, you are allowed to deduct DOUBLE the highest daily limit by doubling the highest rate of per diem in this publication for your days of travel.  For 2013, Vail, Colorado is the highest at $367 per diem limit. Therefore water transportation limit is $734 per day IF business is discussed on the work days for 4 hours and 1 minute.  If you work each day for four hours and one minute, all your non-workday weekends are considered business days.  If you only have 4 business days and 2 personal days, you would have to decrease your tax deduction.
  5. Back to the fact that the luxury water transportation deduction is double the land deduction. $367 x 2=$734 (January to March 2013  and December 2013).  For the other months, doubling the Vail rate is at a lower rate of $620 per month to $624 per month.
  6.  You can find the current per diem rates at http://www.gsa.gov/portal/category/21287.

 

When Shari (employee of the corporation) and I fly to Boston in July for a New England cruise, we will not be able to deduct the cruise unless we can meet with other CPAs, CFPs or marketing professionals who can help us increase our revenues. The sessions must be for 4 hours and 1 minute on the business work days. Weekends are considered business workdays if we arrive or leave on these days or we spent the business workdays in sessions for at least 4 hours and 1 minute.

 

We are meeting one of my financial planning clients in Boston. They will pick us up at the airport so the travel day is a business day so we can deduct the airfare and the hotel/meals, etc. On our return trip, we will meet with CPA we know in another city and spend time going over tax saving techniques. So we will be able to write off 2/8th of the trip.

 

However, if there was a seminar for 4 hours and 1 minute on workdays and we joined the cruise on Friday (a travel day  is considered business), we would be able to write off the entire trip!

 

The wonderful thing about professional conferences is that you meet other professionals from other parts of the country who consider you a friend because you are not competing with them.

 

You build up a network of people who give you valuable information because you are not a competitor to them. If you are having a problem in your office, you can reach out to them through Facebook, Linkd In, or Twitter.

Cruises do not break out the cost of meals, so there isn’t any 50% limitation on meals on a cruise ship.

 

With the improved rules for cruises. Shari and I are going to start going on CPA and CFP continuing education credits. From these cruises, we will meet other professionals who also enjoy cruising. We can then schedule our own cruise meeting for future cruises.  We will each bring subjects that we will discussed to meet the 4 hour + 1 minute rule.  We collect our “best practices” and resource materials to the cruise.

 

We will have a written agenda for 4 hours and 1 minute which makes the cruise day, a business day.  We will document the purpose of our trip IN advance of our trip by email.  The participants will be from different cities which reduces an IRS argument that we could have met in the same city.

 

Trips outside the US for seven days or less: you may deduct 100% of the transportation to a foreign destination when your trip involves one business day and is less than seven days, excluding the day of departure.

 

If more than 75% of your days for foreign travel are for business, you may deduct 100% of the costs of transporting yourself to a foreign destination.  A foreign destination is outside the 50 United States and District of Columbia. If you spend 75% or less of your days on business, you may deduct transportation expenses based on the ratio of business days to total trip days.

 

Cruises within the US and its possessions are limited to only $2,000 for cost of cruise ship convention or meeting, provided:

  1. The meeting relates directly to the conduct of your business.
  2. The ship is a registered U.S. vessel.
  3. All ports of call are in the U.S. or its possessions.(Carribean and South Pacific areas)
  4. You attach written statements, signed by you and the program sponsor, to your tax return.

If you are a dentist,  one source for information for CE is:  http://www.continuingeducation.net/schedule.php?profession=Dentists

  1. However, if you have a group of dentists from other than Maricopa County, you can schedule your own sessions as long as they are 4 hours and 1 minute per day.

THE KEY IS DOCUMENTATION BEFORE THE CRUISE AND DURING THE CRUISE.

 

Related posts:

  1. 1099 rules that you need to know to avoid penalties and taxes
  2. IRS is winning in audits of business use of auto! But you could deduct more auto expenses!
  3. Auto & vehicle mileage rate will increase for 2013. How to increase your write off deductions of autos & vehicles in 2012
  4. Mortgages Ltd IRS tax deduction write- off
  5. Can you tax deduct the costs of your dog?
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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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JBrooks Wealth Advisors, PC.

Certified Public Accountant
Address: 4647 N 32nd Street, Suite B245
Phoenix, Arizona 85018
Phone: 602-292-2009
Email: jeff@jbrookswa.com