Although we are always looking to make continuing education fun (check out the CWA 31st Annual Meeting), when it comes to the tax deductibility of CE—when does the IRS think you’ve crossed the line?
CWA Tax Director and CPA Kristina Yarbrough says she gets asked several times a year regarding the deductibility of cruise ship expenses when associated with a convention, seminar or other meeting that contains business related continuing education.
In fact, there are several cruise agencies out there that sell cruise packages that offer specific trade or business conventions while cruising. “What these companies don’t tell you is that it is not always a deductible business expense,” says Kristina. “Because of extensive abuse involving tax dedications on these types of expenses, the IRS has passed strict rules on their deductibility.”
Although more difficult now, the IRS has outlined specific guidelines that a taxpayer must follow in order to get a deduction for a cruise associated with a convention, seminar or meeting that is specific to their trade or business.
Per the IRS code section 274(h) you can deduct up to $2,000 per year of your expenses for attending conventions, seminars, or similar meetings held on cruise ships. Any water vessels that sail are considered “cruise ships” regardless of ship size.
You can deduct these expenses only if all of the following requirements are met:
The convention, seminar or meeting is directly related to your trade or business.
The cruise ship is a vessel registered in the United States.
All the cruise ship’s ports of call are in the United States or in possessions of the U.S. Important Note: If you are on a cruise ship, and all but one or two of the ports of call are in the U.S. or it’s possessions, you do not get to aggregate the cost. This is an all or nothing clause.
Attach to your return a written statement signed by the taxpayer that includes the following information:
- Total number of days of the trip (not including the days of transportation to-and-from the cruise ship port).
- Number of hours each day devoted to schedule business activities.
- Program guide of the scheduled business activities included in the meeting.
Attach to your return a written statement signed by an office of the organization or group sponsoring the meeting that includes:
- Schedule of the business activities for each day of the meeting.
- Number of hours the taxpayer attended the scheduled business activities.
With the very specific rules regarding cruise ships and deductibility, Kristina likes to recommend that clients use a cruise as a great time to avoid business and take a nice relaxing break. If you are looking to get the maximum write-off, consider a resort or other land trip.
Really want that deduction? Meet with your CPA before you pay to make sure you are prepared to meet the IRS requirements.
