Let's say you get a brochure for an industry trade show. It looks awfully appealing. It's being held in a sun-drenched resort in the middle of winter. Sure, it's expensive, but you decide to attend because it's tax deductible.
Caution: Follow all the rules and keep proper records. IRS Auditors are suspicious of business conventions that look like vacations. Here are some answers to help you secure valuable deductions and stay out of trouble with the IRS:
Q. I'm planning to attend a convention paid for by my company. How much of the cost can the firm deduct?
A. It depends. In order to be deductible, the convention must be connected to your business and the primary purpose of the trip must be business-related. In other words, you can't write off the cost of a six-day trip if you spend one morning attending a seminar and the rest of the time sightseeing or lying on the beach.
If the convention qualifies, you can deduct travel costs to and from the location, convention fees and hotel bills. You can only deduct 50 percent of your meal expenses. If you do a small amount of sightseeing on a trip that is made primarily for business purposes, you can't deduct any of those personal expenses.
You also cannot write off the cost of bringing your spouse or other family members, unless they are employees of your company and have a bona fide business reason for making the trip.
Q. Can I deduct an educational conference offered on a cruise ship as part of my professional educational development?
A. In some cases, you can deduct travel expenses when you attend a convention on an ocean liner or cruise ship but the rules are very strict. In order to qualify for convention write-offs — on land or sea — you must show that attendance benefits your trade or business. No deductions are allowed for meetings related to personal investments, political causes or other purposes.
When you set sail on a cruise ship convention, there are additional restrictions:
- You can only deduct the cost of a business-related convention if the cruise involves a United States flagship and all ports of call are within the U.S. or its possessions.
- There's a $2,000 annual limit on cruise conventions.
- You must attach a written statement to your tax return that includes certain facts about the convention.
Tip: If you meet the qualifications for a deduction, keep a copy of the convention agenda or program with your tax records. It generally shows the purpose of the event and can be used to prove to the IRS that the convention benefited your business.
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