| Travel
Free for CPE
Deducting travel expenses when traveling to obtain CPE credits
is a tried and true tradition. Some tax experts will be more
aggressive than others when determining how much should be
deducted. However, all will agree there needs to be some burden
of proof for those expenses you choose to deduct.
General travel expenses including transportation, lodging,
50 percent of meals, and incidental expenses are deductible,
providing they are not lavish or extravagant. If there is
a bona fide business purpose for your spouse or child to accompany
you on a trip, those expenses may be deductible too. However,
if you’re thinking, “I’m always in a better
mood when my spouse is with me” or “I’ll
learn more in my classes if I know the family is out playing
golf or shopping” are great business purposes; then
you should reconsider.
The IRS provides several guidelines to determine whether
a traveling companion’s expenses are deductible. Generally,
the companion should either be an employee or a business associate
of the taxpayer. Shared expenses may still be deducted if
that expense would be incurred regardless if you had company
or not (for example, sharing a room with a non-business companion).
Paris, Texas vs. Paris, France
When traveling domestically, the IRS will typically look at
the purpose for the trip. If it’s primarily business,
then you may deduct 100 percent of the travel to and from
the destination. Other expenses are only deductible in relation
to the days you spend on business.
International travel is allocated based on the amount of
time spent on business vs. pleasure. For example, in one documented
court case, a lawyer traveled to Israel where she met with
officials to further her practice. However, the IRS only allowed
a small percentage of her overall travel expenses to be deducted,
as this was a very small part of how she spent her time.
The IRS will always look at the facts and circumstances of
a trip to determine its primary purpose and deductibility.
The Open Sea
Luxury water travel gets special attention from the IRS, so
tread carefully here (pun intended). If the business purpose
of the cruise is to get from one point to another, the amount
that can be properly deducted is only up to a ceiling of “twice
the aggregate per diem amounts multiplied by the number of
days of such transportation.” The per diem amount is
the highest amount generally allowable per day to “employees
of the executive branch of the federal government while away
from home but serving in the United States…with respect
to a particular area in the continental United States, exclusive
of Alaska.”
For example, you travel to Europe on business but instead
of flying, you take an ocean liner. Transportation cost is
$3,000 and takes four days. The maximum per diem is $200 from
the IRS tables, and meals aren’t separately stated.
You will deduct $200 x 4 x 2, or $1,600.
But what about the great CPE course that just so happens
to be on a cruise to Alaska? Generally, the cost of CPE courses
on a cruise ship is deductible. However, very strict record
keeping and reporting is required. Taxpayers may deduct a
limited amount of the costs for conventions on cruise ships
if they meet all of the following criteria:
1) the meeting is directly related
to the
active conduct of the taxpayer’s
trade or business
2) the cruise ship is a vessel
registered
in the United States
3) all ports of call of the
cruise ship are
located in the United States or in
possessions of the United States
The annual limitation on deducting cruise ship CPE expenses
is $2,000. Reimbursing travel for an employee on a cruise
ship may be deductible without limits in certain circumstances;
however, we’ll “preserve” that for another
time. ‚
From April 2005
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