Going Cruisin’? How to handle the tax liability of a company-paid cruise or vacation.
Sponsored cruise trips and other paid vacations under the guise of conventions or meetings have become the ultimate sort of employee perk or sales tool for companies with deep pockets. But for the recipient (and in some cases, their spouse), the vacation may sail into choppy tax waters.
Employee business expenses such as: unreimbursed vehicle, travel, transportation, meals and entertainment and other job related expenses, are reported on Form 2106 and claimed as itemized deductions subject to the 2% AGI limit on Schedule A. Travel expenses to conventions are deductible if attendance benefits the taxpayer’s trade or business. Travel expenses for the taxpayer’s spouse, dependent or other individual are only deductible if the individual is an employee of the taxpayer, has a bona fide business purpose for traveling with the taxpayer and the individuals expenses are otherwise deductible.
A deduction of up to $2,000, per person per year is allowable for expenses for attending conventions, seminars or other meetings held on a cruise ship, as long as the seminar is directly related to the taxpayer’s trade or business, the ship is a US flagship and all ports of call are located in the United States or its possessions. To be deductible, the taxpayer must attach two written statements to their tax return. The first statement must be signed by the taxpayer, providing the number of hours each day that were devoted to business activities, total days of the trip and program of business activities.