Tax Facts & Benefits

Tax-deductible business travel by ship

Business travel by luxury water transportation is tax-deductible. A business traveler may attend a bona fide business seminar or business meeting, and all or part of the travel may include transportation by ship.

Just because business travel by luxury water transportation is tax-deductible, it does not mean that every taxpayer may deduct the expense, or any other form of business travel expense. This is one reason that we are unable to provide tax or legal advice relating to the tax treatment of attending our seminars. Only you and/or your tax advisor are in a position to make the decision. The facts and circumstances will determine whether you can deduct your trip as a business expense or not. If the principal purpose for attending a seminar is to take a vacation, travel expenses to the seminar will not be tax-deductible. How you handle other business expenses will dictate your ability to deduct business travel expenses, and the net cost.

The Internal Revenue Service (IRS) addresses travel by luxury water transportation in IRS Publication 463:

"If you travel by ocean liner, cruise ship, or other form of luxury water transportation for business purposes, there is a daily limit on the amount you can deduct. The limit is twice the highest federal per diem rate allowable at the time of your travel. (Generally, the federal per diem is the amount paid to federal government employees for daily living expenses when they travel away from home, but in the United States, for business purposes.)"

The highest federal per diem rate allowed and the daily limit for luxury water travel in December 2007 was $762. The limit changes monthly.

While the content of any Service publication is not "the law", when taken together with "the law" (set forth below), the conclusion is clear.

Sec. 274. Disallowance of certain entertainment, etc., expenses (m) Additional limitations on travel expenses (1) Luxury water transportation (A) In general
No deduction shall be allowed under this chapter for expenses incurred for transportation by water to the extent such expenses exceed twice the aggregate per diem amounts for days of such transportation. For purposes of the preceding sentence, the term ''per diem amounts'' means the highest amount generally allowable with respect to a day to employees of the executive branch of the Federal Government for per diem while away from home but serving in the United States.

With the exception of the daily limitation applied to business travel by ship, the tax regulations that apply to business travel expenses are almost identical for travel by air or sea. The provisions of Sections 162 and 274 apply equally to all modes of business travel.

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