How to turn your vacation into a tax write-off

by Andrew Jordan, Big Picture CPA

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As an entrepreneur, we know you can use all the tax savings you can get. Have you thought about how to leverage your annual vacation into a tax write-off?

Now let’s be clear – you’re not going to be able to deduct just any vacation; the ability to expense a portion of your vacation will depend on many factors. But this is definitely something you should think about, especially when you see all of the beach pics your friends are posting and you figure that a getaway wouldn’t be half bad. Below are six tips to help your turn your next vacation into a tax deduction.

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1. You must have a legitimate business.

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The absolute first thing you need to do is to make sure you have a business in the eyes of the IRS. If you’re just fiddling around with a fancy camera on the weekends, you probably have a hobby – that’s not what we’re talking about here. The IRS will see your enterprise as a business if you are working with the reasonable expectation of making a profit. To figure this out, you can ask yourself some of the following questions:

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• How much time and energy do I spend as a photographer?

• What steps have I taken to become successful?

• Do I depend on my photography income?

• Can I hold my own in knowledge, talent, and technique against other photographers I know?

 

2. The primary purpose of your trip must be for business, not pleasure.

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If you want to deduct your travel expenses, you will need to make sure that (1) you have a business reason for traveling, and that (2) the majority of your vacation is spent doing actual real business-related activities. Some legitimate reasons to travel as a photographer could be:

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• learning to shoot in a different environment (e.g., on the beach with light reflecting off the ocean, away from the city shooting the night sky, or in the mountains with a snowy backdrop);

• taking stock photos that you plan to sell;

• adding experience to round out your portfolio;

• attending a class; or,

• performing an on-location shoot for a client.

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On top of that, the majority of your travel days must be spent on business rather than pleasure. The IRS has some sneaky rules about what counts as a vacation day and what counts as a business day. For example, weekends count as business days only if they are sandwiched between other business days. They also have some tricks when you’re traveling around a major holiday. But don’t worry; we’re experts – shoot us an e-mail if you have a specific question about how the rules apply to your situation, and we’ll answer it for free (please give us up to a week to reply—hey, it’s free).

 

3. The travel expenses that you deduct must be typical for photographers.

 

The IRS is only going to allow deductions that are reasonable (although, they prefer to use the terms “ordinary” and “necessary”). If a typical photographer would make those same deductions, and they are not outrageous or lavish, the deduction will generally be allowed.  Reasonable expenses that you could potentially deduct are:

 

• entry fees to a national park;

• hotel and resort fees;

• cab or rideshare fares;

• a ferry ride to a secluded island;

• meals and snacks (only 50% will be deductible);

• a gondola ride up the mountain;

• amusement park tickets;

• tickets for a tour of an apple tree orchard;

• airport and baggage fees;

• fresh produce from a farmer’s market; or,

• tips to hospitality workers.

 

 

You get the idea; no yachting with a good pal to a deserted island unless that yacht is the only boat in the marina that will take you there. And keep in mind that only business-related travel expenses will be allowed. For example, if you purchased a ticket for a gondola ride but didn’t take pictures from the top of the mountain, you would not be able to expense the ticket.

 

4. You can only deduct your travel companion’s expenses if you hire them.

 

If you bring along a buddy to help you with your shoots, you may be able to deduct their expenses, too. For your friend’s [or spouse’s or grandma’s] expenses to be deductible, three things must happen: (1) you must pay them for their services (in cash, not in favors or IOUs), (2) they must be doing real work for you, and (3) such expenses would have to be deductible on your companion’s return if you were not paying for their trip. If you want to go this route, you can pay them a reasonable fee for their efforts, and you can give them helpful jobs to do, such as:

• hauling gear up a mountain in Colorado;

• scouting locations on a Florida beach;

• holding reflectors to throw light on your subject;

• taking photos from another angle; or,

• documenting a particularly difficult shoot for your social media page.

Don’t just go looking for easy jobs that you think will pass muster; make sure the work your buddy is doing is actually helping you become a better photographer. Don’t kid yourself about this – the IRS will be able to see through to the true substance of your situation.

 

5. Keep impeccable records.

 

It sounds fairly obvious, but it’s super important to keep records of everything that you do while on vacation. If the IRS comes back to you with questions, you’ll need to prove that your expenses were for a real business trip and not just a ploy for you to see Mt. Rushmore on their dime. Many photographers find it easiest to keep a chronological list of their expenses with explanations of what they were doing that day, and why those expenses were necessary. Think of it as a journal, but less angsty. Many accounting software packages[KB4]  allow for a memo line next to each expense, so take advantage of that feature if you have it.

 

6. There are (of course!) other considerations.

 

The IRS has other specific travel rules that you will need to chew on. For example, they are especially picky about foreign travel, cruises, conferences, and conventions. Feel free to contact us at Jordan CPA Services to hear about these other issues, and for any other questions you have about turning your next vacation into a tax deduction.