Many entrepreneurs believe all costs relating to conferences and conventions are tax-deductible. As a result, incorrect business expense claims for travel and education are legion in small businesses. However, mistakes are often unintentional: There are myriad rules for deducting expenditures for conferences and conventions. As well, there are many myths about tax-deductible expenses. These all have led many a business owner down the primrose path.
Education: U.S. entrepreneurs are permitted to deduct costs of attending conventions, conferences, workshops, and seminars within the U.S. if they demonstrate that attendance benefited their businesses in some way.
You don’t need a connection to your specific responsibilities to attend a U.S. conference; general income-producing business management issues are usually satisfactory reasons for your attendance.
On the other hand, costs to attend a convention outside North America are only deductible by U.S. businesses if the convention is directly related to the specific business.
As well, the overseas venue must be seen to be reasonable. For example, an overseas convention is considered reasonable when many of the attendees are foreign-based vendors.
Training courses receive different tax treatment than do conventions. Distinctive business and evidence tests apply to such courses held in locations that are reasonable to the circumstances.
Travel: Several misconceptions surround the subject of tax-deductible travel, and not all travel costs qualify as tax deductions. As with any tax issue, careful record keeping prevents trouble over convention expenses. And the key rule is that any trip to a convention or conference must have business matters as the primary purpose to qualify for deduction of travel costs.
Many believe that outlays for sightseeing and entertainment during a professional conference are acceptable. But, in fact, you need to be very discriminating in determining whether these activities are legitimate business expenses.
If conducting business while traveling is incidental to the excursion, the only tax-deductible expenses you can claim are those directly related to business activity. However, if there’s no personal component to the trip, all travel expenses are deductible, including transportation, lodging, meals, and incidentals.
Costs of any sightseeing during a business trip are not tax-deductible, and combining some personal days with days for attending a business conference necessitates prorating travel costs.
A non-deductible travel expense is the percentage represented by the days devoted exclusively to pleasure relative to total travel days. Of course, none of the extra costs for bringing a travel companion are counted as part of the business expenses.
Because U.S. law allows a tax deduction for only one-half of business meals, these must be accounted for separately from other travel expenses. The IRS also imposes limitations on deducting business travel that is considered “lavish or extravagant.” One rule that assists in record-keeping is that no receipts are required for travel expenses of $75 or less, with the exception of lodging costs of any amount. Despite the many rules and regulations, conventions and conferences represent important networking and learning opportunities-opportunities you might want to take even if not all of the cost of attending is tax-deductible.