For many people, work and travel are mutually exclusive activities.
But in the age of the internet, not only can you do them simultaneously, but you can also combine them to create a tax deductible vacation. The result: More fun, less taxes. Sounds like something you could get behind, right?
To understand how you can take a tax deductible vacation, you need to know what tax deductions actually are: Expenses designed to produce additional income, which taxpayers can legally subtract from their total income, resulting in less taxable income and fewer tax obligations.
If working remotely sounds like a dream come true, here are three ways to take a tax deductible vacation in your destination of choice:
1. Schedule Meetings With Potential Clients
So, is it Tokyo, Japan? What about Sydney, Australia? Once you identify your destination of choice, reach out to potential clients and offer a free consultation or informational meeting. If you’re thinking about traveling internationally, you’d be surprised at how many businesses abroad are seeking English-speaking service-providers. The most obvious targets come from the hospitality industry, like boutique hotels, resorts, popular restaurants, and other touristy places.
While it would be awesome to land one or more clients in your destination of choice, focus more on just securing a business meeting during your trip. That way, you can make it an “expense designed to produce additional income” — AKA, more cash in your pocket.
Rule of thumb: A trip Down Under sounds great, but remember that CPAs will look at what’s ordinary for a person in your industry and position. That means refraining from selecting “First Class” on your plane ticket, even though we could all use the extra legroom.
2. Attend Business Events
Unless you want to venture off to some remote, deserted island, chances are you’ll find business-focused Meetups and other public events at your destination of choice. Coworking spaces have become popular in the freelance community, and they’re always offering a variety of events.
By attending an event or two in your destination of choice, you can rightfully claim the trip as a tax deductible activity. Plus, you just might learn something, or make a meaningful connection.
Rule of thumb: Once you settle on a destination, look into events — specific to your industry — that are going to take place in that area. If you’ve got flexible vacation time, you may be able to adjust your schedule so that you can sit in on an interesting event or two.
3. Put on Your Speaking Hat
If you’re feeling brave, or just enjoy speaking like I do, giving a formal or informal lecture, workshop or seminar in your area of expertise qualifies as a deductible expense, because you’re putting yourself in a position to acquire new clients. Luckily, whether or not you actually land some new clients after the talk is irrelevant, as far as tax obligations are concerned.
Local networking groups, Meetups, coworking spaces and other event organizers are always looking for speakers. Heck, you can even host your own talk in a public space, like a bar.
Rule of thumb: In order to qualify for this deduction, you should be proving that you’re looking to gain clients in places beyond your home region. As such, strive to focus on what you want your audience to do with the information you give them. Share stories of your past experiences that put your successes on display.
So, choose your approach and pack your bags. Whichever approach you take to a tax deductible vacation, make sure you track your expenses and consult a qualified accountant to abide by all of the relevant local, state and federal laws. Just be careful when you’re mixing business and personal travel, and know that incidental personal travels within a business trip are fine as long as you don’t deduct them alongside your other business expenses. For personal trips that have a little business mixed in, make sure that everything you do deduct can be related to a business expense. While a client breakfast is certainly deductible, the same does not hold true for that margarita you drank on the beach.