Ways to write off scuba trip as business expense?

[JamesBon92007]

Whether it's travel writing, photography, doing travel agent-type field research, or doing charitable work, the bottom line is that if it feels to you like it's not really "work," then there's a good likelihood the IRS is going to feel the same way. We occasionally read about people who say they just love doing what they do and it hardly feels like work to them, but those situations are rare (and some of those people are probably a little weird). If it feels more like fun than work, that should be a red flag to you that the IRS is likely to scrutinize whether it's really just your "hobby," not your work.

I would say that's pretty definite. I think the "key" is that first it has to be a real business that is actually making a profit or is likely to make a profit in the near future. You can't take thousands of dollars in deductions if you don't have any profits or revenues to deduct them from.

 

[Wookie]

Even with a business license...the IRS tends to say that if you haven't made a profit in three years out of five, your activities are a hobby and they will disallow them. And then come looking for more.

If you want to write something off as a business expense, be very careful about taking too many expenses (you are not required to take or show all actual expenses) and putting your "business" into losses, despite whatever our new POTUS has done with his affairs.(G)

If you already have established credentials as a writer or photographer or travel agent...by all means, the field trip can be the basis for research and subsequent article or photo sales. That's valid, but you'd better have documentation showing that you made a real (and realistic expectation) of sales of your product, whether they came true or not.

And as 4ever notes, charitable expenses for a "working vacation" can be a good idea even if that's not a total write-off.

This is certainly lore, but I'm not sure how true it is. I operated a liveaboard for 14 years. Because we had awesome accountants, we only showed a profit 2 of those 14 years. Mostly due to depreciation. Those 2 years were spectacular, and couldn't be written off. Of those 14 years, we were audited exactly 0 times, unless you want to count the state of Texas sales tax audit.

I think that we passed the sniff test. That is, we were passing a tremendous amount of money through the corporation, it just wasn't sticking (welcome to the dive business). If some deductions on a DBA or a Subchapter S corp raise a flag, and the person who would be auditing you looks at it and decides that your trip to Bonaire to "Scope out new properties" doesn't fit in with your divemastering business, you fail the sniff test. If you write off a new BCD for your hull cleaning business, maybe it does.

I am not an accountant, nor do I play one on TV, and I did not sleep at the Holiday Inn Express last night.

 

[Lorenzoid]

I would say that's pretty definite. I think the "key" is that first it has to be a real business that is actually making a profit or is likely to make a profit in the near future. You can't take thousands of dollars in deductions if you don't have any profits or revenues to deduct them from.

Yep. As I see it, trying in good faith to make a profit takes much of the fun out of whatever you're doing. There's an adage along the lines of "the best way to ruin the fun of a hobby is to try to turn it into a business."

 

[ReefHound]

I think that we passed the sniff test. That is, we were passing a tremendous amount of money through the corporation, it just wasn't sticking (welcome to the dive business). If some deductions on a DBA or a Subchapter S corp raise a flag, and the person who would be auditing you looks at it and decides that your trip to Bonaire to "Scope out new properties" doesn't fit in with your divemastering business, you fail the sniff test. If you write off a new BCD for your hull cleaning business, maybe it does.

The IRS has been described as a lot of things but incompetent is probably not one of them. They probably have some pretty good algorithms to determine which tiny fraction of returns get flagged for a full audit and their auditors have seen it all and can spot the difference between a legitimate expense and a hobby disguised as a business.

 

[mdb]

I had a fairly wealthy friend who used his own money (inherited) to invest in stocks and bonds.

He had his own seat at a local San Diego brokerage house.

He wrote off his whole life, home office, every dinner out, car, insurance, etc.

He was onsite audited by the IRS one fine summer day, I watched him scramble for
the paperwork. When the audit was complete he was bankrupt.

His sweet and beautiful young wife left him.

He moved from a plush beachfront house to a apartment complex.

Do not f-ck with the IRS.

 

[The Chairman]

Own a forum? Werks for me.

 

[mdb]

Own a forum? Werks for me.

I was an independent manufacturers rep for a lot of years,

I wrote off a lot of expenses. Never audited.

My friend Peters experience was a good learning lesson.

Keep good records.

At some point you might have to show them all-up close and personal-with an onsite audit.

 

[JamesBon92007]

Now I'm wondering if, say, you have a business credit card that earns points (or miles) and you use those points to pay for a legitimate travel expense, is that still deductible? Or do you have to claim the points as business income first? That seems tricky because the points are sometimes only worth half as much in cash as they are if you apply them directly toward a travel expense. Anyone have any comments on this?

 

[mdb]

Now I'm wondering if, say, you have a business credit card that earns points (or miles) and you use those points to pay for a legitimate travel expense, is that still deductible? Or do you have to claim the points as business income first? That seems tricky because the points are sometimes only worth half as much in cash as they are if you apply them directly toward a travel expense. Anyone have any comments on this?

I hired an ex IRS agent as a tax consultant.

His comment was-just keep very good records, put them in a yearly file.

If your number comes up, only a very small % will, the IRS onsite agent has seen
it all. He/She knows the drill.

I have watched it unfold with my friend.

He was smart-Yale grad-had lots of money from family trusts.

The IRS took him down.

I was so conservative after that experience.

I still wrote off all legitimate expenses, car, insurance, etc. but I kept very good notated
records.

A small, but prudent, expense-deductible-is to have a good tax advice person.

 

[Wookie]

Now I'm wondering if, say, you have a business credit card that earns points (or miles) and you use those points to pay for a legitimate travel expense, is that still deductible? Or do you have to claim the points as business income first? That seems tricky because the points are sometimes only worth half as much in cash as they are if you apply them directly toward a travel expense. Anyone have any comments on this?

If you earn points legitimately from a legitimate business expense and use the points to pay for a business expense, you do not need to count them. If, however, you earn the points as a business expense and then choose to use them on your vacation, you must count them as income. Let's say your business buys you a car to use on business. And let's say you do so. You have to separate business miles from personal miles and then count the personal miles as income as you would if you had a personal car you used for business.