Foreign Travel as an Educational or Business Expense

This column, in slightly different format, originally appeared in The San Francisco Examiner Newspaper, Sunday June 1, 1997.


Note: This exercise is for educational purposes only and is not intended to be legal or tax advice. Your particular facts and circumstances must be considered when applying the U.S. tax law. You should always consult with a competent tax professional with respect to your particular situation.

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Question: My wife, who is a school teacher is traveling to Europe this summer. May she deduct her expenses as education or employee business expenses? [Answer]

Question: Do you have suggestions regarding deductions for foreign travel? [Answer]

Answer: No. In the Tax Reform Act of 1986, Congress eliminated any deductions for expenses for travel as a form of education. For example: A Spanish teacher who travels to Spain to absorb Spanish culture may not deduct any travel expenses.

Your wife's travel is deductible if she attends a specific course that either maintains or improves skills required in her teaching position or that meets express requirements imposed as a condition to retaining her teaching position or rate of compensation.

For example: A teacher who enrolls in a summer course in Spain pertaining to her teaching, or conducts specialized research at a university or library, may deduct the travel expenses (subject to the limitations for foreign travel), cost of meals (subject to the 50% limitation on these deductions) and lodging. Amounts expended for sightseeing, recreation or other personal activities are not deductible.

Regulations provide that foreign travel for business lasting more than one week will be deductible if: (1) you spend less than 25% of the total time outside the U.S. on non-business activities; and (2) you lack substantial control over arranging the trip, or can establish that a personal vacation was not a major consideration.

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Answer: If you or your partner became travel writers or photographers and were engaged in a legitimate business, then the costs of travel would be deductible as a business expense (Note: these rules would apply to any business venture). Because it is hard to distinguish between foreign travel as a business expense rather than a personal vacation, the IRS will subject your business claim to close scrutiny.

You need to sell your writings or photos, or self-publish these materials. Generally, it is necessary to show a profit at least 2 of every 7 years to successfully claim you are engaged in business, rather than a hobby. Maintain business records scrupulously. Set up a separate business bank account, use a separate credit card for expenditures and file a Schedule "C" (Form 1040), reporting your income and expenses.

When you do not qualify as a business, your activity will be considered a hobby. You may deduct expenses only to the extent of your income. Also, foreign travel might not be a deductible, since the deduction is predicated on your being in business.

For example: Assume you spent $10,000 on travel and other costs, and earned $6,000 by selling an article about your trip. If you were engaged in business, you would receive a $10,000 deduction, resulting in a $4,000 loss.

Conversely, if you were involved in a hobby, your deduction would be limited to $6,000 and you could not deduct the loss of $4,000. Also, your deduction could be limited to the non-foreign travel portion of your expenses.

In conclusion, if you plan to travel frequently and want to deduct your trips, you must be engaged in business (i.e. as an author or photographer); must maintain accurate and comprehensive business records and bank accounts; and should earn a profit from your activities at least 2 out of every 7 years. Remember, to deduct foreign travel, limit your non-business travel time to less than 25% of the total, and be able to prove that a personal vacation was not your major consideration.

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**NOTE: The information contained at this site is for educational purposes only and is not intended for any particular person or circumstance. A competent tax professional should always be consulted before utilizing any of the information contained at this site.**