Deduct a cruise to Mexico
June 25, 2022
You may not have thought of this, but taking a cruise ship to Mexico for a business meeting is acceptable as a deductible form of transportation.
Because Mexico is in the tax law –defined North American area, the law says that you need no stronger business reason to deduct your trip to Mexico than you need to deduct a trip to Chicago, Illinois or Scottsdale, Arizona.
Less-than-one-week rule. If your trip is outside the 50 states but inside the North American area and if the trip is for seven or fewer days (excluding the day of departure), then the law allows you to deduct the entire cost of travel to and from this business destination. Mexico fits this location rule.
Cruise ship transportation, the law authorizes any type of transportation to and from your travel destination, so long as it is not lavish or extravagant.
The cruise ship cost is not a lavish or extravagant expense, as the law precludes this possibility by placing luxury water limits on this type of travel.
The daily luxury water limit is twice the highest federal per diem rate allowable at the time of your travel.
Example: Say you are going to travel by cruise ship during September 2022. The $433 maximum federal per diem rate for September 2022 comes from Nantucket, Massachusetts. Your daily luxury water limit is $866 (2 x $433).
Thus, for you and your spouse, two business travelers, the daily limit is $1,732. On a six-night cruise, that's a cruise-ship cost ceiling of $10,392. If you spend $12,000, your deduction is limited to $10,392. If you spend $8,000, you deduct $8,000.
Jay Thompson is the president of Golden Empire Services LLC and a Business Consultant with the CSU Bakersfield Small Business Development Center. The CSUB SBDC provides premium, one on one, no cost consulting to small business owners in Kern, Inyo and Mono Counties. For more information visit their website at http://www.csubsbdc.com.