Deducting business related travel expenses

[sethmachine]

A high level executive where I work was sharing with us an interesting way to travel cheaply. He suggested to start a business where one gathers first person video (e.g. a camera strapped to one's head) of exotic and relaxing places (e.g. rainforests, Mayan ruins, etc.) and then sells the videos to people that want relaxing, natural sounds and videos. This business necessitates traveling to exotic locations. Since the travel's primary purpose is business, the whole trips can be deducted for tax purposes, if it's a legitimate LLC or S corporation. He said that these deductions could be used to get taxes back from the taxes we've paid from our salary at our day job.

Is this correct? Is this how many travel bloggers and video bloggers can afford to travel so much, by having flexible salaried jobs and being able to deduct most of their travel expenses to reduce their overall tax burden?

[disneysteve]

People seem to forget that a deduction is only worth a fraction of what was spent. So if you spend $5,000 to take an exotic vacation that is tax deductible and you are in the 25% tax bracket, you'll save about $1,250 at tax time. That means the trip still cost you $3,750.

Now if during those trips you are producing video content that you then sell, you might be able to profit if you are successful enough selling your work, but just deducting the trip expense itself doesn't make that big of a difference.

[MonkeyMama]

Is this correct?

No. Your business has to have a profit motive or an expectation to make profit. Otherwise the IRS considers it a hobby and you are limited in the deductions you can make against any income.

I am not aware of any surefire way to guarantee an IRS audit except to claim "business losses" for some years in a row.

[disneysteve]

No. Your business has to have a profit motive or an expectation to make profit. Otherwise the IRS considers it a hobby and you are limited in the deductions you can make against any income.

I am not aware of any surefire way to guarantee an IRS audit except to claim "business losses" for some years in a row.

True. If the "business" isn't making a profit after 3 years I think it gets deemed a hobby by the IRS. If you are making a profit, you can deduct legit business expenses which will help defray the taxes on the income but that still doesn't get you free travel.

[Gailete]

I know my business has regular deductions for the cost of goods to sell, shipping postage costs, and they really are two different things postage is postage and shipping includes the expense for packing supplies, labels, inks, etc. So many buyers seem to thin that is all free.

After taking those deductions, you can also take them for your home office. Some are directly for within your office/work/storage space. Then you can deduct the cost of whole house things like heat and electric based on a % of the space your business takes up. Sadlly to say, as Steve mentioned, deductions are only a % of the cost of doing business. Including travel to the PO and places to buy merchandise for reselling. But that only accounts for a % of your car expenses.

Traveling somewhere to take videos to resale has to be the main reason for the trip and the largest % of what you do. If you take video for a couple of hours each morning then kick back to swimming, golfing and what not in the afternoon and then bar hopping all evening, the IRS would most likely disavow the write off of the trip.