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Columns by June Walker: IPs Face Unique Tax Challenges Tax Deductions Are There For The Taking You Say You're Self-Employed -- Will the IRS? Criteria for Self-Employment Do You Have a Business or a Hobby? Proving That You're a Business Keeping Records -- It's Not Just for Taxes Three Ways to Expand Your Business Deductions Can I Deduct Disneyland and Other Questions Mixing Business with Pleasure and Other Gray Areas Quicken for IPs Courses That Qualify Training You Can't Deduct Getting There is Half the Battle Taking Deductions on the Road Getting Credit and Taking Allowances Advertising: Do It, Then Deduct It The Subtle Art of Advertising Deductions Billy Bridesnapper's Start-up Saga Starting Up and Shutting Down Start-Up Wrap-Up Giving Gifts, Taking Deductions

Taking Deductions on the Road In recent columns we have been looking at how to determine if a course qualifies as business education; and if it does, which costs can be deducted. We also saw that the IRS has its own peculiar way of determining when you can deduct your transportation round-trip or only one-way for classes or seminars qualifying as business education. Now, let's journey down the road of travel for business education. Keep in mind: the difference between transportation and travel is that travel is overnight. Travel expenses for qualifying education are treated the same as travel expenses for other business purposes. Travel expenses include the costs of: Getting to and from the location of the course, seminar, or workshop Lodging on the way to, on the way from, and while staying at the location Meals (subject to the 50-percent limit) while going to and from, and while attending the course If you've read my column on travel, you're aware of the many specific rules and regulations applying to business travel deductions. In general keep in mind that: You cannot deduct expenses for personal activities, such as sightseeing, visiting, or entertaining. If you mix business with pleasure, you will have to prorate or exclude certain expenses depending upon where you traveled and for how long. The following examples illustrate how and to what extent business travel is deductible when it is mixed with personal travel on the same trip. Example 1. Patty Party-Planner's business is in Boston. She traveled to Philadelphia to take a deductible one-week course on security measures for large events. While there, she entertained friends and took a one-day trip to Valley Forge. Because the trip to Philadelphia was mainly for business, she can deduct her round-trip airfare, the transportation related to the course, and meals and lodging for the days of the course. She cannot deduct the transportation or other expenses of her visits with friends or her trip to Valley Forge. Example 2. Estelle has really made a go of her estate sales business in Seattle. She flew to San Francisco for a two-week seminar on new trends in tracking down and marketing antiques. While there, she spent an additional four weeks visiting her mother. Her main purpose was clearly not business, so she cannot deduct her airfare or any other expenses during her four-week visit with her mother. She can deduct only her expenses for meals and lodging for the two weeks that she attended the seminar. Cruises and Conventions Heed not the siren call of certain cruises and conventions that offer seminars or courses as part of their itinerary. Even if these are work related, your deduction for travel may be limited if the travel is by ocean liner, cruise ship, or is held outside North America. Travel as Education You may no longer treat travel as a form of education, even if it is directly related to your duties in your business. In my column on travel I explained that Jack Japanese-Instructor may deduct a trip to Japan to take courses in Japanese and Japanese culture or history. He may not deduct the costs of a trip to Japan if he just travels around the country soaking up the culture. If the trip is primarily a vacation, there is no deduction for travel costs to and from the foreign location. Just because Jack Japanese-Instructor took a one-day Haiku course during his ten days in Japan does not make the airfare or any of his other expenses deductible. Only the cost of the one-day course is a business expense. Nondeductible Expenses If you receive help in paying for your education costs from scholarships, veterans' educational assistance, or the education savings bond program, you don't have to pay tax on that money; but because financial aid is tax-exempt you cannot deduct it as an education expense. The IRS also does not allow you to deduct the amount of income you would have generated in your business had you been working instead of attending class. Which Records to Keep You may at some time and for some reason need to prove that your education expenses are legitimate business deductions. In addition to cancelled checks and receipts proving that you paid for the course or seminar you should also keep papers such as: College transcripts Course descriptions Seminar agendas Workshop speaker lists Catalogues or brochures Scholarship information If you have attended a workshop that you believe qualifies for educational expenses, keep not only a record of those expenses but also evidence of the workshop's connection with your business, especially if the connection is a bit wacky or sounds just a little too imaginative. If at a later date you can show how that course figured in your business, also put that information in your tax file -- the tax file of the year that you took the expense. Coming up next column: pointers on how to save more taxes through the recently enacted tax benefits connected with business education. (c) 2000 June Walker. All rights reserved. We'd love to hear your feedback about this column, or put you in touch with June Walker if you like. You may also like to see her biography.