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Many convention expenses are tax deductible
It must be shown that the attendee's professional duties and responsibilities tie into the conference program or agenda.
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Imagine an enjoyable — and educational — vacation with Uncle Sam, in the form of our tax laws, picking up part of the tab. It is true, every optometric professional, the principals, managers and employees of that practice (even someone who is a shareholder/employee), can legitimately claim an income tax deduction for the expenses of attending trade shows, conventions and meetings.
Thanks to our tax laws, the government will pick up the tab for a sizable portion of the expenses of attending events — if the rules are followed. Generally, in order to qualify for convention-related tax deductions, all that is required is that the attendee be able to show, if asked, that attendance at events such as the International Vision Expo and Conference, the American Academy of Optometry meeting or other trade show, convention or meeting was practice-related.
Naturally, when it comes to events for investment, political, social or other purposes unrelated to the practice, only a limited expense deduction may be available.
Tax deductible
Again, every optometric professional can deduct the expenses of attending a convention. All that is required is a bona fide business purpose.
Among the expenses that can be claimed as tax deductions when attending a conference are costs such as:
- conference or trade show registration fees;
- standard mileage for a vehicle driven to the meeting, trade show or convention;
- air, bus or train fare;
- lodging, including tips;
- 50% of meal expenses; and
- 50% of the cost of entertaining patients or suppliers.
Unfortunately, if a spouse, dependent or other individual accompanies an attendee to a convention or on a business trip, that individual’s travel expenses are not usually tax deductible. Of course, if a bona fide business purpose exists for the individual's presence and can be proven, a tax deduction might result. Incidental services, such as keeping notes or assisting in entertaining, are not enough to make the expenses deductible under our tax rules.
Generally, the travel expenses of someone accompanying an attendee can be deducted if that person is an employee of the practice and has a bona fide business purpose for travel and would otherwise be allowed to deduct the travel expenses.
If a business associate, such as a current or prospective (likely to become) patient, client, supplier, employee, agent, partner or professional advisor, travels with an attendee and has a bona fide business purpose for the travel and would otherwise be allowed to deduct the travel expenses, their expenses can be deducted. Consider our hypothetical optometry professional: Jerry.
Jerry drives to Chicago to attend a seminar and takes his wife, Linda, with him. Although Linda occasionally keeps notes, performs similar services and accompanies Jerry to luncheons and dinners, she is not Jerry’s employee. The performance of these services is not enough to establish her presence on the trip as necessary to the conduct of Jerry's practice, and her expenses are not deductible.
Fortunately, regardless of who accompanies him, Jerry still has deductible expenses. Consider that Jerry pays $199 a day for a double room while a single room costs $149 a day. He can deduct the total cost of driving his car to and from Chicago, but only $149 a day for his hotel room. If he uses public transportation, he can deduct only his fare.
Those dreaded receipts
Whenever business expenses are claimed it is a good idea to keep detailed records and receipts for everything. Business expenses can be charged to a practice credit card, receipts should be obtained from taxi drivers or other modes of transportation, and a detailed copy of the hotel bill should be kept. For the show, meeting or conference, a copy of all charges, as well as a copy of the convention schedule/agenda, can help prove it is relevant to the optometry practice.
Receipts for expenses of $75 or less are not required. Thus, if you take a taxi from your hotel to the site of a trade show or convention for a cost of $12, no receipt is required. Exception: A receipt is needed for lodging of any amount.
Although an optometry professional may not be required to keep all receipts, it does not hurt to do so. Those receipts can serve as a reminder of a deductible expense, especially where the payment was in cash. Also keep in mind that while there is no overall dollar limit on the amount that can be deducted for trade show-related expenses, entertainment and meal costs that are “lavish and extravagant” cannot be deducted. In addition, everyone is limited to a deduction of only 50% of the cost of meals.
The per diem standard deduction
When it comes to lodging, meals and other incidental expenses, the IRS will allow every optometric professional to claim a federal “per diem allowance,” which is determined by the location of the trip or conference. There is a per diem rate for lodging and a separate one for meals and incidentals.
Under the optional high-low method for 2016 travel, the high-cost area per diem rate is $275, (up from $259 in FY 2015), consisting of $207 for lodging and $68 for meals and incidental expenses (M&IE). The per-diem for all other localities is $185 (up from $172 in FY 2015), consisting of $128 for lodging and $57 for M&IE. Note that new rates are coming for 2016-2017 in late September.
When it comes to the 50% limit on meals, everyone traveling away from home for any length of time may deduct half of the per diem allowance or “standard meal allowance” rather than half of the actual cost of meals, laundry, cleaning and tips.
The bottom line, however, is that the advantage to using the standard meal allowance is that records do not have to be kept of actual meal expenses, although records do have to be kept to prove the time, place and business purpose of your travel. The biggest disadvantage is that the standard meal allowances are not very generous. Chances are that the actual expenses — and therefore the deductions — would be larger.
Working in a vacation
As mentioned, every optometry professional can deduct all of their travel expenses for a trip that is entirely business related. If the trip was primarily for business and, while at the business destination, the stay was extended for a vacation, to make a personal side trip or for other personal activities, only the business-related expenses can be deducted.
Naturally, if the trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. However, any expenses incurred while at that destination that are directly related to the business are, of course, deductible.
In the eyes of the IRS, a trip to a resort or on a cruise ship, even one advertised as primarily for business, may be labeled a vacation by the IRS. The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, rarely changes what is really a vacation into a business trip.
It should also be noted that no tax deduction is available for the expenses of attending a convention, seminar or similar meeting held outside the North American area unless it is “reasonable” to hold it outside the North American area. Fortunately, many medical-related conferences, shows and meetings scheduled outside the loosely-defined North American area qualify for tax deductions.
Going local
Meals and entertainment expenses are subject to a 50% limitation, meaning only half of the costs of these items can be deducted. New rules recently proposed by the IRS allow convention or trade show attendees, except the self-employed, to deduct the cost of local lodging as long as it is practice- or business-related. That means the expense of staying in town while attending a local trade show, convention, seminar or meeting can be tax deductible. A self-employed optometric professional can, of course, deduct travel away from his or her home base.
The lines between business and pleasurable expenses in the federal income tax rules are not always clear. However, most travel expenses (including travel, lodging and meals) are a legitimate tax deduction for anyone attending a convention within and without the U.S., as long as it can be shown that attending the convention benefits the optometry practice.
The requisite business relationship test can be satisfied by showing that an attendee’s professional duties and responsibilities tie in to the program or agenda of the convention. The agenda does not necessarily have to deal specifically with the attendee’s duties or responsibilities — a tie-in is enough.
Travel expenses are among the most common business expense deductions. Whether planning to attend the International Vision Expo in Las Vegas in September or other shows, conventions or meetings, planning will be a lot easier and the chances of Uncle Sam, in the form of our tax laws, picking up part of the cost, greatly enhanced. Because this type of expense is also one of the most confusing, now might be the time to seek a professional guide through the tax rules.
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- Mark E. Battersby has been reporting on news and developments in the tax and financial arenas for more than 25 years. He can be reached at MEBatt12@Earthlink.net.
Disclosure: Battersby reports no relevant financial disclosures.