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Take advantage of tax write-offs for conference attendance
However, many previous deductions were temporarily suspended by the Tax Cuts and Jobs Act.
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Industry events such as Academy 2018, the American Academy of Optometry’s November event in San Antonio, or even SECO 2019 in New Orleans are good ways to gain know-how, find new suppliers and network with others in the industry. Best of all, Uncle Sam, in the form of our tax laws, is willing to pick up the expense of attending many of these events – at least for some.
The bottom line is that an optometry practice can deduct all non-extravagant “ordinary and necessary expenses” for attending practice-related meetings, conferences, shows and other events. With certain limits, allowable expenses include travel, lodging, meals and associated out-of-pocket costs.
Unfortunately, many deductions previously claimed on the personal tax returns of optometric professionals for show attendance were temporarily suspended by last December’s Tax Cuts and Jobs Act (TCJA), the same bill that put a crimp in the meals and entertainment deductions.
Reform for meals, entertainment
The TCJA eliminated, at least until 2026, some itemized deductions on the tax returns of individuals. Targeted were miscellaneous deductions subject to the former 2% floor, including unreimbursed employee business expenses (expenses for travel, lodging, meals, entertainment, continuing education and others).
Fortunately, the expense of getting to, staying at and attending meetings, conventions, trade shows or seminars can still be claimed by a practice – including sole practitioners.
Of course, for an optometry practice to take the deduction, it must have the convention expenses on its books. If the principal/employee, or any attendee, pays an expense personally, he or she must submit an expense report detailing the expense, and the practice must reimburse that expense to get the deduction.
Although the TCJA is not too clear on how the new law applies to business meals, it is quite clear that no deduction will be allowed for entertainment. The term “entertainment” in our tax laws means any activity that is generally considered to constitute entertainment, amusement or recreation such as night clubs, cocktail lounges, theaters, country clubs, golf and athletic clubs, sporting events and hunting, fishing, vacation and similar trips.
Under the new law, while entertainment is no longer deductible, no change was made to the 50% deduction for business meals or the 100% deduction for expenses incurred for recreational, social or similar activities primarily for the benefit of employees.
Despite appearing as if the TCJA wiped out many show attendance-related expense deductions, some remain, at least for an optometry practice. If, for example, business is conducted during a meal, a business expense deduction may result. The tax laws do, of course, limit business meal deductions to only 50% of the expense.
The deduction of 50% of the cost of meals incurred while traveling away from home on business is still possible. Not too surprisingly, however, the rules in this area contain quite a few gray areas. If, for instance, the practice foots the bill for taking employees to a conference, the full amount of their meals is deductible by the optometry practice. The 50% rule applies only to the practice’s principals.
With a meal that immediately precedes or follows a substantial business meeting, 50% of the cost can be deducted – as long as it was not “lavish or extravagant.” Under the TCJA, meals during business travel and meals at a seminar or conference are 50% deductible.
If an optometry practice or business provides meals in a hospitality suite at a convention with the clear intent of generating business, the cost is usually deductible. Other meals outside that were paid purely for goodwill purposes may not qualify as “directly related” to the business or practice.
Because entertainment-related meals are now treated differently than patient, customer or client business meals, it is now necessary to account for each separately. As mentioned, business- or practice-related meals are deductible only if they are not lavish or extravagant and only if the taxpayer – or a representative – is present. Because entertainment expenditures are no longer deductible, it is necessary to actually conduct business with the client or customer for the meal to be deductible.
Mixing business and pleasure
Attending a business-related event does not have to be strictly for business. Generally, taking extra days for a mini-vacation will not always result in the loss of the show attendance deduction. The tax rules permit a deduction for the total travel costs when the trip’s main purpose is attending a convention, trade show or conference.
When combining a vacation or side trip with convention attendance, a good rule is to spend more days on business than on pleasure. Lodging expenses cannot be deducted for personal days, but purchasing a reduced-fare ticket requiring stay-over days means lodging costs for stay-over days are deductible.
When mixing business travel with pleasure, round-trip travel is fully deductible if more days are spent on business than on pleasure. Days spent traveling are usually considered business days.
When traveling by car, the standard mileage deduction for the year of travel can be used. The standard rate for use of a car, pick-up or van is up a penny from 2017, to 54.5 cents per mile for business travel.
Friends, family, others
If friends, family or other guests accompany an attendee to a conference, only the business-related portion of the expenses can be deducted. In other words, deducting the cost of the family’s hotel suite is a no-no. Instead, only the cost of a single room would be deductible.
If a bona fide business purpose exists for an 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. The travel expenses of someone accompanying an attendee can be deducted if that person:
- Is an employee of the practice or business;
- Has a bona fide business purpose for the travel; and
- Would otherwise be allowed to deduct the travel expenses.
Convention types
Anyone clearing the legal hurdles, and with the proof to support it, may be able to deduct the entire cost of the conference trip (subject to the usual 50% limit on meals and entertainment) and minus any personal expenses incurred. However, the rules are tighter if the event is held outside the North American area or on a cruise ship.
Foreign conventions. In order to deduct the expense of attending a trade show or convention held outside the North American area, the optometry practice must show that the event is directly related to the active conduct of the practice and it is as reasonable for the event to be held outside the North American area as it is to hold it within the North American area.
Cruise ship conventions. Even more stringent rules exist in order to deduct expenses of events held on a cruise ship. First, the cruise ship must be a U.S.-registered vessel. Next, the ship must make all of its ports of call in the U.S. or U.S. possessions.
Finally, the tax law limits cruise ship convention deductions to only $2,000 per year. In addition, a signed, written statement stating the total days spent on the ship and how many hours were devoted to business each day is required. Another statement, this one from an officer of the sponsoring group or organization confirming both the scheduled activities and the attendance of the participant, is also required.
Those dreaded receipts
Receipts for expenses of $75 or less are not required. However, while it may not be required to keep all receipts, it does not hurt to do so. In fact, when attending a show, 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.
As a general rule, whenever business expenses are claimed it is usually a good idea to keep detailed records and receipts for everything. They often 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 the expenses incurred attending a trade show, costs that are “lavish and extravagant” cannot be deducted.
To recap, as with the travel and lodging expenses of other business trips, the primary reason for attending must be practice- or business-related in order to qualify for federal tax deductions. When it comes to events for investment, political, social or other purposes unrelated to the practice or business, only a limited expense deduction may be available. If the trip is strictly a disguised vacation, business travel expenses cannot be deducted. In addition, a limited deduction of only 50% of the cost of meals is usually permitted.
Additional guidance is available from the IRS in “Publication 463: Travel, Entertainment, Gift and Car Expenses,” available at: www.irs.gov/formspubs. Any optometry professional or practice needing additional help with this, one of the more confusing area of our tax rules, would be well-advised to seek professional help.
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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 has no relevant financial disclosures.