- Thinking of starting a travel blog so you can write off all your family vacations? Think again. The IRS posts specific requirements that dictate whether your blog is a business or a hobby.
- Business expenses, including travel, also need to be considered "ordinary and necessary" to qualify. Many travel expenses fall into a gray area.
- Some of your website expenses can usually be taken as business expenses no matter how profitable you are. Examples include your domain name, hosting, website design, and some basic equipment. If you're unsure what you can deduct, you should consult a tax professional for help.
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While "traveling for free" might seem like a pipe dream to most of us, a wave of online entrepreneurs have mastered the art of turning travel into a business expense.
We're talking about travel bloggers, of course - a term used to describe website owners who write about destinations, hotels, travel credit cards, and other aspects of the travel industry in order to turn a profit. These innovators have somehow learned how to turn their love of travel into a career, earning real cash along the way.
Unfortunately, not everyone can write off their travel expenses, even if they're a travel blogger, says Eric Nisall, founder of AccountLancer. Nisall says clients regularly come to him believing they can throw up a travel website and immediately begin expensing all their trips to their business, but they're usually wrong.
Like anything to do with taxes, the reality of writing off travel is much more complex than most people think. What you can and can't write off is also defined by the Internal Revenue (IRS).
Is your travel blog a business, or a hobby?
According to Nisall, the main factor that determines whether you can write off travel expenses is whether your endeavor is currently functioning as a business or a hobby - regardless of how you hope it operates in the future. The IRS lists some guidelines on their website to help you determine where you stand.
Nisall says the main factors that apply to travel blogs include:
- Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records
- Whether the time and effort you put into the activity indicate you intend to make it profitable
- Whether you depend on income from the activity for your livelihood
- Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business)
- Whether the activity makes a profit in some years and how much profit it makes
Looking over this list, it's easy to see where people might have issues right off the bat - particularly with the time, income reliance, and profitability requirements. That's because most people start a blog as a "side gig," meaning both the time involved and the reliance on the income factors are not generally met, says Nisall.
While travel bloggers make earning money online look easy, that couldn't be further from the truth. Blogging for profit is actually rather difficult; it takes a lot more than adorable bikini pictures or family vacation photos to earn real income with the main avenues bloggers use (affiliate marketing, display ads, PPC ads, etc.) Like it or not, most bloggers shouldn't expect to make any money for the first six to twelve months. After that, they might make a little or a lot - but it can take years to find out.
Not everyone with a travel blog wants to heed these requirements, but it doesn't change the fact they exist. Nisall says that, realistically, you can still expect to deduct many of your regular expenses right away, including costs involved in setting a website up, getting it running, and creating a design.
However, "don't try and deduct thousands of dollars of travel and equipment expenses right off the bat," he says. If you do, don't be surprised if you're audited by the IRS.
Are your business expenses ordinary and necessary?
When it comes to travel blogging, another important aspect to consider is the IRS requirement for business expenses to be "ordinary and necessary." According to the IRS, an ordinary expense is one that is "common and accepted in your trade or business," while a necessary expense is "one that is helpful and appropriate for your trade or business."
Also be aware that, per IRS notes, "an expense does not have to be indispensable to be considered necessary."
This is a regular issue of contention in the world of travel writers, mostly because there is so much gray area. You may have to travel somewhere for your work, but there are lots of ways to go about it that may be far from ordinary.
For example, it may be ordinary and necessary to book a flight from New Jersey to Orlando to write about Disney World for your travel blog, but is it "necessary" to fly first class for a trip that is less than three hours? Probably not, says Nisall. Likewise, if you write about affordable family travel, booking a penthouse suite at the most expensive hotel you can find isn't "ordinary" because it doesn't fit in your niche.
What about equipment and supplies?
Provided you have met the requirements that make your blog a "business" and not a "hobby," you should be able to write off portions of your trips related to your entrepreneurial endeavors. Nisall says that, if 60% of any given trip was spent on business-related activities and the other 40% of your trip was personal, you can reasonably expect to deduct a prorated 60% of your expenses.
But, things get even trickier when we talk about deducting business equipment and supplies on your taxes as a travel blogger. Obviously, you will need to pay for certain items like luggage or camera equipment to complete your work, but are those items going to be used exclusively for business purposes?
"For some people the answer may be yes, because they only take pictures when traveling on sponsored trips or for income-generating pieces," says Nisall. "But if you are using anything for mix-use purposes, then you must make sure to only deduct a portion as business expenses."
A good example is a camera you buy to take pictures and video for your travel website and social media accounts. If you also use the same camera to snap family photos and take pictures of your kids at their events, then it's not a full-fledged business expense. If you buy a second camera specifically for travel, on the other hand, then you can absolutely write off the entire cost of the camera instead of a prorated amount.
Nisall says food is another common travel expense that is often miscategorized as a business expense. You have to eat, but not all of the food you consume is directly related to your travels - even if you're in the midst of a work-related trip.
"Just because you mention a place as a point of interest doesn't qualify your meal as a business expense," says Nisall. You can take a portion of your bill as a prorated travel expense, but you have to be honest and reasonable when writing it off."
When it comes to clothing and accessories, Nisall says these items are almost never deductible as a business expense.
"It doesn't matter if you need to be prepared to survive in an Alaskan igloo for a week or spend two entire days in the heat of the Sahara Desert," says Nisall. "Clothing, sunscreen, sunglasses, coverings or anything similar are non-starters, but heating and cooling equipment, enclosures, canteens, and the like are acceptable."
Writing off travel expenses isn't as easy as you'd think
If you hoped to start a travel blog so you could write off your family vacations, IRS guidelines probably have you feeling deflated. Unfortunately, saving big by writing about travel isn't as easy as some might lead you to believe - and it will be impossible for some.
The thing is, all the points we've discussed here are "the rules," but that doesn't mean everyone will follow them. Some people are looser about IRS requirements, so they choose to deduct everything regardless of the guidelines. Others are more conservative, so they automatically take smaller percentages as business deduction.
It all boils down to one thing: Are you willing to defend and substantiate all the expenses you take against your income (if you even have any) in the event of an audit?
As with any other tax-related issue, you should consult a knowledgeable professional for help with your taxes if you're not sure where you stand. But, if you were under the assumption that all your travel expenses were fair game once you started a travel blog, prepare yourself to be disappointed. You may be able to write off some of your expenses, but certainly not all of them - especially not if your earnings are slim or nonexistent.
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