Some of your clients may get away to business conventions from time to time. It gives them a chance to rub shoulders with colleagues, catch up on the latest developments, and fine-tune their skills. And, when the meetings or convention sessions are over, they can relax on the golf course or at the pool. But are the costs of business conventions deductible? Generally, according to IRS guidance, the answers is "yes", although you must be careful to observe the strict letter of the tax law.
Here's the starting point: As with the travel and lodging expenses of other business trips, the primary reason for attending must be business-related in order to qualify for deductions. If the trip is strictly a disguised vacation, you can't deduct business travel expenses, although you still may be allowed to deduct 50 percent of business-related entertainment and meal expenses.
Assuming you clear this hurdle, and have the proof to support it, you may be able to deduct the entire cost of the convention trip (subject to the usual 50 percent limit on meals and entertainment), minus any personal expenses spent on golfing and other activities. But the rules become even stricter if you attend a convention outside the North American area (see sidebar). In this case, you must also meet a "reasonableness test."
What this means: To qualify for deductions, you have to show that it is it is reasonable for the convention to be held outside the North American area as within it. If you don't pass the reasonableness test, you can't claim any deductions for the convention.
The following factors are taken into account to determine if it was reasonable to hold the meeting outside the North American area as within it.
- The purpose of the meeting and the activities taking place at the meeting.
- The purposes and activities of the sponsoring organizations or groups.
- The homes of the active members of the sponsoring organizations and the places at which other meetings of the sponsoring organizations or groups have been or will be held.
However, you may present other relevant factors to support the position that it is as reasonable for the convention to be held outside the North American area as within it. Note: Other special rules apply to conventions aboard cruise ships.
In any event, regardless of where the convention is held, it is recommended that you retain records of sessions you attended and convention brochures and materials. Finally, remember that the primary reason for the trip must be business-related. In other words, you can enjoy yourself; just don't go overboard.