- Are you thinking of starting a travel blog so that you can write off all of your family vacations? Think again The IRS has specific requirements that determine whether your blog is a business or a hobby.
- Business expenses, including travel expenses, must also be considered “normal and necessary” to qualify. Many travel expenses fall into a gray area.
- Some of your website expenses can usually be considered business expenses no matter how profitable they are. Examples include your domain name, hosting, website design and some basic equipment. If you’re not sure what to deduct, you should seek help from a tax advisor.
- You can find more stories on the Business Insider homepage.
While “traveling for free” seems like a pipe dream to most of us, a wave of online entrepreneurs has 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 travel destinations, hotels, travel credit cards, and other aspects of the travel industry to make a profit. These innovators somehow learned how to turn their love of travel into a career while making real money in the process.
Unfortunately, not everyone can write off their travel expenses, even if they’re a travel blogger, says Eric Nisall, founder of AccountLancer. According to Nisall, customers come to him regularly because they think they can go to a travel website and immediately start spending all of their trips on their business, but they’re usually wrong.
Like anything tax-related, the reality of writing off travel is much more complex than most people think. What you can and can’t write off is also set 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 business is currently a business or a hobby – regardless of how you hope it works in the future. The IRS lists some guidelines on their website that can help you determine where you stand.
According to Nisall, the top factors that apply to travel blogging are:
- Whether you are doing the activity in a business-like manner, keeping complete and accurate books and records
- Whether the time and effort you put into the activity indicates that you intend to make it profitable
- Whether you depend on income from the job for your livelihood
- Whether your losses were due to circumstances beyond your control (or normal in the early stages of your type of business)
- Whether the activity will make a profit in a few years and how much profit it will make
By looking at this list, you can easily see where people might be having trouble the first time – especially with regards to time, income dependency, and profitability requirements. That’s because most people start a blog as a “side appearance,” which means that both the time investment and confidence in the income factors generally fall short, says Nisall.
While travel bloggers make making money online a breeze, it couldn’t be further from the truth. For profit blogging is actually quite difficult; It takes a lot more than just adorable bikini pics or family vacation photos to generate real income from the top ways bloggers use (affiliate marketing, display ads, PPC ads, etc). Like it or not, most bloggers shouldn’t expect any to make money for the first six to twelve months. After that, they may do a little or a lot – but it may take years to figure it out.
Not everyone with a travel blog wants to be aware of these requirements, but it doesn’t change the fact that they exist. According to Nisall, realistically, you can still expect to deduct many of your regular expenses right away, including the cost of setting up, running and creating a design.
“Don’t try to immediately pull out thousands of dollars in travel and equipment expenses, however,” he says. If you do, don’t be surprised if you get audited by the IRS.
Are your business expenses normal and necessary?
Another important aspect of blogging travel is the IRS requirement that the business expense be “normal and necessary”. According to the IRS, a normal expense is one that is “common and accepted in your trade or business” while a necessary expense is “one that is helpful and appropriate to your trade or business”.
Also note that, according to IRS notes, “an expense need not be indispensable to be deemed necessary”.
This is a regular issue of contention in the travel writing world, largely because there are so many gray areas. You may have to travel somewhere to do your work, but there are many options that are far from common.
For example, booking a New Jersey to Orlando flight may be normal and necessary to write about Disney World for your travel blog, but is it “necessary” to fly first class for a trip of less than three hours? Probably not, says Nisall. If you’re writing about affordable family travel, booking a penthouse suite in the most expensive hotel you can find isn’t “normal” as it doesn’t fit your niche.
What about equipment and accessories?
Assuming you’ve met the requirements that make your blog a “business” rather than a “hobby”, you should be able to write off portions of your trips related to your business endeavors. Nisall says that if 60% of a given trip was spent on business activities and the other 40% of your trip was personal, you can reasonably expect to deduct a prorated 60% of your expenses.
However, it gets even more difficult when we, as travel bloggers, talk about deducting business equipment and consumables from your taxes. Of course, you will have to pay for certain items like luggage or camera equipment to complete your job. However, are these items used solely for business purposes?
“For some people, the answer may be yes because they only shoot on sponsored trips or for income-generating pieces,” says Nisall. “However, if you are using something for mix-use, you need to make sure that only some of it is deducted as a business cost.”
A good example is a camera that you buy to take pictures and videos for your travel website and social media accounts. Using the same camera to take family photos and take pictures of your children at their events is not a full-fledged business expense. On the other hand, if you buy a second camera specifically for travel, you can write off the entire cost of the camera in absolute terms instead of a prorated amount.
Another common travel expense, according to Nisall, is food that is often classified as a business expense. You must eat, but not all of the foods you consume are directly related to your travel – even if you are in the middle of a work-related trip.
“Just because you mention a place as a POI doesn’t make your meal a business expense,” says Nisall. You can use part of your bill as a pro-rated travel expense, but you need to be honest and reasonable in writing it off. “
When it comes to clothing and accessories, these items are almost never deductible as business expenses, according to Nisall.
“It doesn’t matter whether you need to be prepared to survive a week in an Alaskan igloo or spend two full days in the heat of the Sahara,” says Nisall. “Clothing, sunscreen, sunglasses, covers or the like are not starters, but heating and cooling devices, housings, canteens and the like are acceptable.”
Writing off travel expenses is not as easy as you might think
If you were hoping to start a travel blog so that you can write off your family vacation, the IRS guidelines are likely to leave you feeling emptied. Unfortunately, saving a lot of money by writing about travel isn’t as easy as some have led you to believe – and for some it will be impossible.
The thing is, all of the points we’ve discussed here are “the rules,” but that doesn’t mean everyone will follow them. Some people are more relaxed about IRS requirements so they choose to pull it all off regardless of the guidelines. Others are more conservative, so they automatically take smaller percentages as a business drain.
It all boils down to one thing: are you willing to defend and justify any expenses you may have in the event of an income audit (if any)?
As with any other tax problem, if you are unsure of where you stand, you should seek help with your taxes from a seasoned professional. However, if you assumed that all of your travel expenses were fair after starting a travel blog, prepare to be disappointed. You may be able to write off some of your expenses, but certainly not all of them – especially if your income is low or nonexistent.
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