Could Tax Deductible Philippine Travel Even Be Legal?
Tax Deductible Philippine Travel? Wow, isn’t that one of those “link bait” style article titles, Dave? Everybody “knows” you can’t cheat on your taxes and get away with it … “they” say you can’t, don’t “they”?
Well, I’m sure “they” do, and let me say right now (and probably a few more times in the article), I do not advocate, advise or support in any way “cheating” on your US income taxes. I pay mine, honestly, every year, and I recommend you do too. I also am not a tax professional, this article is my personal opinion and not to be mistaken for professional tax advice.
This fits directly into some of my thoughts in: Is It Time To Travel To The Philippines? This is now prime travel season.
That said, I’ve read, carefully IRS Publication 529, Miscellaneous Unreimbursed Employee Expenses and I recommend you do the same. Also I recommend you read this neat article from Bankrate.com:
These days a lot of Americans find themselves pounding the pavement in quest of a new job, whether they’ve gotten the pink slip or expect to get one soon. The good news: The search may help you cut your tax bill — under certain circumstances, job-hunting expenses are tax-deductible.
Tax Deductible Philippine Travel – I Actually Could Do That?
Yep, in my opinion you certainly can, as long as you follow the IRS’s own guidelines. I’ve done this myself, and so have others traveling here to the Philippines. Of course, that only means in the long run that I didn’t get caught, but I never lost a minute’s sleep so long as what I claimed followed the rules.
First, your hunt for new work must be in the same field in which you’re currently or were formerly employed. Uncle Sam won’t help out if you decide to totally switch career gears. As an example, if you work as a truck driver in the USA, you certainly can’t travel to the Philippines and seek work as a nightclub manager. But truck driving, trucking management positions, truck driver trainer, truck driver safety officer, etc. would clearly seem to be in the “same field”.
No Long Break
You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one. What is a “substantial break”?
Typical IRS obfuscation there. it really means anything the IRS wants it to mean, but it really all boils down to how actively you are actually looking for work.
Even if you have been out of work a long time, if you are doing something (and even better, keeping a record or log of your activity) other than reading the want ads over coffee in the morning and then going back to bed … well, you are probably actively looking for a job.
Must Have Had a Job
Recent graduates are out of luck. The costs you incur in getting your first job aren’t deductible, because the tax law only allows you to write off expenses incurred in searching for another position in your present occupation.
Tax Deductible Philippine Travel — What you can write off
This is directly from the IRS website:
Did you know that you may be able to deduct some of your job search expenses on your tax return?
Many taxpayers spend time during the summer months updating their résumé and attending career fairs. If you are searching for a job this summer, you may be able to deduct some of your expenses on your tax return. Here are six things the IRS wants you to know about deducting costs related to your job search.
- To qualify for a deduction, the expenses must be spent on a job search in your current occupation. You may not deduct expenses incurred while looking for a job in a new occupation.
- You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year.
- You can deduct amounts you spend for preparing and mailing copies of your résumé to prospective employers as long as you are looking for a new job in your present occupation.
- If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
- You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.
- You cannot deduct job search expenses if you are looking for a job for the first time.
So In Summary, These Items and More:
- Employment and outplacement agency fees.
- Resume services.
- Printing and mailing costs of search letters.
- Want-ad placement fees.
- Telephone calls.
- Travel expenses, including out-of-town job-hunting trips.
Here’s something you want to read and consider carefully if you, like me, have decided to improve your own life by empowering yourself with your own business, on or off-line, rather than waiting for a “boss” to tell you how to run your life … or even if you even if you can have one (a life that is).
Even self-employment efforts could count at tax-filing time.
The costs associated with investigating or attempting to start your own business, as long as it’s in the same field as your current profession, may be tax-deductible.
Let me give you a quick example of something I did myself, several years ago, where I legally deducted non-trivial Philippine bus8nes travel expenses. Again, my advice is opinion only and lay advice, but I did have help that year from a doctoral-level tax attorney, and it certainly all seemed legal and smart to both he and I. You use your own expert advisor, please.
I retired from my USAF civilian job. I was doing consulting work for a lawyer … basic research on a number of matters I had expertise in, particularly issues about divorce and Federal employee benefits.
Well my lawyer client/friend had a number of potential legal business ventures “hanging fire” in the Philippines. So I got a list of people he wanted to explore partnering with, came up with 10 that we agreed were good prospects, and booked myself a 14 day trip to the Philippines.
Ten out of the fourteen days I spent here, I visited these prospects, “pitched” my clients services and joint project ideas, bought a few lunches and dinners, and had a very nice time. My “insurance” for this scheme was a simple notebook where I logged my activities (and of course my expenses) every day, explaining, in 25 words or less, the business reason I met with each potential client.
According to my advisor, 10 out 14 days certainly established the basic business reason for my trip … and when I filed my taxes the following April, turns out (because I had a whopping tax bill that year due to other issues), the IRS essentially paid 30-odd percent of my Philippine travel.
As my sainted daddy would have said, “Better than a poke in the eye with a sharp stick”, for sure.
Itemizing limits — Again, Direct From The IRS
Travel and transportation expenses. If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area.
You can deduct the travel expenses if the trip is primarily to look for a new job. The the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area.
You can choose to use the standard mileage rate to figure your car expenses. The 2010 rate for business use
ness, and of a vehicle is 50 cents per mile. See Publication 463 for more information on travel and car expenses.
Careful tracking of these expenses is critical because they are classified as miscellaneous itemized deductions. You itemize them on line 21 of Schedule A.
But you can’t automatically subtract your job-hunting costs from your income — just those that, when added to all your miscellaneous deductions, come to more than 2 percent of your adjusted gross income.
So hang on to those job-hunt vouchers. They can help push that miscellaneous amount to the allowable level, even if you don’t get new work
What else do you want to know about Tax Deductible Philippine Travel?