Ask yourself two questions: First, would you like to take a cruise? Second, would you like to get a tax deduction for the cost of your cruise? If you answered “yes” to both questions, this article is for you.

The beauty of the cruise deduction is that tax law has a rulebook; complete with safe harbors and documentation standards you can follow to audit-proof your deductions. This article gives you the rules, safe harbors, and documentation you need and shows you how to make the rules work for you.

The important rules that make the cruise deductible include:

Certification that tax law makes the cruise ship a defined alternative to air travel.

How the safe harbor rules protect your cruise ship deductions for trips outside the United States.

How the law classifies each day of your trip as business or personal.

How the law applies special cruise and other rules to conventions, meetings, and seminars.

Rules for substantiation that produce audit-proof deductions.

Two ways to make your spouse’s trip deductible.

A rule to follow for cruise travel within the United States.

These rules provide you with a guidebook to audit-proof cruise deductions. We examine and explain each rule so you can plan your tax-deductible cruise.        

Certification That Tax Law Makes the Cruise Ship a Defined Alternative to Air Travel

You may ask yourself, how can I deduct a seven-day cruise to St. Thomas, in the Virgin Islands, when the airplane can get me there in one day? The answer is, because the law says you can!

The certification of the cruise ship as an alternative to the airplane is embedded in the law. Under tax law, when you travel by airplane, the law places no dollar limits on your deductions. But when you take the cruise ship, the law places a daily dollar limit on your deductions (see exhibit 1 for the limits).

The dollar limit is a good thing. When lawmakers put a limit on cruise-ship deductions, they specifically authorized and recognized the cruise ship as an appropriate method of transportation for business trips. The daily limit ... Log in to view full article.