(TAX Filter) What can we write off? Not your typical situation!
July 6, 2007 3:41 PM Subscribe
TAX FILTER: We are on a grand adventure on our sailboat which we are documenting via our website. My wife is an established writer/editor and I am an established photographer and a wanna-be writer. We are planning on writing a book based on our adventure and having difficulty deciding what is deductible and what is not. Hivemind, please help.
The sailboat is the key to the where we are adventuring (South-Central Alaska: Skiing and Sailing). What portion of the sailboat expenses can we write off? We have a strong grasp of the basic rules, i.e dinners count when meeting with potential clients, but what about the new skis we bought to for the DEEP snow which is why we traveled here; to gain material for the book. How about the food we buy and store aboard to be in very remote locations? Engine maintenance? General boat expenses (docking, fuel, repairs, equipment, etc.). Our trip is centered around the experience, we knew we wanted to write the book before leaving, we work on web/book content on a regular basis, the boat + location is the adventure, but also our home, where is the line? What should we be writing off? Any ideas and suggestions would be greatly appreciated.
The sailboat is the key to the where we are adventuring (South-Central Alaska: Skiing and Sailing). What portion of the sailboat expenses can we write off? We have a strong grasp of the basic rules, i.e dinners count when meeting with potential clients, but what about the new skis we bought to for the DEEP snow which is why we traveled here; to gain material for the book. How about the food we buy and store aboard to be in very remote locations? Engine maintenance? General boat expenses (docking, fuel, repairs, equipment, etc.). Our trip is centered around the experience, we knew we wanted to write the book before leaving, we work on web/book content on a regular basis, the boat + location is the adventure, but also our home, where is the line? What should we be writing off? Any ideas and suggestions would be greatly appreciated.
Assuming that you are in the U.S.:
Are you claiming the boat as your primary residence? If not, what's the tax situation with your primary residence? You might be able to capitalize and depreciate the boat as a vacation home.
"How about the food we buy and store aboard to be in very remote locations?"
Regardless of the location, general daily feeding of yourself is a personal expense, not a business one. Anything that you would have to be doing whether or not you were travelling, even if the travelling is for work, is not automatically deductible.
"what about the new skis we bought"
The spouse is a tax CPA and he likes to remind me on my own work travels and during my self-employment stints that the best rule of thumb is that "the more it looks to the IRS like fun, the less likely you can expect to deduct it." Is your book specifically about skiing, and can you document that? Or is it more generally about "we're having an adventure, however we decide to define that along the way"?
The ultimate answer to "where is the line?" is "how okay are you with getting audited?" Because, the lines can be pretty gray and wobbly, right up till the taxman comes knocking, and then it depends on how good a case you can make.
posted by pineapple at 4:23 PM on July 6, 2007
Are you claiming the boat as your primary residence? If not, what's the tax situation with your primary residence? You might be able to capitalize and depreciate the boat as a vacation home.
"How about the food we buy and store aboard to be in very remote locations?"
Regardless of the location, general daily feeding of yourself is a personal expense, not a business one. Anything that you would have to be doing whether or not you were travelling, even if the travelling is for work, is not automatically deductible.
"what about the new skis we bought"
The spouse is a tax CPA and he likes to remind me on my own work travels and during my self-employment stints that the best rule of thumb is that "the more it looks to the IRS like fun, the less likely you can expect to deduct it." Is your book specifically about skiing, and can you document that? Or is it more generally about "we're having an adventure, however we decide to define that along the way"?
The ultimate answer to "where is the line?" is "how okay are you with getting audited?" Because, the lines can be pretty gray and wobbly, right up till the taxman comes knocking, and then it depends on how good a case you can make.
posted by pineapple at 4:23 PM on July 6, 2007
Response by poster: Thanks for the suggestion b33j.
We are in the US citizens and will be paying the IRS.
posted by Fuzzy Dog at 4:52 PM on July 6, 2007
We are in the US citizens and will be paying the IRS.
posted by Fuzzy Dog at 4:52 PM on July 6, 2007
I can't recommend this enough: See a tax professional. They will more than pay for themselves and watch your back.
posted by Ookseer at 5:43 PM on July 6, 2007
posted by Ookseer at 5:43 PM on July 6, 2007
I am a former tax preparer. In your situation I certainly hope your taxes are being done by a professional. You should meet with that person before you start this adventure, and ask him or her. But since you asked...
If you're clearly intending to make a profit, and have a reasonably good chance at doing so, then any reasonable and necessary expenses are deductible.
Your cost to buy anything that lasts more than a year must be depreciated over multiple years. The IRS tells you over how many years. Search the IRS web site for "MACRS".
On the question of how okay are you with getting audited, I would say don't worry about it. Take all the deductions you're entitled to, and report the income your required to, and document it, and you'll be fine. Attempting to manage your risk of getting audited would be way more trouble than it's worth. Who knows what's going to raise a red flag with the IRS?
posted by Dec One at 6:13 PM on July 6, 2007
If you're clearly intending to make a profit, and have a reasonably good chance at doing so, then any reasonable and necessary expenses are deductible.
Your cost to buy anything that lasts more than a year must be depreciated over multiple years. The IRS tells you over how many years. Search the IRS web site for "MACRS".
On the question of how okay are you with getting audited, I would say don't worry about it. Take all the deductions you're entitled to, and report the income your required to, and document it, and you'll be fine. Attempting to manage your risk of getting audited would be way more trouble than it's worth. Who knows what's going to raise a red flag with the IRS?
posted by Dec One at 6:13 PM on July 6, 2007
Response by poster: Dec One, Thanks. Our taxes are being prepared professionally, but we get the stock IRS answer from him and wanted more perspective.
Again, thanks for all the input!
posted by Fuzzy Dog at 7:12 PM on July 6, 2007
Again, thanks for all the input!
posted by Fuzzy Dog at 7:12 PM on July 6, 2007
Sidenote: Sailing has the potential to forge a very amazing marriage or have it implode in the worse way possible. Your book may end up to be a different animal entirely.
Know everything you can about your boat before you embark on this mission, including taking some longer trips on it.
As for tax-wise, keep track of everything and throw it at your tax professional. They're only as good as your documentation.
posted by lilithim at 7:52 PM on July 6, 2007
Know everything you can about your boat before you embark on this mission, including taking some longer trips on it.
As for tax-wise, keep track of everything and throw it at your tax professional. They're only as good as your documentation.
posted by lilithim at 7:52 PM on July 6, 2007
Our taxes are being prepared professionally, but we get the stock IRS answer from him and wanted more perspective.
Find a different professional.
posted by Mick at 9:47 AM on July 7, 2007
Find a different professional.
posted by Mick at 9:47 AM on July 7, 2007
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posted by b33j at 4:09 PM on July 6, 2007