Travel is amazing. Since childhood, I’ve had the travel bug because growing up, that’s all I did. I was born in Manila, Philippines, stayed briefly in Washington, DC and moved to Lusaka, Zambia for a couple years. In Kobe, Japan I started kindergarten. In Taipei, Taiwan I had four years of elementary school. I then went to Kuala Lumpur, Malaysia for middle school where I learned a lot of bad things. Finally, I returned to the States for high school and college. As the son of US foreign service parents, life was interesting.
As an adult, my frequent travel continued because luckily I found jobs in the international equities department of two large financial organizations. Up to four times a year, I’d travel to Asia to attend conferences or bring clients to see companies. Kissing the ring in New York City HQ was also an annual rite of passage. It was a whole lot of fun!
Traveling to new places on business is one of the most rewarding experiences you can have. Not only do you get to explore new worlds and meet amazing people, all your flights, hotels, and meals are free. Since I’m no longer in Corporate, I needed to some how recreate this perk.
Travel Blogging To The Rescue
The great thing about the personal finance arena is that money touches everything we do, including travel. I can write about how to save money on flights and hotels. Or I can discuss how to travel for free with credit card rewards points. There’re innumerable topics I can write about that relate to travel and money, including this post!
My epiphany came while I was hanging with a bunch of travel bloggers who said a lot of transportation and hospitality companies provide free everything in exchange for writing a review. For example, one travel blogger stayed at a 5-star resort in Bali for free in exchange for publishing a post about his experience. The retail value of his stay was ~$1,500, and the actual cost to the hotel was less than $100 for food and cleaning. What a win-win!
Therefore, the easiest way to get free travel and accommodations is to start a travel blog, establish yourself as an enthusiastic traveler and contact the marketing departments of places you want to visit and make a deal to write about them. You probably want to chronicle your experiences anyway. Maybe companies won’t comp everything, but freebies might include an upgrade, meals, or an excursion. I get some nice bonuses all the time once I mention I have a site. You never know until you ask.
Then, while watching a Rick Steves’ Guide To Rome episode on TV, I had another epiphany. Given I like to travel and write, why can’t I do something similar to Rick Steves and write about my experiences around the world through a personal finance lens? Instead of doing the same old “Top 10 Places To See,” why not interview the locals about their thoughts on happiness, life, work, family, and play? At the same time, I’d offer the usual travel tips to make a traveler’s trip as pleasant and economical as possible. What a no brainer.
Check out these posts which I’ve already written!
I’ve Seen The Future And It Looks So Bright – Given America’s government continues to grow in size and reach, I went to Europe to see what our future might look like with super high tax rates, higher unemployment, free health care, and good public infrastructure. What I found made me so bullish on America’s future and gave me the confidence to leave my job and not be afraid of falling through the cracks.
Learning From The World’s Happiest People – Scandinavian countries are consistently ranked the happiest countries in the world by the World Happiness Monitor survey. As a result, I went to Stockholm to see why and share my knowledge with all of you. Financial Samurai is really a blog about maximizing happiness with the use of money.
Living In An Expensive City Can Make You Richer, Happier And More Diplomatic – After returning from beautiful, but impoverished Angkor Wat, Cambodia, I was reminded how lucky we are living in a developed country. I turned a memorable visual I had of kids walking for miles in 100+F degree heat into a post about the upside of living in expensive cities like New York, San Francisco, London, and Hong Kong.
What Is Capitalism? To Understand Let’s First Explore Communist China – Most people, when they go to China, visit Beijing and Shanghai. I went to the fire pit of Chongqing, in the center of China and wrote about the different perspectives of Communism and Capitalism. The city is developing quickly, but its views are still 10+ years behind the coastal cities. I think you’ll love the pictures I took.
Exploring The Edge Of The World: Welcome To The DMZ – Here is a fascinating post about what happens when one people is divided by two different ideologies. If you go to Seoul, you must take the one hour trek to visit the Demilitarized Zone between North and South Korea. You will realize how lucky you are to be free. You’ll also gain a lot of empathy for North Koreans. And with more empathy, comes more harmony. You’ll be less quick to judge someone based on how they look or where they come from. Enjoy the video I embedded.
My posts are so different from the typical travel guide or travel blogger article. With the publication of several more travel articles, I should be able to package all my travel-related posts into an insightful Travel Diaries ebook to make extra passive income. Bingo!
What Travel Expenses Are Deductible?
Great question. I asked my CPA and he said, “All reasonable related travel expenses required to produce and sell your product.” The key word in his answer is “reasonable.” Spending $10,000 to fly first class to Paris doesn’t seem reasonable when you can fly for $1,500 in economy class and your business only generates $50,000 a year in operating profits.
But what if you are writing a series about flying first class on the world’s top 10 major airlines to compare which has the best service and most comfortable seats? Then perhaps the cost of a first class ticket is reasonable because you can’t properly assess the experience from coach. And if your business is generating at least $500,000 a year in operating profits, and you are the CEO of the company, maybe first class is reasonable too. After all, plenty of CEOs of bigger companies fly first class or business class. I know I did as an Executive Director.
As you can see from my examples, “reasonable” can be subjective. So let’s go to the IRS website (https://www.irs.gov/taxtopics/tc511.html) for an explanation.
Travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. Generally, employees deduct these expenses by using Form 2106 (PDF), Employee Business Expenses, or Form 2106-EZ (PDF), Unreimbursed Employee Business Expenses, and Form 1040, Schedule A (PDF), Itemized Deductions. You cannot deduct expenses that are lavish or extravagant, or that are for personal purposes.
You are traveling away from home if your duties require you to be away from the general area of your tax home for a period substantially longer than an ordinary day’s work, and you need to get sleep or rest to meet the demands of your work while away.
Generally, your tax home is the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home. For example, you live with your family in Chicago but work in Milwaukee where you stay in a hotel and eat in restaurants. You return to Chicago every weekend. You may not deduct any of your travel, meals or lodging in Milwaukee because that is your tax home. Your travel on weekends to your family home in Chicago is not for your work, so these expenses are also not deductible. If you regularly work in more than one place, your tax home is the general area where your main place of business or work is located.
In determining your main place of business, take into account the length of time you normally need to spend at each location for business purposes, the degree of business activity in each area, and the relative significance of the financial return from each area. However, the most important consideration is the length of time you spend at each location.
You can deduct travel expenses paid or incurred in connection with a temporary work assignment away from home. However, you cannot deduct travel expenses paid in connection with an indefinite work assignment. Any work assignment in excess of one year is considered indefinite. Also, you may not deduct travel expenses at a work location if you realistically expect that you will work there for more than one year, whether or not you actually work there that long. If you realistically expect to work at a temporary location for one year or less, and the expectation changes so that at some point you realistically expect to work there for more than one year, travel expenses become nondeductible when your expectation changes. For an exception to the 1-year rule for federal crime investigations or prosecutions, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses.
You may deduct travel expenses, including meals and lodging you incurred in looking for a new job in your present trade or business. You may not deduct these expenses if you had them while looking for work in a new trade or business or while looking for work for the first time. If you are unemployed and there is a substantial break between the time of your past work and your looking for new work, you may not deduct these expenses, even if the new work is in the same trade or business as your previous work. Refer to Publication 529, Miscellaneous Deductions.
Travel expenses for conventions are deductible if you can show that your attendance benefits your trade or business. Special rules apply to conventions held outside the North American area.
Deductible travel expenses while away from home include, but are not limited to the costs of:
- Travel by airplane, train, bus or car between your home and your business destination. (If you are provided with a ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero.)
- Fares for taxis or other types of transportation between the airport or train station and your hotel, the hotel and the work location, and from one customer to another, or from one place of business to another.
- Shipping of baggage, and sample or display material between your regular and temporary work locations.
- Using your car while at your business destination. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking fees. If you rent a car, you can deduct only the business-use portion for the expenses.
- Meals and lodging.
- Dry cleaning and laundry.
- Business calls while on your business trip. (This includes business communications by fax machine or other communication devices.)
- Tips you pay for services related to any of these expenses.
- Other similar ordinary and necessary expenses related to your business travel. (These expenses might include transportation to and from a business meal, public stenographer’s fees, computer rental fees, and operating and maintaining a house trailer.)
Good records are essential. Refer to Topic 305 for information on record-keeping. For more information on these and other travel expenses, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses.
OK, great! Everybody understand the rules? If not, please read again. The key words are “lavish and extravagant.” Again, subjective words that are open to interpretation. For a multi-millionaire, booking a suite at the Ritz might not be extravagant. For a bootstrapping entrepreneur living paycheck to paycheck, anything other than a hostel room could be considered extreme!
Make Sure You Have Real Revenue Eventually
What the IRS frowns upon is people dumping all their lifestyle expenses into their business and never making a profit. With no profits, the IRS can’t collect any of your hard earned money. The general rule is that your business needs to make a profit after the third year. If not, you’d better lower your expenses and prepare for potential scrutiny.
The great thing about having a website is that you can easily pivot or add multiple income streams. After seven years of operation, Financial Samurai earns a healthy income from financial services. I want to now build my travel business through partnerships with travel companies and my favorite airlines and hotels.
To build my travel business will require startup costs. If my travel business was an isolated department, it would certainly be loss making. Good thing I don’t create silos at Financial Samurai. My financial services business will help subsidize the build out of my travel business until profitable. Meanwhile, the losses from my travel business will help reduce my taxable income from my financial services business. It’s one team, one dream baby! Now you know why conglomerates like Alphabet (ex Google) are created.
Given I earn a good operating profit from Financial Samurai Inc, my travel business could incur losses for a very long time without triggering an IRS audit because I would never let the losses of my travel business exceed the profits of my financial business. I love supporting America and paying over $100,000 in income taxes a year. I could also hire my family members as freelance travel writers for FS as well. After all, my parents just got back from a three week cruise from Panama City to Barcelona.
Just look at unprofitable companies like Tesla and Amazon. They are worth billions, but pay ZERO corporate income taxes because they make operating losses. What about companies like GE who engineer the most complicated tax strategies to avoid taxes. Got to love it. It’s the small business owners like me who are paying all the taxes and keeping our country strong.
I hope this post gives you some ideas on how you might be able to travel for free or at a discount at the very least. More importantly, I want you guys to realize how having a business can legitimately reduce your taxable income. America is great because anybody is allowed to give entrepreneurship a go. Nobody says you have to be a crazy success either.
I’m thankful starting an online business costs so little and takes under an hour to set up. It allows us to experiment without fear of financial ruin. The magic happens when you can make money doing what you love every day.
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