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Tax Newsletter

Deductions for Business Conducted on Cruise Ships

It is common to conduct business on luxury travel vessels such as ocean liners and cruise ships. However, only in certain situations are some or all business expenses related to this type of travel deductible.

Luxury Water Travel

The Internal Revenue Service places a daily limit upon the amount you can deduct for expenses related to travel by ocean liner, cruise ship, or other related luxury water transportation. The limit is twice the highest federal per diem (daily) rate allowable at the time of your travel. For 2012, the per diem rate ranged from $310 to $367 depending upon the time of year, so the maximum deductible amount for luxury water travel ranged from $620 to $724 per day.


There is an exception from the per diem rate for expenses related to attending conventions, seminars, or similar meetings held on cruise ships. Certain of these expenses are deductible up to a $2,000 annual limit, but they are subject to numerous tests to determine their deductibility. For instance, if the convention takes place outside the North American Area (as defined by the IRS), then it must be shown that:

  • The meeting is directly related to your trade or business, and
  • It is reasonable to hold the meeting outside the North American area.

The determination of reasonableness is itself subject to a four-prong test. Finally, in order to deduct expenses for attending conventions, seminars or similar meetings on board cruise ships (up to the $2,000 annual limit), the following factors must be present:

  • The convention, seminar, or meeting must be directly related to your trade or business.
  • The cruise ship must be a vessel registered in the United States.
  • All of the cruise ship’s ports of call are in the United States or in possessions of the United States.

You must attach a written statement to your return signed by you including information about:

  • The total length of the trip in days (not including the days of transportation to and from the cruise ship port),
  • The number of hours each day that you devoted to scheduled business activities, and
  • A program of the scheduled business activities of the meeting.

Finally, you must attach a written statement to your return signed by an officer of the organization or group sponsoring the meeting that includes:

  • A schedule of the business activities of each day of the meeting, and
  • The number of hours you attended the scheduled business activities.
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