Every chiropractic practice can claim a legitimate income-tax deduction for the expenses incurred when principals and employees attend a convention, trade show or other professional meeting. The practice must simply be able to show, if asked, that the meeting benefited their trade or business.
Unfortunately, you cannot deduct the expenses from taking a spouse or other family member to a professional meeting. Nor can you claim a tax deduction for expenses related to attending a conference for investment, political, social or other personal purposes unrelated to chiropractic.
However, think of the positives. You can attend virtually any convention or trade show related to your business and claim the expenses as an income-tax deduction. If the chiropractic practice foots the bill, the employer’s payments or reimbursement don’t count as taxable income. This rule holds true even for owner-employees.
In essence, the government, in the form of the Internal Revenue Service (IRS), is willing to pick up the tab for a sizable portion of the expenses of your attendance at professional meetings – if you follow the rules.
Deducting the Essentials
The expenses incurred while traveling to the site of the professional meeting are tax-deductible. Tax-deductible travel expenses include costs such as traveling by plane, train, bus or car between your home and the meeting. Also included are the expenses of taxi cabs, commuter bus and airport limousines, lodging and meals, telephone calls and even tips. And don’t forget the costs directly associated with attending the meeting, such as the registration fee. Your travel expenses and the cost of lodging and meals are deductible as long as you are away from home overnight or you need to stop for sleep or rest to properly perform your duties.
When it comes to meals, the tax rules contain quite a few restrictions, but also a number of loopholes. Generally, the deduction for meals includes the amount spent for food, beverages, taxes and related tips. The tax deduction for meals, however, is limited to 50% of the amount actually spent.
Under the tax rules, you can use either the actual cost of meals or a standard amount in order to figure out your allowance. If you are reimbursed for those expenses, the way that you apply the 50% limit depends on whether the practice’s reimbursement plan was accountable or unaccountable.
Remember, too, that you cannot deduct expenses for meals that are lavish or extravagant. However, an expense is not considered to be extravagant if it is reasonable based on the facts and circumstances. Expenses will not be disallowed merely because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, night clubs or resorts.
If your spouse, family member or other person accompanies you or an employee to a professional meeting, you cannot ordinarily deduct that person’s travel expenses. The expenses can only be deducted if the person:
- is your business associate;
- has a bona fide business purpose for the trip; and
- would otherwise be allowed to deduct the expenses.
If a business associate’s travel meets the conditions imposed by the IRS, you can claim the deductible travel expenses paid for that person. A business associate can be an employee, customer, client, supplier, agent, partner or professional advisor. You must be able to show a legitimate business purpose for the person’s presence at the professional meeting to qualify for the tax write-off. Incidental services, such as typing notes or assisting in entertaining clients, is no longer enough.
Take for example, chiropractor Dr. Joe Smith. He drives to Chicago from Cleveland to attend a convention. Suppose he takes his wife, Jane, with him. Jane is not Dr. Smith’s employee. Even if her presence serves a bona fide purpose, her expenses for the convention are not tax-deductible. Dr. Smith pays $115 per night for a double room. A single room costs $90 per night. He can deduct the total cost of driving his car to and from Chicago, but only $90 per night for his hotel room. If he uses public transportation, he can deduct only his fares.
Both self-employed chiropractic professionals and employees can deduct a standard amount for their daily meals and incidental expenses while attending a professional meeting away from home, or for other business travel. The standard meal allowance is an alternative to the actual cost method. It allows you to deduct a set amount, depending on where and when you travel, rather than keeping records of the actual costs.
If the standard meal allowance is used, you must still keep records in order to prove the time, place and business purpose of any travel or convention attendance. If your employer is related to you or a chiropractic professional corporation in which you are more than a 10% owner, you cannot use the standard meal allowance. The standard allowance is the federal meal and entertainment expense (M&IE) rate. For 1998, the rate was between $32 and $40 per day, depending on where and when you travel and other factors.
Mixing Business and Pleasure
The tax rules clearly state that all travel expenses are tax-deductible if the trip to the convention, trade show or other professional meeting was entirely business-related. But what if you combine the business trip with a vacation?
If the trip was primarily for business, and while at the meeting you extended your stay for a vacation, you can still deduct your business-related travel expenses. You can also deduct your business-related travel expenses even if you take a nonbusiness side trip or participate in other nonbusiness activities during the trip. The expenses you can deduct include the travel costs of getting to and from the meeting and any business-related expenses while there.
If, however, the trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. Naturally, you can deduct any expenses you incur while on the trip that are directly related to attendance at a professional meeting or other business-related activities.
You can also deduct entertainment expenses that are directly related to attending business meetings or conventions of certain exempt organizations. These organizations include business leagues, chambers of commerce, real-estate boards, trade associations and professional associations. The expenses of attendance must be related to the active conduct of a trade or business. And once again, these expenses are subject to the 50% limit.
The 50% limit on entertainment and meals applies to employees or their employers, as well as self-employed professionals. The limit applies to meals and entertainment expenses incurred while traveling for business or entertaining customers or clients. The same goes for costs associated with attending a business convention, reception, meeting or luncheon.
Backing Up Deductions
In order to claim any deductions, you must be able to prove that the business expenses were actually incurred. You need to save receipts and records for any expenses that are $75 or more.
Certain business expenses that tend to be more open for abuse require accurate records to corroborate you tax statement. They include: expenses related to business travel (including meals and lodging), entertainment expenses, and business gifts.
Self-employed chiropractors and employees of a practice whose expenses are not reimbursed may use the standard M&IE rate to substantiate meal and incidental expenses while traveling. You must prove, through adequate records, the time, place and business purpose of the convention travel. While the M&IE rate may be used, the amount of lodging costs still must be proven by documentary evidence, such as a receipt or paid bill.
By now, it should be evident that you can legitimately write off or deduct the expenses of attending a convention, trade show or other professional meeting. All that is required is a legitimate business purpose. In fact, the agenda of the convention does not even have to deal specifically with chiropractic practice. It is enough if the agenda is related enough to your profession, active trade or business that attendance for business purposes is justified.