Transcript: 162 – Business Travel and Conference Deductions for Music Teachers with Charles Harris, CPA
Transcript for 162 – Business Travel and Conference Deductions for Music Teachers with Charles Harris, CPA
[00:00:00] Andrea: Hey, it’s Andrea with Music Studio Startup, the podcast about the business of teaching music. Learn from the startup stories of music teachers who are doing incredible things with their studios. Be inspired by creative musicians who are branching out and thriving as entrepreneurs. Be empowered by the insights of experts who will help you grow your own studio.
Let’s get started.
Hi , Charles!. Welcome back to the podcast today. Thank you for making another appearance as our resident CPA to talk about taxes in all its forms.
[00:00:45] Charles Harris: Thanks, I’m glad to be here. And we get to talk about a pretty fun subject today as we’re swinging into conference season.
[00:00:51] Andrea: Yes, yes, you’ve got the Music Teachers National Association Conference just around the corner, so pretty excited about that.
Hopefully we’ll see some folks there. Recently there was the Texas Music Educators Association Conference, which is a massive conference. The NCKP piano conference is happening this summer. So lots of conferences and conferences bring great opportunities for learning, just rubbing shoulders with other teachers, getting inspired, being refreshed, taking some time off.
And we love them for all of those reasons. There are also a lot of expenses associated with these conferences, and they’re kind of significant to our businesses a lot of times. So looking forward to talking with you today about conference specific tax deductions and just what the implications are of those.
So to kick us off for someone who’s maybe new to self employment, let’s say they’ve heard this phrase, it’s a write off or it’s tax deductible. What does that mean?
[00:01:43] Charles Harris: It really just means it’s tax deductible. So you get all of your income, and then you’re taxed only on your net income. So net income is revenue minus expenses.
And so you’re not actually taxed on pure revenue. You can think of this as if you earned 100, 000 and you spent 98, 000, you would have 2, 000 and it would be a little crazy for the government to then ask you for more money than you earned last year. And obviously that’s an extreme example and I hope none of us are at that point, but we can use the same analogy here to say, hey, if we have to spend this money to gain training, we all have to keep up certifications and make sure that we’re in compliance, right?
We have to spend money in order to maintain our business. And so these expenses then decrease the amount we’re taxed on at year end.
[00:02:32] Andrea: Okay. And for self employed, this is just kind of like a different way of thinking for self employed people because so much of what we spend money on is relevant to sustaining our businesses.
[00:02:42] Charles Harris: Right. And I think it’s important to realize that just because it’s a deduction doesn’t mean you should spend the money because it is still your money that you’re spending. But if you’re going to have to spend this money anyway, we need to count it as a deduction so that it can save you money longterm.
[00:02:57] Andrea: Great point. Yes, just getting a deduction doesn’t mean you should spend the money. And if anyone joined our tax webinar a couple weeks ago, we talked more about like specifically how taxes are calculated and where expenses come out and at what levels different income is taxed. So people can listen to that or watch that replay.
We’ll link up to that in the show notes to understand more like how write offs and expenses impact the bottom line for your taxes. So I thought I’d run through some of the typical expenses that I incur as a teacher going to conferences, and maybe you can just comment on each one and whether or not they’re tax deductible.
So the first one, registration fees, just your general conference registration.
[00:03:36] Charles Harris: Of course it’s tax deductible. That’s a perfect one. Perfect. A hundred percent? A hundred percent.
[00:03:41] Andrea: Travel. So let’s say I’m driving and driving 500 miles to get to the conference.
[00:03:48] Charles Harris: Right? So there are probably a few different ways to do this one.
For driving, I usually recommend to take the mileage approach. The IRS has a mileage rate. I think it’s point 70 cents for 2025, but please look it up on Google. It’ll tell you the right answer and you’ll just multiply that by the distance you’re traveling. And we’ve talked about it before, I think on previous podcasts, but I would recommend getting a map of the distance so you can prove out how long that is and how much money you’re taking as a deduction.
But you kind of alluded to travel in general. So plane is also a way that you can get deducted. So if you’re traveling cross country to a Las Vegas convention or something like that, it is still fully tax deductible. This is mainly for a convention, right? So if we’re going to fly somewhere and then go to convention for a day, but we’re spending two weeks on vacation, then the airfare would not be deductible. And so some of this is going to be a little bit subjective, but if your main purpose in travel is for the convention, it is tax deductible, even the airfare.
[00:04:53] Andrea: And Ubers to the airport and from the airport to the hotel and all of that.
[00:04:57] Charles Harris: Absolutely. And then the nice part about those is, right, you’re not taking the mileage deduction, keep the receipt.
That’s how you deduct that.
[00:05:04] Andrea: Okay. How about hotel?
[00:05:07] Charles Harris: Hotel similar to driving, it’s deductible a hundred percent. But again, and we’ll probably talk about this more, right? If you’re going to stay an extra day, then that extra day would not be tax deductible, but the previous time during the convention would be.
[00:05:22] Andrea: Okay. And how about, I know a lot of teachers, in an effort to make conferences more affordable, they’ll share a room at a hotel with a roommate, and so they’re splitting the cost of that. How would the deduction work in that situation?
[00:05:35] Charles Harris: Right, so however you end up billing or paying for it, right? So if you’re reimbursing another teacher, I would still keep the original receipt that you got from the hotel or, or ask whoever you’re rooming with for the original receipt.
And then I would just make a note on there saying, Hey, I shared a room with so and so. So half of this cost is the expense you paid for it. And then it is fully tax deductible in that case as well.
[00:05:59] Andrea: Excellent. Yeah, so it’s not just whatever amount is on the receipt that it’s what you actually paid for it.
How about meals and coffee? Because you can’t go to a conference without lots of coffee.
[00:06:10] Charles Harris: It’s a great question, and it’s going to depend a little bit the majority of the time meals are 50 percent deductible. And you could argue the IRS came up with that rule because if you were at home, you’d still have to eat if you’re at the conference, you’d still have to eat.
So it’s only 50 percent rather than the full 100. But for you, as a teacher, what I would do is record the full 100%. And your tax account will actually take off the 50 when they’re doing your taxes. So record the full amount as a business expense and for your financials, you’ll see the full expense. And it’s really just for taxes. Half of it is non deductible. But yeah, please, please record the full amount.
[00:06:51] Andrea: Okay, I really like that example because this kind of gets into that distinction between bookkeeping and like keeping records of your business expenses, which if the meal is 25, it costs 25, even though the tax deductible portion of that is only 12.50, it still costs your business 25. Although they’re closely related, your tax records are not the same as your business records. Okay, so meals are deductible at 50%. How about entertainment? Let’s say a group of teachers are going out to see a play afterwards or, you know, going on a walking tour or something. So as a group, a bunch of people are going, how about that?
[00:07:29] Charles Harris: So sadly not deductible at all. Anything you do for fun in the convention center, if it’s for fun, it probably counts. But if you’re doing anything afterwards or with a group, it probably doesn’t count. Sadly. Then it gets a little bit interesting with entertainment if you’re doing a meal and entertainment at the same time.
So that’s something else to keep in mind. If you can differentiate on the receipt, 50 percent for the meal and 50 percent for the entertainment. Or if the receipt is itemized, so it’s saying that the show was this much and your meal is that much, that’s awesome. But you can separate out if the entertainment comes with a meal, but it has to be reasonable, right?
You can’t just say the meal was 100 percent and the entertainment was free. That’s not how it works either. But if you use your best judgment, it’s a little subjective.
[00:08:21] Andrea: Okay. A lot of teachers are also vendors at these conferences, and they might have a couple of people from their team who have gone along with them on the conference, and it’s the last night they want to treat everyone to dinner.
There’s another meal, but it’s a team event. Does that change things?
[00:08:36] Charles Harris: Yes, that does. So team meals are deductible if everyone is invited. So it has to, you can’t be exclusive. You can’t have an odd man out, but if everyone is invited and they’re your employees, then absolutely they’re tax deductible at a hundred percent too.
[00:08:53] Andrea: Okay. What constitutes business travel? Like if I’m booking a hotel in my home city for a staycation, can I teach a zoom lesson from my hotel 15 minutes away and call that business travel?
[00:09:08] Charles Harris: No, there’s actually and I’m not going to pull up the specifics, but there’s basically something that’s talking about your taxable home base. And so you actually have to be a reasonable distance away from your taxable base in order to then count as business travel. And so we could go into the specifics of if you had to travel weekly for work and things like that, and that’s kind of where it kind of leads. But for the sake of music teachers that would not count sadly, so I would recommend still staying at home and commuting to the conference if it’s in your city.
[00:09:40] Andrea: All right, how about traveling internationally? Does any of this change?
[00:09:45] Charles Harris: So for music teachers, we’re going to keep it pretty simple. If you travel outside of the US, the same rules do apply. But just always remember that if you’re then staying on extra days, that’s going to change. Those extra days are not going to be business deductible.
And then if you’re doing any entertainment, just like we talked about, that is not business deductible as well. So it’s important to keep track of all these things. Take careful notes for your records and receipts for your records as well. But generally the rules that we’ve talked about still apply if you’re traveling outside of the U. S.
[00:10:19] Andrea: Okay. And you’ve referenced many times keeping track of expenses. I can share how I do that. I’d love your ideas too for what’s helpful for you from a tax preparer standpoint. Typically when you go to a conference like MTNA or others, they often give you an envelope that has all your information in it for that conference and I just put my receipts all in there and depending on how crazy the conferences, if I’m really on top of things, I’ll every night like take a picture of the receipts and digitize them while I’m there and then trash them and I don’t have to carry anything home. Otherwise, I just know they’re all going to be collected in the envelope every night and then I get home and I process them through my normal weekly routines.
[00:11:00] Charles Harris: That’s perfect. That’s pretty much what I do as well. I probably am less diligent about keeping the receipts and I just make sure to take a picture as soon as I get it. And then I’ll put them in my filing system. I have a filing system, so every month has its own folder. And so I can kind of go through it that way.
[00:11:15] Andrea: A lot of teachers ask me, do I really need to keep every receipt or scan every receipt? What’s your advice there?
[00:11:21] Charles Harris: Yes, please. So technically I think the rule is $75 but like me and Andrea were talking earlier, if the IRS audited you, they would still be able to say that’s not a business expense and you’d have to fight it. You might win eventually, you might not. It would be in court, it would be difficult, it would be annoying.
I just recommend keeping your receipt. It’s a lot easier than dealing with the IRS audit.
[00:11:45] Andrea: I concur. Okay, some other random questions I’ve just gotten from teachers over the years about traveling in particular. So here’s one. My family’s traveling with me. Can I deduct the cost of their travel as well?
[00:11:59] Charles Harris: No, sadly not. So this kind of goes back to the entertainment or doing fun things. After the convention or during the convention, right? Your family’s not tax deductible. And so as well in that, like if you’re staying at a hotel with your whole family, you’d have to take a percentage of how many people are in the room and then how much you’re spending on yourself for the convention, right?
So if you’re sharing with your spouse or your significant other, then only 50 percent of the lodging would be deductible and then if you’re spending days after the convention, that wouldn’t count as well, or the travel for their airfare. Your airfare would count, but theirs wouldn’t.
[00:12:38] Andrea: Okay, here’s another one. I’m driving to a conference with a friend. Can we both claim the mileage deduction?
[00:12:45] Charles Harris: So you can’t double count it. So you could split it 50/50 if you wanted on the mileage rate, but I think probably would make more sense would be the fuel in that case and then splitting the fuel during that trip. But it’s just going to depend on the situation.
[00:13:00] Andrea: Here’s another scenario. A teacher is purchasing their plane tickets using airline miles. The sticker price of the plane tickets was 400, but they’re only paying 50 because they have points. Can they deduct the whole 400 value of the airline tickets?
[00:13:17] Charles Harris: Sadly, no. So points and things similar are considered discounts and they’re not considered revenue or income or expenses. So in this situation, it would be a discount to your business or your credit card or whatever it is. And so I actually wouldn’t recommend using points for business travel because you won’t get reimbursed.
[00:13:40] Andrea: Yeah. And to put some numbers behind that, if you paid the 400 cash to buy the tickets and then had that write off, you would be saving, what would that be, around 60 ish plus in tax. So the true cost of the plane tickets becomes more like 340. And then you can use those points for your fun personal travel where there’s no tax advantage to paying full stick price.
[00:14:05] Charles Harris: Or use the points to buy a ticket for your significant other so they can come with you.
[00:14:09] Andrea: There you go. There you go. What are the most commonly miscategorized travel expenses you see or things that people maybe try to claim as business travel expenses that really aren’t?
[00:14:21] Charles Harris: I think it’s usually the entertainment people just assume because they’re traveling for business that they can count that as well. And I wish we could but we can’t. And so I think along with that would be then not counting meals because they think that’s entertainment. And so then those, that’s kind of usually the place where it’s missed the most.
[00:14:39] Andrea: Okay, so lost opportunities by people being overly conservative and not counting anything.
And if you want to get in touch with Charles about tax or accounting services, you can learn more at musicstudiostartup.com/services. There are just a few weeks left in the tax season at this point. You can also see that Self Employment Tax Crash Course at musicstudiostartup.com/tax. And all of those links will be in the show notes for this episode.
That’s all for today. Thanks for listening. I’ll be back next week.