Jenny Hunnicutt poses in front of the Royal Caribbean Ultimate World Cruise, which she’s been on for nearly nine months traveling the world. While on board, she’s working remotely for her writing and consulting business based in Florida.
Courtesy: Jenny Hunnicutt
Income made ‘worldwide’ is taxable
Despite a Bahamas flag flying atop the Serenade of the Seas, American cruise passengers making a living while working from the ship are still subject to U.S. federal income taxes, experts say.
As a U.S. citizen or everlasting resident, you incur U.S. income taxes on “worldwide income,” whether you are making a living from a ship or one other country.
Meaning filing taxes was pretty normal for Hunnicutt and her husband.
“My distant work through my consulting business, it’s all through Florida where my business is predicated,” she said. “It didn’t change for us.”
Nevertheless, leaving the boat and dealing remotely could potentially trigger tax issues.
If you work from one other country, “that is a very different thing,” said certified financial planner Jane Mepham, founding father of Elgon Financial Advisors in Austin, Texas, who makes a speciality of international planning.
As a U.S. citizen or everlasting resident working abroad, you’ll still incur U.S. income taxes — but could also face tax liability for that country, depending on its laws and the way long you worked there, she said.
Some places could start attempting to collect income taxes after day one, which is why it is best to speak with a cross-border tax skilled before leaving for the trip, Mepham said.
To avoid double taxation, some expats qualify for the foreign earned income exclusion or the foreign tax credit. But cruise passengers aren’t more likely to meet the necessities, experts say.
Gifts can change into ‘taxable income’
For some self-employed cruise passengers, income could are available different forms.
Joe Martucci, one other passenger on the ship, is a licensed public accountant who lived abroad for 16 years. He’s retired now, but offered some tax advice to influencers on board who were monetizing content posted concerning the trip.
Retired CPA Joe Martucci poses for a photograph in Montenegro, a stop on the Royal Caribbean Ultimate World Cruise.
Courtesy: Joe Martucci
“An organization in Australia gave them some gifts. Those gifts are taxable income, because they asked [the influencers], ‘Are you able to do a TikTok showing this gift we gave you?'” Martucci said. “You have got to pay tax on that.”
Passengers ‘surprised’ by taxes on casino winnings
For U.S. residents and everlasting residents, casino prizes won aboard a cruise are also subject to federal income taxes, no matter where the boat is whenever you hit the jackpot, experts say.
“Some people might be a bit surprised” by a future tax bill, said James Border, a Florida-based certified public accountant and attorney, who makes a speciality of maritime tax law.
Typically, casinos issue a replica of Form W2-G, which should be reported in your tax return. Gambling losses cannot be deducted unless you itemize tax breaks and keep accurate records, in line with the IRS.
