Jenny Hunnicutt poses in front of the Royal Caribbean Ultimate World Cruise, which she has been on for almost nine months traveling around the world. While on board, she works remotely for her Florida-based writing and consulting business.
Courtesy: Jenny Hunnicutt
Income generated ‘worldwide’ is taxed
Despite the Bahamian flag flying atop Serenade of the Seas, American cruise passengers are making money while they work from the ship are still subject to US federal income taxes, experts say.
As a US citizen or permanent resident, you are subject to US income tax on “global income”, whether you earn money from a ship or from another country.
That means filing taxes was pretty normal for Hunnicutt and her husband.
“My telecommuting through my consulting business is all through Florida where my business is based,” he said. “It hasn’t changed for us.”
However, abandoning ship and working remotely could potentially cause tax issues.
When you work from another country, “that’s a whole different thing,” said certified financial planner Jane Mepham, founder of Elgon Financial Advisors in Austin, Texas, who specializes in international planning.
As a U.S. citizen or permanent resident working abroad, you’ll still be subject to U.S. income taxes — but you could also face tax liability for that country, depending on its laws and how long you worked there, he said.
Some places could start trying to collect income taxes after the first day, so you should talk to a tax professional before you leave for the trip, Mepham said.
To avoid double taxation, some expats qualify for the foreign earned income exclusion or the foreign tax deduction. But cruise passengers are unlikely to meet the requirements, experts say.
Gifts can become ‘taxable income’
For some self-employed cruise passengers, income can take different forms.
Joe Martucci, another passenger on the ship, is a chartered accountant who has lived abroad for 16 years. He’s retired now, but he offered some tax advice to influencers monetizing content posted about the trip.
Retired CPA Joe Martucci poses for a photo in Montenegro, a stop on the Royal Caribbean Ultimate World Cruise.
Courtesy: Joe Martucci
“A company in Australia gave them some gifts. These gifts are taxable income because they asked [the influencers]”Can you make a TikTok showing this gift we gave you?” Martucci said. “You have to pay tax on that.”
Passengers ‘surprised’ by taxes on casino profits
For U.S. citizens and permanent residents, casino prizes won on a cruise are also subject to federal income taxes, regardless of where the boat is when you hit the jackpot, experts say.
“Some people could be a little surprised” by a future tax bill, said James Border, a Florida-based CPA and attorney who specializes in maritime tax law.
Usually, casinos issue a copy of it Form W2-Gwhich must be reported on your tax return. Gambling losses it can’t be deducted unless you itemize the tax breaks and keep accurate records, according to the IRS.
