Working remotely from a cruise? Here’s why the IRS still expects taxes

August 2, 2024
Travel News & Insights

Jenny Hunnicutt poses in front of the Royal Caribbean Ultimate World Cruise, which she has been on for nearly nine months traveling the world. While on board, she is 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 money while working from the ship are still subject to U.S. federal income taxes, experts say.

As a U.S. citizen or permanent resident, you incur U.S. income taxes on “worldwide income,” whether you are making money from a ship or another country.

That means filing taxes was pretty normal for Hunnicutt and her husband.

“My remote work through my consulting business, it’s all through Florida where my business is based,” she said. “It didn’t change for us.”

However, leaving the boat and working remotely could potentially trigger tax issues.

When you work from another country, “that’s a completely 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 would still incur U.S. income taxes, but could also face tax liability for that country, depending on its laws and how long you worked there, she said.

Some places could start trying to collect income taxes after day one, which is why you should speak with a cross-border tax professional 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 are not likely to meet the requirements, experts say.

Gifts can become ‘taxable income’

For some self-employed cruise passengers, income could come in different forms.

Joe Martucci, another passenger on the ship, is a certified public accountant who lived abroad for 16 years. He is retired now, but offered some tax advice to influencers on board who were 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. Those gifts are taxable income, because they asked [the influencers], ‘Can you do a TikTok showing this gift we gave you?'” Martucci said. “You have to pay tax on that.”

Passengers ‘surprised’ by taxes on casino winnings

For U.S. citizens and permanent residents, casino prizes won aboard 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 bit surprised” by a future tax bill, said James Border, a Florida-based certified public accountant and attorney, who specializes in maritime tax law.

Typically, casinos issue a copy of Form W2-G, which must be reported on your tax return. Gambling losses cannot be deducted unless you itemize tax breaks and keep accurate records, according to the IRS.