Jenny Hunnicutt has always loved to travel, but last year she embarked on a journey that was a bit more unconventional than what she’s used to.
The Florida-based writer and consultant in December boarded Royal Caribbean’s Serenade of the Seas for a 274-night cruise that spans the globe. The trip that quickly went viral on TikTok presented an opportunity for remote workers like Hunnicutt and her husband in a post-pandemic world.
“We have been used to the remote lifestyle. We’ve been traveling off and on for the past three years,” she said. “Most of my work is in Eastern time, so sometimes that means meeting in the middle of the night, but it’s all just part of it.”
Working from a cruise ship raises an interesting question: How do taxes work for Americans earning money from international waters?
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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’re 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 aren’t 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’s retired now, but offered some tax advice to influencers on board who were monetizing content posted about the trip.
“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 can’t be deducted unless you itemize tax breaks and keep accurate records, according to the IRS.