"Turn Your Dream Vacation into a Tax-Saving Business Adventure 

Turn Your Vacation—Even a Luxurious One—into Tax-Deductible Business Travel

Ever thought about turning your next vacation into a tax-deductible business trip? With the right planning, you can write off airfare, luxury hotels, and even cruise expenses if they serve a legitimate business purpose.

Two Main Types of Deductible Expenses

1. Transportation: If your U.S. trip is primarily for business, 100% of your travel costs are deductible. If it’s mainly personal, transportation costs are not deductible.

2. Living Expenses: You can deduct lodging and meal costs on business days but not on personal days.

Five Essential Rules for Deductibility

To qualify for deductions, follow these guidelines:

• Profit Motive: Your trip must contribute to your business’s profitability.

• Overnight Stay: The trip must require an overnight stay.

• “For Only” Test: A reasonable businessperson should undertake the trip solely for business.

• Primary Purpose Test: The majority of the trip must be for business.

• Record-Keeping: Maintain detailed documentation of business activities and expenses.

Real-Life Success Stories

Many taxpayers successfully deduct travel costs by integrating business activities, such as corporate meetings in scenic locations or attending industry-related conventions.

Avoid Common Pitfalls

Trips lacking a clear business purpose or primarily for entertainment often lead to denied deductions. Ensure your travel has a legitimate and well-documented business reason.

Take Action

Before planning your next trip, consider how you can integrate business elements, such as attending seminars or meeting clients, to reduce travel costs through tax deductions.

BOI Reporting Deemed Unconstitutional for Some

On January 1, 2024, the Corporate Transparency Act (CTA) took effect, requiring most small businesses to file a Beneficial Ownership Information (BOI) report with FinCEN. However, a recent federal court ruling has brought uncertainty to its enforcement.

Key Updates:

• The court ruled the CTA unconstitutional, halting enforcement for two specific plaintiffs: a small business owner and the National Small Business Association.

• FinCEN still expects all other businesses to comply.

• The Justice Department has appealed the ruling, meaning the final outcome is still pending.

• Businesses formed before 2024 have until January 1, 2025, to file. Businesses formed in 2024 must file within 90 days.

• New York has enacted its own BOI reporting law, with similar measures under consideration in California and other states.

If you’re required to file, monitor legal developments and ensure compliance by the appropriate deadlines.

Tax Reform Doubles Down on S Corporation Reasonable Compensation

From 2018 to 2025, the Tax Cuts and Jobs Act offers a 20% deduction on pass-through business income (Section 199A). However, proper planning is crucial for S corporation owners.

Why Reasonable Compensation Matters

• Lower Salary: Reduces payroll taxes but risks IRS scrutiny and penalties.

• Higher Salary: Increases payroll taxes and may reduce the Section 199A deduction.

• Zero Salary: Rare cases where an owner does not need to take a salary can maximize deductions but require careful structuring.

S Corporation vs. Sole Proprietorship

• S Corporations: Can reduce Social Security and Medicare taxes but require a reasonable salary.

• Sole Proprietorships: Simpler tax structure and, in some cases, higher Section 199A deductions.

Takeaway: The right entity choice depends on your income level, payroll tax strategy, and ability to justify reasonable compensation. Consult a tax professional to optimize your structure.