Deduct Personal Travel

You can deduct travel if the primary purpose of the travel is business-related. Example: Small-business owners go to Hilton Head to work on business plans and review business reports because the location was “appropriate and helpful” in accomplishing that work. As long as 4 hours and 1 minute of each week-day is business-related, then the entire cost of the trip can be deducted to some degree. …and, if you conduct business on Friday and Monday, then the sandwiched-weekend does not need to be business-related in order to deduct weekend lodging and meals.

Other potentially-deductible business-related travel: Travel and visit a customer or prospect each day of the trip to deduct that day’s travel expenses. Or you can spy on a competitor, study architecture of the city for an upcoming office remodel, sample food of the destination-city if you are in the food business, attend a convention or seminar, or cruise to Europe to attend a seminar or visit a client.

Transfer of Assets from Personal to Business Use

If you purchased a desk for personal purposes and then started using it in your business, you can start depreciating the value of that desk. Identify any personal assets that are now used for your business to gain a depreciation deduction on that asset: desk, cell phone, printer, trailer, computer, supplies, equipment, etc.

S Corporation Reasonable Compensation

You can choose to take money from your S Corporation in 2 ways…as a wage and as a draw (i.e. return on equity). You pay 14% more tax when you take the money as a wage because Social Security and Medicare taxes must be paid on a wage, while money taken as a draw is free from this 14% tax. The IRS requires you to take a “reasonable wage” from your S Corporation if your S Corporation is sufficiently profitable. You should aim to set your S Corporation wage on the low end of “reasonable” in order to minimize this 14% tax.

Deduct Your Business Clothing

You cannot deduct clothing costs if that clothing is “adaptable to street-wear”. There is an exception to this rule for any clothing with your business logo on it. So, if you want to buy a $300 coat and expense it, then simply put your business logo on it.

Need Another Personal Toy?

The same rules apply for a motor homes, trailers, lawn mowers, etc that you use 100% for business use in the year of purchase even though you may not use that asset again for business after the year of purchase.

Need a New Personal SUV

If you buy a new or used truck or SUV at the end of the year and claim 100% business-use (by, for example, purchasing it on December 31st and driving it from the dealership to Office Depot to purchase paper for your business and then leaving it in the Office Depot parking lot until January 1st), then you can write off 100% of the cost of the vehicle in the year that you buy it even though you are likely never going to use that vehicle very often for business again. If you buy the same vehicle mid-year and use it 5% for your business, then your deduction would be 5% of the cost of the vehicle. This strategy works best if the vehicle is titled in the name of the business, but that isn’t absolutely necessary.

Changes to the Meals Deduction

In general, you can deduct 50% of meals and 0% of entertainment. There are various exceptions to this, such as:
a. You can deduct 100% of the office holiday party or picnic
b. You can deduct 100% of the transportation to the entertainment event or meal
c. You can deduct 100% of the food offered to the public for free (e.g. seminar, open house)