The tax law offers several incentives that can turn a vacation into part of your win-win wealth strategy.
Own a business? Make your travel work for you. The government wants you to grow your business and knows that travel is often part of the equation, so business travel is a deductible expense. Proper planning allows you to add some R&R or personal adventures to your trip and maintain all or part of that deduction.
Here’s how it works:
Travel in the U.S.: The full trip is deductible if 51% of the trip is devoted to business.
International travel: The deduction is proportional to the time spent on business.
As always, the four business deduction rules apply. Your expenses must have a business purpose and be ordinary, necessary and documented.
Make the most of your vacation property. If you own a vacation property and rent it for 14 days or less each year, you don’t have to pay federal taxes on that rental income.
If you own a vacation property that you rent on a regular basis, you open yourself up to all of the tax incentives of any real estate investor. Plus, you can use the property for personal use for up to two weeks each year or 10% of the total days you rent it at a fair rental price, whichever is greater. Work with your tax advisor on this; there also are opportunities to divide the expenses between rental and personal use.
The government wants us to invest in things that promote its agenda. And when we invest in these priorities, it offers great tax incentives that essentially pay us to make the investment. Business and real estate are two of these investments that also come with opportunities for travel.
If you’re ready to put a win-win wealth strategy to work for you, book a call with the team at TFW Advisors® today!