Follow these IRS rules and you may be able to deduct
some business expenses on your next vacation. In this episode, I'm going to address the question,
"Can I write off a vacation as a business expense?" Well, yes and no. I'm going
to show you how you can and also what you have to do so that the IRS says you can't.
My name is Doug Andrew and I've been sort of a tax specialist, a financial strategist for
4 and a half decades. And I've helped many, many people prepare for a comfortable retirement. Also,
achieve other financial goals like college funding for their kids or grandkids,
estate planning, business planning. But I've coached and mentored many, many
business owners. In fact, my next book is 10 Keys To a Meaningful Transformation to be able to
10 times your business in less than 60 months. But when I coach and mentor business owners,
one of the favorite topics is this one. They always say, "Doug,
how can I deduct some of my vacations or vacation expenses as a business expense?" I go, "Well,
you want to make sure you do it the right way because what is the difference between
income tax evasion and income tax avoidance?" I'll give you the answer. About 10 years in jail, okay?
Now, if I were on long island in New York and I'm going over to Manhattan, I either
can choose to go across a toll bridge and pay a toll. Or I can take an alternate route
and avoid it. But if I break through the toll and don't pay the necessary toll to the bridge or
whatever, they will nab me and arrest me. So, you can't just write off a business expense unless you
do it the way the IRS says. So, I'm going to explain to you what you have to do in order to
qualify to be able to deduct or write off certain business expenses while you're on a vacation. Are
you ready? So, first of all, you must have a legitimate business. What's that? The IRS
defines a legitimate business is you must be in the pursuit of a profit. Now, you may not make a
profit for several years if you go year after year after year with losses, they're going to
audit you, they're going to come in because they expect a new business owner to not make a profit
maybe for 2 or 3 or 4 years. But you can't sit there for 10 or 15 years and always lose, lose,
lose. I assure you, they will audit you. They flag those kind of people. So, you have to be in
pursuit of a profit. So, if you're out there and you are in business, I'm going to simplify this.
You can deduct any money that you spend, invest to make money. So, it's that simple?
Any money that you spend to make money in your business is deductible. Now, sometimes you can't
write it off all in 1 year. You have to amortize or depreciate it and so forth. Your accountant
will help you with that. But it means if you rent office space, if you use your car, you can choose
to write off the... Or you can keep track of the gas and the repairs and so forth. There's
all kinds of ways to be able to track business expenses. But we're talking about vacations here.
So, how do you do that on a vacation? Well, first of all, whoever you have with you on a vacation.
Now, my wife and I, we have 6 children and so our children ever since they were small,
they would sell drinks at parades on the 4th of July. They were young entrepreneurs. They
all had their own business entities. They were registered in the state where we lived and then
they started to sell not only drinks at parades but first aid kits and they started to deliver
newspapers and all kinds of things. They all had their own business entities. Why? Well,
because they can deduct legitimate expenses in the pursuit of a profit in their business selling
drinks at a parade on the 4th of July. Some years, they would go to Costco or a warehouse and get a
bunch of drinks and they wouldn't sell enough to cover the cost of goods sold and they learned real
quick. You have to still pay for those costs, the inventory. But if it was a loss, they could write
that off. And so, they were able to do that and actually use tax-advantage dollars to buy their
school clothes. So, our kids, they paid for their school clothes, they paid for their tuition, they
paid for their fees, their cheerleading, their football because we showed them how to have their
own business entity. So, first of all whoever you are going to have with you on a family vacation,
if you want to write off the expenses for them or they want to write it off, they should have
their own business entity. So, all of our 6 children have their own business entities, okay?
So, we go on a family vacation. Now, it could be a trip to a lake, it could be to Maui.
Our children would look forward to a a trip every other year to Maui because we had timeshares
on the odd years. And so, we fly over to Maui. Now, I would tell my kids, "You're going to be
responsible for the airfare, for the lodging and for the meals and so forth." And so they would
know 2 years in advance that we're going to go to Maui this week but they would pay their way.
Now, they would do that by saving, preparing. They had to have skin in the game. I actually showed
them how to be able to buy a timeshare that's selling for retail for 20,000 for 5,000, for 25
cents on the dollar. We bought some timeshares that were selling for 20 and 30 thousand,
we bought one for a dollar, okay? That's in my books because we were a godsend to those people
who bought a timeshare and then they had a death in the family or they filed bankruptcy
and they just wanted out. And they were willing to just give it to us if we would bring their
property taxes current and save their credit. We have bought many of those. And so for example,
the last time we were in Maui, we had 4 units and I rented out one bedroom in 60 minutes that we
didn't need on Airbnb. It paid for the maintenance fees on the entire whole four units. We've rarely
had to pay for our lodging, okay? We put them in a rental pool and if we rent out one, it pays for
all the rest of them. So, our lodging is free. Our children because they have business entities. They
charge on credit cards not to get into debt but they pay off those credit cards every
single month and they've continued to do that for years. They have enough air miles the airfare is
free because they have a business, okay? So, the airfare is free, the lodging is free. And then
we collectively pool our money together and we go grocery shopping, we go out to dinner.
But how do we write off those expenses? Because all of our children have their own entities.
So, I am teaching them entrepreneurial skills just like I do my workshops with business owners.
And the IRS says, "If you will gather on a business meeting, a business convention
for at least 90 minutes a day..." Have you ever wondered why when you go on a company convention,
they always have you sit down for at least 90 minutes a day or 3 hours every other day
in meetings is so that they can write it off. So, that's the requirement. So, I have to have
minutes, agendas which we do. I teach them how to run a business, how to be profitable,
how to market, how to do this how to save. All kinds of things. I empower my kids how to author
a book. All kinds of things because they are entrepreneurs and their definition and their
rules, their corporate organization or their LLC says that they can do all kinds of things. So,
I have agenda, I have minutes. And they can tax deduct the airfare, the cruise fare,
the proportion and amount of mails, lodging, entertainment, massages because there are a
couple of hundred different ways you can deduct expenses in a business. And on a family vacation,
you can do the same thing but you must keep minutes, you must have an agenda, you must show
what you taught because it's a business meeting. And when you comply, you dot the I's and cross the
T's. We have tax deducted our family vacations for years. I've been audited many, many times.
They've never thrown out one single deduction because they're all legitimate. Because all of
our children have their own business entity. So, if you jump through those hoops... And some people
say, "Is it worth it?" Well, our family vacations cost way less than probably yours do. Because when
you're writing them off, it's 100% write off off of the business. Whereas if it's personal, even
if you could tax deduct the interest on a second home, you're only getting your tax bracket 33%
write off. You don't get 100% write off unless you have a business entity to write off the expense.
If this is going over your head, oh, my heavens. If you're a business owner, if you want to empower
your children to be entrepreneurial, to enjoy the four freedoms that entrepreneurs have --freedom
of time, to spend time as you see fit. Freedom of money, freedom of relationships, freedom of
purpose. When they have those 4 freedoms, they will be self-reliant forever. And we teach those
principles on family vacations and it makes it a legitimate business expense and meetings on our
family vacations. Sure, we scuba dive, bike, hike, golf, fish. But for at least 90 minutes a day,
we gather as a family. And we have unbelievable discussions about how to have a more abundant
life and take your business idea to a higher level. If this has aroused some curiosity,
my next book when it comes out is the 10 Key Transformation. If you're an entrepreneur or
business owner, I would implore that you stay connected to me and engage. Subscribe
on this channel and you'll be notified when I have that book. But my most recent best-selling book is
called The Laser Fund. It's book number 11. And there's actually stories in this book about how
business owners use my favorite vehicle, the Laser Fund to accumulate money tax-free in their
business. It's working capital for business. And so, if this video has intrigued you and you want
to see how business owners (savvy business owners) keep their working capital liquid
in a tax-free side fund and how when they need money for business to tie up a piece of property
to buy inventory, they borrow money out of their Laser Fund at 5%. And they keep earning 10% on
their money. They don't withdraw their money out of The Laser Fund. They borrow money using it as
collateral. They keep earning 10, 16, 25 percent. I had a business owner who borrowed a million
dollars out of his Laser Fund in 2017. A million bucks. He borrowed at 5%. And the million actually
stayed in the policy. And that year, he earned 25. So, he made a quarter of a million on his money
that he actually borrowed out. But he borrowed using that money as collateral if you understand
what I'm saying. He made a quarter of a million, they deducted 50,000 of interest. He netted 20%
or 200,000 on his money in the laser fund while he was using his money (the million) for
business. If this is blowing you away, you have no idea what you may be missing out on. Claim your
free copy, The Laser Fund. If you go to (LASER) laserfund.com, you contribute a nominal amount
towards the shipping and handling and I'll cover the rest of that cost. I'll pay for the book and
I'll fire it out to you. This site is all kinds of charts and graphs and you'll see how business
owners use it this side. There's a chapter actually that gives all kinds of stories on
how business owners use the Laser Fund for working capital. And guess what? If you taught your kids
the principles in this book on a family vacation, you could write it off as continuing education.