Are business retreats tax deductible?
As a business owner, you might be eligible for more tax deductions than you thought. Many business owners take the ‘“typical write-offs” but leave a lot of money on the table that should be off the table and in your bank account. That’s because the tax system is complex and I’m no expert — you likely aren’t either.
That said, I’ve learned a thing or two about write-offs hosting retreats. One area many business owners overlook is the company retreat write-off. While laws have changed slightly and it might be a little harder to get it, there are ways you can write off business retreats so that you can treat yourself (and potentially your employees) and reduce your tax burden. If that’s not a win-win, I don’t know what is.
Here’s what you must know.
**Please note, I’m not a tax advisor and this is not legal advice. Please connect with your tax advisor or financial advisor before making any decisions.**
How the IRS Classifies Business Retreats
The IRS doesn’t have an exhaustive list of all options for employee entertainment write-offs, but company retreats are usually one you can write off as long as it meets certain criteria.
Business retreats are usually for the purpose of improving morale, creating a stronger community, building teams, or learning new skills, tactics, or ways to conduct business. Because each of these is necessary to run a successful business, they are almost always deductible.
But there’s a catch.
You’ll need proof that the retreat is necessary. You might think that’s impossible. How do you prove that your retreat is necessary?
Spoiler alert: It’s actually pretty easy, all you have to do is provide an agenda.
If the agenda shows a majority (at least 60%) of the retreat is focused on business purposes, you can usually write off the cost of the entire retreat, even the portion that might be considered “personal”.
Another simple way to prove a retreat is for business purposes is to hire a professional coach or another business professional to speak at or host the retreat. It’s hard to dispute that the retreat is for business purposes when it has professional service providers like coaches.
Criteria for Company Retreats to be Tax Deductible
Aside from business retreats needing to be “mostly for business purposes”, there are a few other criteria a retreat must meet to be tax-deductible:
- The retreat is available to ALL employees, not just a select few
- The entertainment is for all employees and not just high performing employees or employees that own 10% or more of the business
- You must keep track of who attended and what costs were incurred throughout the retreat
This is why working with a retreat planner or plugging into an existing retreat can be so beneficial, the retreat host or coordinator will track all of this for you (at least that’s what I do!)
Proving the Retreat is Necessary
This is where a lot of people get caught up. They assume they can’t prove the retreat is necessary for their business to survive.
The fact is, though, that it’s a lot easier than you think. You just have to prove that the retreat is useful in some way for your employees which with most retreats it’s rather self-explanatory or easy to prove.
You could have any goal in mind, but here are some reasons I host retreats:
- Build community
- Gain clarity around goals
- Boost creativity
- Develop content
- Refresh your brand
- Relax and unwind from the stress of small service-based business ownership
- Reward yourself (and/or your employees)
It’s best if you have the reasons in writing, which can be something as simple as putting it in the invitation for the retreat that you send to your employees or sharing goals, objectives, and intentions as part of a retreat program
If you aren’t sure what business purpose you could use for the retreat, I’d be happy to give you ideas or business retreat themes you could use, just comment below.
Almost anyone in any business in any industry would benefit from a company retreat even if it’s to improve team bonding or to help everyone rejuvenate or as a reward for reaching a specific goal or milestone.
Other Ways to Deduct Expenses from a Company Retreat
I hope it’s clear by now that writing off the cost of a company retreat is usually possible, but there may even be further expenses you can write off relating to retreats including the following:
If you give your employees gifts (non-cash gifts) at the retreat, you can deduct up to $25 per employee for the cost. You can also deduct up to $1,600 for non-cash gifts given to certain employees that achieved certain milestones or service levels.
Gifts could be something you send every employee home with as a memento of your time together at the retreat or a special reward for specific milestones.
And if you come to one of my retreats, I guarantee… there will be gifts. 😉
Retreat Facilitator Costs
You can write off part of the cost of the retreat facilitator if you can prove it was for business purposes. Most business retreats have an external facilitator or host to help guide employees in different sessions and to deliver the main content of the retreat, or the skill-based reason everyone came to it. For example, at one of my retreats, the main content was around relationship marketing and developing content pillars (in addition to building community, gaining clarity, and rejuvenation).
You can deduct the cost of travel to and from the retreat. If you have to fly your employees, send them on a train, or bus, and you can write off the expense of getting to and from the destination. You can even write off gas mileage if you drive as long as you go directly from home to the retreat and back. Any rerouting for personal reasons wouldn’t be tax-deductible.
Tracking the Expenses
The most important part of ensuring you can deduct your company retreat is to ensure that you track all expenses. Think of lodging, food, professional services, equipment, or any other expenses that go along with a company retreat.
Keep receipts and log every expense so that you can write off as much as possible for entertaining your employees.
Yet another benefit of plugging into an existing all-inclusive business retreat, you’ll just have your travel expenses and the cost of the retreat ticket, everything else you would normally have to track like meals is already included in the ticket price. You’re welcome! 😘
Company retreats can be tax deductible if you can prove they are for a valid business reason, which following the guidelines above, can be done relatively easily with just a few simple additions to your existing processes. I have designed my retreats so that the business owners who attend are able to prove the necessity of the retreat for themselves (and/or their employees) so that they can write it off through Harvest Retreats. I love being a one-stop-shop.
As long as you have a valid reason for the retreat, of which there are many(I can help you with that), that all employees are invited (even if all don’t attend), and that you keep the retreat at least 60% business-focused you’ll be golden in the eyes of the IRS.
There is some wiggle room in there for personal time too for personal reflection and rejuvenation, which can also be a lovely reward for you and your employees for a job well done.