7 Luxury Items You Can Write Off in Taxes, According to Experts
Written by
Daisy Carrington
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Zuri Anderson
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When it comes to taxes, high-net-worth individuals and business owners have access to some creative ways to legally deduct luxury expenses.
But taxpayers shouldn’t try to write off that trip to Mexico just yet–bending the tax rules to spending whims could result in an audit, and big tax bill. For luxury items to count as a legitimate expense in the eyes of the IRS, they must serve a business purpose.
Tax experts Arron Bennett, CEO of Bennett Financials, and John Adams, certified financial planner (CPA) and owner of Bridgewater Tax and Financial Consulting, reveal some surprising deductions you can claim — if you follow the right rules.
Luxury Business Retreats
If you own a business, you may be able to write off a vacation as a company retreat to a luxury destination. According to Bennett, the IRS allows up to seven days for a business retreat, covering expenses such as flights, hotels and meals.
“You need to have an agenda and do actual work while you’re there,” Bennett explained. “Always have a laptop by the pool, take notes, record meetings and document minutes. That way, you’re setting strategic plans for the next 12 months while also enjoying the trip.”
He said so long as you dedicate four hours a day to creating strategy for the year ahead, it counts as a work trip, adding that it’s possible to deduct a spouse’s expenses, so long as they are on the payroll as a W-2 employee.
“If you have a business making $200,000 a year, you can lower your salary by paying your spouse $50,000, and also have them answer your emails, field your calls and take notes on a company retreat,” he said.
Weekend Trips
Business owners who travel frequently can structure their trips to include luxury accommodations and first-class flights — legally.
“If you have business meetings on a Thursday and the following Monday, you can deduct Saturday and Sunday as business days,” Bennett noted. “Flights, hotels and meals (but not entertainment) are covered, as long as you document at least four hours of business activity on workdays.”
One caveat: Don’t attempt to do this if attending a personal event, like a wedding or reunion.
“The primary purpose always had to be business. It’s very easy for the IRS to go on Facebook and see that you went somewhere for a wedding,” he said.
Luxury Handbags, Jewelry, and Clothing for Work
Think your designer handbag or custom suit is just a personal indulgence? If used exclusively for business purposes — like a photoshoot or stage performance — it may qualify as a deduction.
“I had an entertainer who deducted all their stage jewelry and clothing,” said Adams. “The key is that the items must be exclusively for business use. A luxury handbag used in a fashion shoot for a magazine, for example, could be justified.”
High-End Conferences in Luxury Hotels
Many professional conferences take place in five-star resorts, and as long as the primary purpose is business, the entire trip — including accommodations — can be deductible.
“I have clients who attend business conferences in places like Hawaii, London and Orlando,” Adams said. “As long as the conference is legitimate and they’re participating, the flights, hotel and meals can be written off.”
Yacht Rentals
Hosting a client event on a yacht or in a luxury setting can also be deductible — if done properly.
“If you’re recruiting high-end clients, a luxury event can make sense,” Adams explained. “But you need to be able to prove that it was a business event, not just a pleasure cruise.”
Artwork
Buying high-end art can serve as both an investment and a tax deduction — if used in a business setting.
“Some of my clients buy artwork for their offices or donate it to charity for a tax write-off,” Adams said. “The IRS tends to scrutinize these, so you need clear documentation showing its business purpose.”
Property Upgrades
If you rent out a property for Airbnb — providing no one’s stay exceeds seven days — it could be possible to deduct future upgrades and maintenance fees.
Bennett advised clients to get an engineer to perform a cost segregation study and provide a depreciation schedule. This allows property owners who rent their space using Airbnb to frontload depreciation on their tax forms. For example, if the HVAC needs to be replaced once every seven years, you can deduct a seventh of the estimated depreciation every year for seven years.
“You need to put in at least 100 hours of material participation, like maintenance and renovations,” Bennett advised “That way, when you travel to check on the property, you can deduct the trip,” he added.
While luxury tax deductions exist, they must be justified with a clear business purpose.
“At the end of the day, you need to be able to look an IRS auditor in the eye and prove the business necessity,” Adams cautioned. “If it’s personal, it won’t fly.”
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