If you own a Schedule C business, I have good news. You could own a vacation home or second home, use it for business entertainment purposes, let the business pay off the mortgage and cover the expenses AND use the vacation home as your own down the road.
The home you buy – it can be any type whether ski cabin, beach house, or any other vacation home, must be for the sole purpose of your employees’ entertainment. This cannot include officers, shareholders or anyone that owns 10% or more of the business.
If you use the home this way, you can take 100% of the entertainment facility tax deductions and your employees get tax-free use of the home for themselves and their families. As a business owner, you get to deduct the home as a business asset, and you own the property with the ability to use it once you’re done with it for business use without tax consequences.
Please note, however if/when you sell the property, if there are capital gains or losses, you may have to pay some tax on depreciation recapture.
Another important note is that if you own your business as a corporation, you can still take the deduction BUT the corporation must rent the property from you or reimburse you for the costs. You want the title in your name so when you are done with it as an entertainment facility, you can use it for your personal use without tax consequences.
If this sounds like something you’d like to know more about, contact us today and we’ll show you how an entertainment facility could help your tax liabilities and be something for you and your family to enjoy down the road.