Month: June 2025

Here’s an example that may be relevant to your tax planning strategy—particularly when it comes to travel for business purposes that may also offer a more comfortable or enjoyable experience.

Consider this case: A financial planner needed to meet a high-net-worth prospect in St. Thomas during the winter. Rather than have the meeting in snow-covered Boston in February, the planner opted to take a five-day, four-night cruise to the U.S. Virgin Islands. After two days of business meetings in St. Thomas, the planner returned to Boston by air.

The entire seven-day trip—including a pre-cruise hotel night in Miami—was classified as 100 percent tax-deductible business travel under IRS guidelines. This outcome is possible due to specific rules that apply when a trip is conducted solely for business purposes, with no personal leisure days included.

Key IRS considerations in this case included:

• Luxury water travel limits. For 2025, the daily deduction cap for cruise travel (January through March) is $1,150. The cruise fare must fall below this per-day limit to be fully deductible.
• Meal separation rule. If the cruise line does not itemize meal and entertainment costs separately, the full cruise fare (up to the daily cap) is deductible. If meals and entertainment are itemized, only 50 percent of the meal costs are deductible and you get nothing for the entertainment.
• Foreign travel rules. Though St. Thomas is a U.S. territory, it’s treated as a foreign destination for travel deduction purposes, allowing further tax planning opportunities.

This scenario illustrates how strategic travel planning, when aligned with IRS requirements, can create opportunities for tax-efficient business development.

If you would like to discuss cruise-ship travel, please call me directly at 408-778-9651.

• By Leon Clinton
• June 27, 2025

If you own rental property, you may have heard that you’re not required to file Form 1099-NEC for contractors, such as plumbers or handymen. While that’s often true, choosing not to file could be costing you valuable tax savings.

Filing 1099s helps position your rental activity as a trade or business—a critical step if you want to claim the 20 percent Section 199A deduction or deduct repairs under the de minimis safe harbor.

Here’s how it works:

• Section 199A allows a 20 percent deduction on net rental income—but only if your rental qualifies as a business. Filing 1099s supports that claim, and it can be worthwhile. For example, $20,000 in rental income could mean $4,000 in deductions—saving you nearly $1,000 at a 24 percent tax rate.
• The de minimis safe harbor allows you to deduct repair and maintenance costs (up to $2,500 per item) immediately rather than depreciating them over several years. But again, this applies only if the tax code treats your rental activity as a business.

The IRS has made clear that failing to file 1099s may weaken your ability to claim these benefits. Fortunately, this is something you can address proactively.

We can help you evaluate your rentals, determine whether you qualify, and handle the necessary filings and documentation. It’s a small step that could lead to decent savings.

If you want to discuss your rentals, please call me directly at 408-778-9651.

• By Leon Clinton
• June 24, 2025

If you’ve used your personal vehicle for business—whether you’re a sole proprietor or you received mileage reimbursement from your S or C corporation—there may be a valuable tax deduction waiting for you.

When you use the IRS standard mileage rate (or when your corporation uses it to reimburse you), the mileage rate is not just a substitute for gas and maintenance. You’re also claiming “embedded depreciation”—a hidden deduction built into the mileage rate.

Here’s where the surprise comes in: when you sell or trade in that vehicle, you could be eligible for a significant additional deduction tied to that depreciation.

Let’s say you bought a $50,000 vehicle in 2021 and used it 80 percent for business. Over the past 4.5 years, you have accumulated nearly 40,000 business miles and deducted or been reimbursed based on the IRS mileage rate. You then sell the vehicle for $20,000. 

By calculating the business-use portion of the sale and subtracting your embedded depreciation, you might unlock a $12,937 ordinary loss—fully deductible against your other income, under Section 1231 of the tax code.

This isn’t a tax loophole—it’s standard tax law, but it’s often overlooked. And it only applies if your vehicle was

• deducted or reimbursed using the standard mileage rate,
• used at least partially for business, and
• sold or traded in after accumulating depreciation.

If you would like to discuss using your personal vehicle for business, please call me directly at 408-778-9651.

• By Leon Clinton
• June 20, 2025