The Secret 280A Deduction

Holding Business Meetings for Your Business at Your Personal Residence

In the ordinary course of business, some companies, due to their structure, are required by law to hold meetings for their entities. Others hold meetings for a variety of purposes, including educational workshops, Christmas parties, or even regular staff meetings.

Tax Code Section 280A contains provisions allowing a business owner to conduct regular meetings at his or her residence.

Traditionally, business meetings are held on office premises or rented spaces such as a Board Room at a Hotel or Conference Center. The expense of conducting these meetings in an outside venue can be significant, with the national average cost approaching $1,500 per day. This cost is based upon accommodating the Officers, Stockholders, Directors, Managers, Principals, Members, and Employees while providing two meals, break expenses, audio-visual and internet access support, etc. However, self-employed owners are specifically excluded.

In Nashville, costs range from $1,800 to $2,000 per day for comparable facilities.

These expenses are tax deductible for your business but are not considered taxable income on your personal return under Tax Code Section 280A.

Whether these meetings are a requirement by law for your practice or other purposes, these meetings can and should be conducted at your home.

However, your business entity must have principals, directors, or board members to qualify for the tax deduction. This means your business entity must be organized as something more than a sole proprietorship, such as an LLC, PLLC, S-Corporation, C-Corporation, or partnership.

There are certain requirements for conducting these business meetings. While each entity will have its specific Agenda items to cover and determining the meeting frequency will be a personal decision, certain topics should be covered annually, semi-annually, and· every time a meeting is held. There may also be a need to conduct Special Meetings to adopt resolutions, change practice direction, adopt a new program of significant impact, re-finance for strategic purposes, expend or commit a material practice resource, or make significant personnel or ownership adjustments.

Under Code Section 280, you can rent your home up to 14 days per year without having to recognize personal income. This could cover up to 12 monthly sessions plus a Semi-Annual and Annual meeting if you so desire. The scenario for the rental is as follows:

As a business owner, you would rent from you, the homeowner, the Fair Market Value of area meeting space for up to 14 days per year. The total you spend as the business owner is written off as rental expenses, while this same income to you as the homeowner is non-taxable rental income.

Taking the lower Nashville area figure of $1,800 per meeting, your business would spend $25,200 for 14 meetings. The estimated potential tax savings for your business to conduct these required meetings could be up to $9,324, with no tax due on the $25,200 paid to you for renting your home.

There are specific requirements for conducting these business meetings. If this is of interest to you, we would be happy to guide you through the process to make your meetings run smoothly, comply with all regulations, and maintain deductibility over the course of a year.

Remember, you must maintain the correct documentation.