Basic Tax Rules for Corporate Retreats
If you’re thinking about reuniting your team for a corporate retreat in 2025, get informed about the tax rules that could make your next team offsite a financial win-win.
Learn All About The IRS Playbook
When it comes to corporate retreats, the Internal Revenue Service (IRS) isn't out to get you. In fact, they generally encourage you to deduct these expenses, as long as you play by their rules. But what's the golden rule? Your retreat must be exclusively for business purposes. In other words, your agenda should be more spreadsheets and strategy sessions than sunbathing and cocktails.
According to DLM, if your offsite agenda shows a majority (at least 60%) of business-focused activities, you can usually write off the cost of the entire retreat, even the portion that might be considered “leisure”.
Qualifying for the Tax Write-Off
To turn your corporate retreat into a legitimate business retreat tax write-off, you must keep these key points in mind:
- Open to All: The retreat should be available to all employees, not just the C-suite crowd.
- Majority Rules: As stated above, at least 60% of the retreat should focus on business activities. So, for every hour of beach volleyball, schedule 1.5 hours of workshops.
- Prove the Retreat is Professional: Hiring external speakers or coaches can help solidify the business nature of your retreat.
- Document Everything: Collect and keep records of attendees, costs, and activities. These will come in handy later.
The Business Purpose Requirement
Here's where you need to excel your CEO skills. To make sure you obey the IRS rules, your retreat needs to have a clear business purpose. This could include:
- Improving employee skills
- Strategic planning sessions
- Team building activities that enhance workplace productivity.
✅ Our advice: Create a written agenda that clearly outlines your business activities. This will be your safeguard if the IRS comes calling. It's the structured problem-solving workshops and strategic planning sessions that'll help you justify your retreat’s costs to the tax authorities. If you follow these guidelines, you’ll be setting your company up for some great corporate event tax benefits.
What Expenses Are Deductible?
In order to turn your corporate retreat into a tax-savvy adventure, let's break down the expenses you can potentially write off and save your company some cash next 2025.
- Traveling Costs: Your travel expenses to and from the retreat are, in general, tax-deductible. Just remember that we are talking about travel costs from HQ to the retreat and back. Any detours come out of your own pocket.
- Accommodation: Lodging often takes the biggest portion out of your retreat budget, typically 25-35% of the total cost. But here's the positive side: these expenses are usually deductible. From mountain cabins to luxury suites, as long as it's for business purposes, you can write it off. Don’t forget to negotiate group discounts to maximize your savings.
- Meals & Team Drinks: Meals during your corporate retreat can still be tax-deductible. The key? Keep it reasonable and business-focused. Before the Tax Cuts and Jobs Act (TCJA), most meals and entertainment expenses were 50 percent deductible, but the new law curtailed their deductibility. For example, your team brainstorming over breakfast is deductible. Just remember to keep those receipts.
- Activity Expenses: Activities that have a clear business purpose, like workshops or professional development sessions, are typically tax-deductible. That leadership ropes course? Could probably be deductible. A spa day with your team? Probably not. Choose activities and events that enhance skills or address workplace challenges to stay on the right side of the IRS. The key is to ensure these activities have a clear business purpose and aren't purely social.
Remember, the number one rule for making your corporate retreat tax deductible is to keep it exclusive for business purposes.
Requirements for Tax Deduction
To make sure your corporate retreat is tax deductible, documentation is your company’s new best friend. Here's what you need to keep track of:
- Detailed itinerary showing business activities
- Receipts for all expenses (yes, all of them!)
- Attendee list (employees only, no plus-ones)
- Written objectives and outcomes of the retreat
When it comes to tax deductions, the guest list matters. Here's the deal:
- Expenses for employees? Generally deductible.
- Expenses for spouses or guests? Not deductible.
If you do invite non-employees, make sure to separate their expenses. Better yet, have them cover their own costs to avoid any tax headaches.
✅ TeamOut advice: Use an expense tracking app to make life easier.
Location, Location, Location
Believe it or not, where you hold your retreat can impact its deductibility. While there's no hard rule against exotic locations, the IRS might find it suspicious if your team is heading to Bali for a strategy session. Choose a location that makes sense for your retreat purpose. A nearby conference center, a villa retreat, or a glamping location within driving distance might be the best options.
Best Practices to Nail Your Tax-Deductible Corporate Retreat
Think of record keeping as a way to maximize corporate retreat tax write-offs. Here's how to level up your documentation game:
- Create a detailed agenda containing at least 60% business activities and share it with your team.
- Keep all receipts, even for expenses under $75 (morning coffee, for example).
- Use expense tracking apps to make life easier.
- Maintain a list of attendees and their roles in the company.
The IRS evaluates corporate retreat deductions based on two key factors: the event must relate directly to business activities like team building or skill development, and expenses must be reasonable—not extravagant. Over-the-top spending might not qualify for deductions, so keep activities focused and within budget.
Smart planning is beneficial for your offsite tax deductions. Here are a few tips:
- Set clear business objectives for the retreat before you even start planning.
- Choose a location that makes sense for your business purposes.
Common Mistakes to Avoid
Even professional planners can stumble, so we’ve curated some pitfalls to watch out for:
- Don't make your corporate retreat a vacation in disguise. The IRS isn't fooled by that "strategy session" on the beach without any planning and business agenda.
- Avoid inviting non-employees unless they're covering their own costs.
Need Help Planning Your Next Team Offsite? Ask Our TeamOut Experts
As you’re navigating the tax landscape of corporate retreats you might encounter a few challenges that may leave you anxious or overwhelmed. That’s when TeamOut steps in. As we've explored in this article, team offsites can indeed be tax deductible, but it's vital to work within the rules carefully. Here's a quick wrap-up of what you need to know:
- According to the latest IRS guidelines, business-related meals are 50% deductibleThis applies to meals during corporate retreats as well.
- Entertainment expenses, on the other hand, tend not to be deductible since the Tax Cuts and Jobs Act.
- Team-building activities and company-wide parties for employees remain 100% deductible.
🚨 Don’t forget: Guidelines can change quite frequently, so make sure you access the most up-to-date information on the official IRS website (www.irs.gov) for current tax rates and limits.
It's worth noting that while entertainment deductions have been limited, there are still ways to maximize your tax benefits. For instance, if you can prove that your retreat is primarily for business purposes (at least 60% business-focused), you may be able to deduct a significant portion of the costs.
The key advice to making your corporate retreat tax deductible is careful planning and record-keeping. Document everything, from your business-focused agenda to every receipt.
Need help organizing a standout team-building event or planning your next corporate retreat? Reach out to our TeamOut experts! From the best locations in the U.S. to corporate retreats in Mexico, Bali, or Europe, we’ve got you covered.
At TeamOut, event planning is seamless and effective, serving every team's style, needs, and budget! Don't believe us? Check it for yourself and schedule a free call today!
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