November 7, 2025 • 8 mins
“Hey Mike, I’ve got many friends who have family businesses for retirement so they can write off their family travel and fun expenses. Does that really work?”
Discover why the fake businesses and other alleged tax loopholes don’t typically pass an audit.
Text your questions to 913-363-1234.
Request Your Wealth Analysis by going to www.retireontime.com
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Mike (00:05):
Welcome to how to retire on time, a show that answers
your retirement questions. Saygoodbye to that oversimplified
advice you've heard hundreds oftimes. This show is all about
getting into the nitty gritty.Now that said, remember, this is
just a show, should not beconsidered financial advice. As
always, text your questions to(913) 363-1234, and we'll
feature them on the show.
Let's begin. Hey, Mike. I've gotfriends who have family
(00:28):
businesses for retirement sothey can write off their family
travel and fun expenses. I knewthis question would come
someday. Does that really work?
That's a good end to thequestion. The answer is no.
Please don't do this. Let megive you a little background. So
there's this place called theIRS, and their job is to make
sure that people are followingthe tax code as it was intended
(00:50):
to be done.
The IRS will do this thingcalled an audit on people every
now and then, and they'll lookat your tax returns, your
financials, and so on to see ifit's legitimate or if there's
any tomfoolery going along, anyshenanigans. I've never seen
anyone ever in my fifteen yearsover a decade of doing this get
(01:11):
away with this strategy. Everyaudit that I'm aware of. Now
it's never been to any of myclients because I don't put up
with this crap. I don't leadthem down this idea of taking
advantage of the tax codethrough these gray area ideas
that don't hold water.
I don't deal with this crap, butI know people do. So let's
address it. Okay? Here's theidea. The idea is if you have a
(01:33):
lot of money and you're alreadybe taking family vacations, why
not create a company and havefancy board meetings where your
family can get together, you'vegot some minutes and all as
well, and then then you go offand play.
Okay. Well, first off, all ofthat is a deduction, not a tax
credit. You need to understandthe differences. A tax deduction
(01:53):
is you're gonna get maybe 20¢back on every dollar you spend.
So why would you deliberatelyspend money to then get 20¢
back?
And you might say, oh, Mike, I'mgonna spend the money anyway.
Well, I guess, yeah, if you'regonna spend the money anyway,
might as well get 20¢ I get thatside of it, but you don't wanna
spend money for the sake oftrying to get a deduction. Plus,
most people aren't even gonnaexceed the standard deduction
(02:14):
regardless. And then if you putthe standard deduction and the
senior deduction and the Trumpdeduction, you're now really
high up. Like, it would cost aton of money.
You have to spend a ton of moneyto even get there. Are you
jumping over dimes to pick uppennies? Do you really wanna
take these lavish vacations?Because it has to be so lavish,
(02:35):
extremely lavish, for you toeven facilitate the idea that
maybe you could do an itemizeddeduction right now because the
standard deduction is so high.That's the first bit.
Okay? The second bit is, yeah,you could put money into like
some sort of LLC, I guess, andmaybe manipulate things. But
(02:55):
look, it's I've never seen itpass an audit, because it all
comes down to a simple question.Are you running a legitimate
business or not? A legitimatebusiness is where you're
actually working to create aproduct or service that is
intended to be sold to thepublic for gain.
(03:16):
That is a business. If yourbusiness is to go on vacations
and then go on Instagram andsay, hey. Look at how fun this
is, and we're sharing ourexperiences on the travel and
blah blah blah. Hey. We're doingthis, and you're trying to build
up a social media audience, but,like, you're not really trying
to do it.
You're just posting so you canrationalize it. It's not gonna
(03:38):
fly. Please do not assume youcan cheat the IRS. They're not
dumb. Now let's take the sameexample and just have some fun
with it.
Let's say and I'm not saying youshould do this, but let's say
you want to travel extensivelyand you wanna do it with your
family. Fine. Let's say then allof your family I don't know.
(03:59):
There's three kids. You andthree kids.
You're going on these vacations,and you legitimately all have
jobs in this business. Youlegitimately are putting in ten,
twenty hours of work at leastevery single week. And you're
legitimately going on there andposting and taking trainings and
spending marketing dollars togrow your reach and whatever you
(04:21):
do for social media influencersand all of that. If you can
legitimately show that andthere's a trajectory to where
you're gonna make money insteadof just spend money, then maybe
you've got a shot in the dark.But that's a huge if, and you
actually need to work.
Now here's an example where itmight actually can make sense.
So I I joke about this with myfamily, but I'm actually pretty
(04:44):
serious about it. My son, whenhe turns, I don't know, 14, 16
years old or so, is gonna starta business, whether he likes it
or not. I want him to learn whatentrepreneurship is actually
like. I want him to understandhow difficult it is, because I
think entrepreneurship's beenromanticized when it's actually
rather difficult to do.
Most businesses fail in the sameyear that they start. So I want
(05:07):
him to start a business with theintention of scaring him out of
doing a business. I want him totake a safer route unless he's
really got the gumption to dothis. The company that I've
picked out for him is calledBuen Tacos. I like tacos.
Who doesn't like tacos? Butwe're gonna create a small food
truck business called BuenTacos, which, you know, Bueno
(05:28):
Buen, it's good tacos. That'swhat it translates to. And maybe
we create an LLC. I will fundit, and maybe we take a vacation
to Mexico to try out a fewthings.
So it's like a one timevacation. We go back, we've
invested in there, and thenwe're going from place to place,
park to park, whatever we end updoing to legitimately try to do
(05:48):
the business. So there is someresearch to it, which kind of
would be a lot of fun, but itall is going to be going down
into trying to make money, andwe could legitimately project
the research, the trajectory,the inventory, what we've
purchased, and how we're gonnabreak even in all of that. It
would be treated as a legitimatebusiness. And if he takes off
with it, then great.
Maybe we sell it. Maybe wefranchise. I don't know.
(06:09):
Whatever we end up doing. Butthe exercise is intended to make
more money than we put into it.
So then we can start torationalize what we're
deducting, what we're spendingon, and so on. Are we gonna
invite cousins to these trips?No. Are we gonna be inviting
other extended family to thetrips? That doesn't make
business sense.
You've gotta keep things withincertain parameters. So just be
(06:31):
mindful of that. And just forfun, yeah, I heard about the
domain, so it's just sittingthere. But that's gonna be a
real thing. So if you're inKansas City, and I don't know,
in ten years you remember thisthis show.
Buen tacos. But and then I'vegot the other one, yoyi
teriyaki, because I'm fromSeattle originally, and I love
teriyaki. I would love to havereal teriyaki here in Kansas
(06:51):
City. But anyway, the point isdon't cheat the IRS. Don't spend
money just to get the deduction.
It's different deductions. Youmight get 20¢ back on the
dollar, maybe. A credit isdollar for dollar. You're not
buying credits. You're notgetting credits for this.
You really wanna make sure thatyou're doing a legitimate
enterprise if you go down thisroute. And if you do, maybe
(07:13):
that's your encore career. Maybeyou have a lot of fun doing it.
Just don't cheat the system.That's all the time we've got
for the show today.
If you enjoyed the show,consider subscribing to it
wherever you get your podcast.Just search for how to retire on
time. Discover if your portfoliois built to weather flat market
cycles or if you're missing taxminimization opportunities that
(07:34):
you may not even know exist.Explore strategies that may be
able to help you lower youroverall risk while potentially
increasing your overall growthand lifestyle flexibility. Is
not your ordinary financialanalysis.
Learn more about Your WealthAnalysis and what it could do
for you regardless of your age,asset, or target retirement
date, go towww.yourwealthanalysis.com today
(07:57):
to learn more and get started.
Welcome to how to retire on time, a show that answers
your retirement questions. Saygoodbye to that oversimplified
advice you've heard hundreds oftimes. This show is all about
getting into the nitty gritty.Now that said, remember, this is
just a show, should not beconsidered financial advice. As
always, text your questions to(913) 363-1234, and we'll
feature them on the show.
Let's begin. Hey, Mike. I've gotfriends who have family
(00:28):
businesses for retirement sothey can write off their family
travel and fun expenses. I knewthis question would come
someday. Does that really work?
That's a good end to thequestion. The answer is no.
Please don't do this. Let megive you a little background. So
there's this place called theIRS, and their job is to make
sure that people are followingthe tax code as it was intended
(00:50):
to be done.
The IRS will do this thingcalled an audit on people every
now and then, and they'll lookat your tax returns, your
financials, and so on to see ifit's legitimate or if there's
any tomfoolery going along, anyshenanigans. I've never seen
anyone ever in my fifteen yearsover a decade of doing this get
(01:11):
away with this strategy. Everyaudit that I'm aware of. Now
it's never been to any of myclients because I don't put up
with this crap. I don't leadthem down this idea of taking
advantage of the tax codethrough these gray area ideas
that don't hold water.
I don't deal with this crap, butI know people do. So let's
address it. Okay? Here's theidea. The idea is if you have a
(01:33):
lot of money and you're alreadybe taking family vacations, why
not create a company and havefancy board meetings where your
family can get together, you'vegot some minutes and all as
well, and then then you go offand play.
Okay. Well, first off, all ofthat is a deduction, not a tax
credit. You need to understandthe differences. A tax deduction
(01:53):
is you're gonna get maybe 20¢back on every dollar you spend.
So why would you deliberatelyspend money to then get 20¢
back?
And you might say, oh, Mike, I'mgonna spend the money anyway.
Well, I guess, yeah, if you'regonna spend the money anyway,
might as well get 20¢ I get thatside of it, but you don't wanna
spend money for the sake oftrying to get a deduction. Plus,
most people aren't even gonnaexceed the standard deduction
(02:14):
regardless. And then if you putthe standard deduction and the
senior deduction and the Trumpdeduction, you're now really
high up. Like, it would cost aton of money.
You have to spend a ton of moneyto even get there. Are you
jumping over dimes to pick uppennies? Do you really wanna
take these lavish vacations?Because it has to be so lavish,
(02:35):
extremely lavish, for you toeven facilitate the idea that
maybe you could do an itemizeddeduction right now because the
standard deduction is so high.That's the first bit.
Okay? The second bit is, yeah,you could put money into like
some sort of LLC, I guess, andmaybe manipulate things. But
(02:55):
look, it's I've never seen itpass an audit, because it all
comes down to a simple question.Are you running a legitimate
business or not? A legitimatebusiness is where you're
actually working to create aproduct or service that is
intended to be sold to thepublic for gain.
(03:16):
That is a business. If yourbusiness is to go on vacations
and then go on Instagram andsay, hey. Look at how fun this
is, and we're sharing ourexperiences on the travel and
blah blah blah. Hey. We're doingthis, and you're trying to build
up a social media audience, but,like, you're not really trying
to do it.
You're just posting so you canrationalize it. It's not gonna
(03:38):
fly. Please do not assume youcan cheat the IRS. They're not
dumb. Now let's take the sameexample and just have some fun
with it.
Let's say and I'm not saying youshould do this, but let's say
you want to travel extensivelyand you wanna do it with your
family. Fine. Let's say then allof your family I don't know.
(03:59):
There's three kids. You andthree kids.
You're going on these vacations,and you legitimately all have
jobs in this business. Youlegitimately are putting in ten,
twenty hours of work at leastevery single week. And you're
legitimately going on there andposting and taking trainings and
spending marketing dollars togrow your reach and whatever you
(04:21):
do for social media influencersand all of that. If you can
legitimately show that andthere's a trajectory to where
you're gonna make money insteadof just spend money, then maybe
you've got a shot in the dark.But that's a huge if, and you
actually need to work.
Now here's an example where itmight actually can make sense.
So I I joke about this with myfamily, but I'm actually pretty
(04:44):
serious about it. My son, whenhe turns, I don't know, 14, 16
years old or so, is gonna starta business, whether he likes it
or not. I want him to learn whatentrepreneurship is actually
like. I want him to understandhow difficult it is, because I
think entrepreneurship's beenromanticized when it's actually
rather difficult to do.
Most businesses fail in the sameyear that they start. So I want
(05:07):
him to start a business with theintention of scaring him out of
doing a business. I want him totake a safer route unless he's
really got the gumption to dothis. The company that I've
picked out for him is calledBuen Tacos. I like tacos.
Who doesn't like tacos? Butwe're gonna create a small food
truck business called BuenTacos, which, you know, Bueno
(05:28):
Buen, it's good tacos. That'swhat it translates to. And maybe
we create an LLC. I will fundit, and maybe we take a vacation
to Mexico to try out a fewthings.
So it's like a one timevacation. We go back, we've
invested in there, and thenwe're going from place to place,
park to park, whatever we end updoing to legitimately try to do
(05:48):
the business. So there is someresearch to it, which kind of
would be a lot of fun, but itall is going to be going down
into trying to make money, andwe could legitimately project
the research, the trajectory,the inventory, what we've
purchased, and how we're gonnabreak even in all of that. It
would be treated as a legitimatebusiness. And if he takes off
with it, then great.
Maybe we sell it. Maybe wefranchise. I don't know.
(06:09):
Whatever we end up doing. Butthe exercise is intended to make
more money than we put into it.
So then we can start torationalize what we're
deducting, what we're spendingon, and so on. Are we gonna
invite cousins to these trips?No. Are we gonna be inviting
other extended family to thetrips? That doesn't make
business sense.
You've gotta keep things withincertain parameters. So just be
(06:31):
mindful of that. And just forfun, yeah, I heard about the
domain, so it's just sittingthere. But that's gonna be a
real thing. So if you're inKansas City, and I don't know,
in ten years you remember thisthis show.
Buen tacos. But and then I'vegot the other one, yoyi
teriyaki, because I'm fromSeattle originally, and I love
teriyaki. I would love to havereal teriyaki here in Kansas
(06:51):
City. But anyway, the point isdon't cheat the IRS. Don't spend
money just to get the deduction.
It's different deductions. Youmight get 20¢ back on the
dollar, maybe. A credit isdollar for dollar. You're not
buying credits. You're notgetting credits for this.
You really wanna make sure thatyou're doing a legitimate
enterprise if you go down thisroute. And if you do, maybe
(07:13):
that's your encore career. Maybeyou have a lot of fun doing it.
Just don't cheat the system.That's all the time we've got
for the show today.
If you enjoyed the show,consider subscribing to it
wherever you get your podcast.Just search for how to retire on
time. Discover if your portfoliois built to weather flat market
cycles or if you're missing taxminimization opportunities that
(07:34):
you may not even know exist.Explore strategies that may be
able to help you lower youroverall risk while potentially
increasing your overall growthand lifestyle flexibility. Is
not your ordinary financialanalysis.
Learn more about Your WealthAnalysis and what it could do
for you regardless of your age,asset, or target retirement
date, go towww.yourwealthanalysis.com today
(07:57):
to learn more and get started.
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