“Looks deductible” but is not

• Personal, living, and family expenses
  Household costs, family travel, nonbusiness clothing, and personal meals remain nondeductible even if paid through the S corporation. Publication 17; Publication 334

• Commuting costs
  Travel between home and your principal place of work is commuting and not deductible (even with a company vehicle); commuting value can be a taxable fringe benefit. Publication 463

• Entertainment and many employer‑provided meals
  Entertainment is generally nondeductible; business meals are limited and must be substantiated. Employer‑operated eating facilities are excludable only if strict conditions are met (on/near business premises and revenue ≥ direct operating costs). Publication 463; Publication 15‑B (2025)

• Corporate stock reacquisition costs
  Corporate expenses connected with reacquiring stock are generally nondeductible (limited exceptions apply). Publication 542

• More‑than‑2% shareholder fringe exclusions
  Many fringe exclusions don’t apply to more‑than‑2% S corporation shareholders (e.g., some cafeteria plan benefits and transportation fringes can be taxable wages to owner‑employees). Publication 15‑B (2025)

• Personal interest
  Individuals generally can’t deduct personal interest; only business interest and specific categories (e.g., qualified residence interest) may be deductible. Publication 17

“Seems personal” but can be deductible with proper treatment

• 2% shareholder health insurance
  If the S corporation pays or reimburses health insurance premiums and includes the amount in the >2% shareholder’s Form W‑2 (Box 1), the shareholder may claim the self‑employed health insurance deduction (subject to earned income and plan‑establishment rules); such amounts are generally not subject to FICA/FUTA. Wage Compensation for S Corporation Officers (FS‑2008‑25); S corporations (IRS)

• Educational assistance (Section 127)
  Employer payments for employee education (tuition, fees, books) can be excluded up to $5,250 per year under a written educational assistance program that meets nondiscrimination rules; owner limitations may apply. Publication 15‑B (2025); IRS FAQs on Educational Assistance Programs

• Home office and accountable plan reimbursements
  Business use of home is deductible when exclusive and regular use tests are met (principal place of business, meeting clients, or separate unattached structure). For owner‑employees, use an accountable plan to reimburse substantiated business use; unreimbursed employee expenses are generally disallowed. Publication 587; Publication 463

• Employer‑provided meals for convenience of employer
  Meals on the employer’s premises provided for substantial noncompensatory business reasons can be excludable; treat owner‑employees carefully under fringe rules. Publication 15‑B (2025)

• Vehicle business use
  Deduct business use costs with adequate records; personal use (including commuting) is nondeductible and may create taxable fringe benefits. Listed property rules require mileage/time‑based allocation and documentation. Publication 463

Grey‑zone items and how to handle them

• Mixed‑purpose travel and meals
  Document primary business purpose, agenda, and hours devoted to business; deduct only the business portion. Entertainment remains nondeductible; the temporary 100% restaurant meals allowance has expired. Publication 463

• Employer‑operated eating facilities
  Exclude meal value only if on/near premises and revenue ≥ direct operating costs; otherwise employee inclusion and employer deduction limits may apply. Apply cafeteria nondiscrimination rules for highly compensated employees. Publication 15‑B (2025)

• De minimis fringes
  Small, infrequent benefits (e.g., occasional coffee, doughnuts, minimal personal use of a copier under controls) can be excluded; cash and cash equivalents (e.g., gift cards) are generally taxable. De minimis fringe benefits (IRS)

• Transportation benefits
  Qualified parking and transit benefits can be excludable to employees up to monthly limits; check treatment for >2% shareholders and employer deduction issues. Publication 15‑B (2025)

• Owner compensation vs. distributions
  Payments to S corp officers for services must be wages subject to employment taxes; treating compensation as distributions or loans risks recharacterization and penalties. Include >2% shareholder health premiums in Box 1 for §162(l) eligibility. Wage Compensation for S Corporation Officers (FS‑2008‑25); S corporations (IRS)

• Home office and accountable plans
  Use an accountable plan for reimbursements (business connection, timely substantiation, return of excess); otherwise payments are taxable wages. Publication 463; Fringe Benefit Guide (Pub. 5137)

• Listed property (vehicles, computers)
  Keep contemporaneous logs for business/investment use; if business use ≤50%, accelerated depreciation and certain credits may be limited/recaptured; commuting is not business use. Publication 463

• Basis limits for shareholder losses
  Losses are limited by stock and debt basis, at‑risk, and passive loss rules; track basis annually to avoid disallowed or suspended losses. S corporations (IRS)

Practical steps for S‑corp owners

• Implement an accountable plan
  Adopt written policies requiring timely substantiation and return of excess; reimburse only documented business expenses. Publication 463; Fringe Benefit Guide (Pub. 5137)

• Distinguish wages, benefits, and distributions
  Pay reasonable W‑2 compensation; report owner health insurance correctly; use distributions for profits after compensation. Wage Compensation for S Corporation Officers (FS‑2008‑25); S corporations (IRS)

• Substantiate, allocate, and document
  Keep detailed records for travel, meals, vehicles, and home office; allocate mixed‑use expenses and exclude personal portions. Publication 463; Publication 587

• Apply owner‑employee fringe rules
  Review fringe exclusions, monthly limits, and owner limitations (e.g., cafeteria plan and transportation benefits); treat >2% shareholders per special rules. Publication 15‑B (2025)

• Avoid routing personal expenses through the S corp
  Personal spend can be constructive dividends, wages, or loans; ensure characterization and documentation align with IRS guidance. Publication 542

Key references

• Business expenses and corporate rules: Publication 542

• Travel, gifts, car, accountable plans, and substantiation: Publication 463

• Fringe benefits and owner‑employee exceptions: Publication 15‑B (2025)

• Home office: Publication 587

• S corporation guidance and officer compensation: S corporations (IRS); FS‑2008‑25

• De minimis fringe benefits: IRS de minimis page

• Employer health care arrangements overview: Employee benefits (IRS)