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This is, FWIW, a fairly complicated area where the IRS’s position is “We won’t make trouble for small business owners unless you really go out of your way to turn your credit card into a business into itself.” https://t.co/55VshGfa4f
What many, many small business owners do is spend $50k on the business’ card and extract $1k of value (flights, cash back, whatever) for themselves personally without that value being taxed. The IRS has a technical objection to this but doesn’t really care.
And so here is a common issue in tax practice: “Alrighty, an SMB owner took a tax position, possibly unknowingly, where they have $2k of underreported income at something like a 40% marginal rate. Do we want to spend five hours and look like #]*}^ to their Congressman over $800?”
Now change the fact pattern a little bit to (one famous case): a consultant flies constantly for their business. This throws off almost $100k in frequent flyer miles. The consultant repeatedly instructs secretary to book travel for express purpose of maximizing miles.
IRS (in that case): Dude, come on. You do not get to pull a second untaxed income out of the business just because everyone in the professional class expects to get a fairly tiny amount of personal vacations as a consequence of work trips.
It is underappreciated how much of tax procedure as it is actually practiced is determined not strictly speaking by the law but by an iterated game between tax agencies and taxpayers (and firms!) where degree of perceived annoyingness or anti-normative behavior is important.
One important rule of the game is that you, as a firm, can offer taxpayers products/services which have the effect of reducing their tax bill, but if you *specifically sell them with that pitch*, you’d better be squarely in Everyone Loves That Tax Break territory.
“What’s one thing where industry stays on the side of the line which doesn’t get the hammer brought down?” “Tax-aware borrowing” (a term of art) is a good one, and is largely protected by the American middle class feeling really strongly about mortgage interest deduction.
(I’d note that one of the things that nobody ever measures when scoring how expensive the home mortgage interest deduction, which is capped at interest on first $750k of mortgage, is that it materially changes norms w/r/t what level of structuring is just Tuesday on $2M loans.)
“Having trouble visualizing how one could structure loans for $2M such that interest is deductible when mortgage interest is only deductible on $750k.” Assume a scenario where the purchase price of the property is $2.5M and the client has substantial assets and cash flow.
Another way you could do it is “Buy a house for $2.5M in cash. Entirely separate from this, while making investments, it seems like a good year to buy $2M of stock on margin. Deduct the interest on all of that against your investment income for as many years as you want.”