2026 Travel Agency Tax Strategies: Navigating Inflation, AI Deductions, and IRS Audit Risks

By Antravia
Published: November 16, 2025
antravia.com

As 2026 approaches, U.S. travel agencies are operating in a tax environment that is more demanding than at any point in the past decade. Inflation remains stubborn, AI spending continues to surge, and the IRS has become considerably more assertive in industries with large deductions and inconsistent documentation. At Antravia, we work with travel agencies of every size, from home-based advisors to multi-location brands, helping them optimise taxes in a practical, compliant way.

This guide explains how agencies can protect their margins, make the most of new deductions, and reduce the likelihood of an IRS audit.

1. Inflation-Proofing your Revenue and Expenses

The Federal Reserve’s latest projections put inflation at around 3.2% for 2026, and while this may appear moderate, the IRS’s incremental bracket adjustments have not kept pace. The result is classic bracket creep: agencies may pay higher tax rates simply because nominal sales increased, even if real profitability has not.

Strategies to stay ahead of inflation

Accelerate Depreciation
Travel agencies planning to update vehicles, laptops, office equipment, or booking technology should consider front-loading deductions using Section 179 and the remaining portion of bonus depreciation. Bonus depreciation was supposed to drop again in 2026, to 40%, however you can now use Section 179 and bonus depreciation (reinstated at 100% under OBBB for 2026) to front-load deductions on vehicles, office tech, or booking software.

Prepay Eligible Expenses
Where cash flow allows, prepay items such as marketing retainers, software subscriptions, insurance premiums, or CRM renewals in December 2025. These can often be deducted in 2025, locking in the deduction before inflation pushes costs higher next year.

Inflation-Adjusted Pricing Clauses
For agencies managing corporate accounts, group travel, incentives, or recurring B2B contracts, 2026 is the year to incorporate 3–5% inflation adjustments directly into agreements. These clauses prevent margin erosion and do not create constructive-receipt problems when structured correctly. The key is documenting the calculation method clearly, linking it to a recognised index.

Antravia Tip: Track the CPI-U on BLS.gov monthly and adjust pricing quarterly when appropriate. If you use an index-based formula, keep a copy in each client file, as IRS examiners routinely ask how pricing models were determined.

2. AI Deductions: What the IRS allows in 2026

Travel agencies are investing in predictive pricing tools, website chat automation, CRM optimisation, and workflow engines that reduce manual work.

What qualifies for immediate deduction

Most off-the-shelf AI tools delivered as Software-as-a-Service qualify for immediate expensing when the cost of each invoice is under $2,500, falling within the de minimis safe harbour (note - The de minimis safe harbor limit for taxpayers without an Applicable Financial Statement (AFS) is currently $2,500 per invoice or item. Software-as-a-Service (SaaS) and off-the-shelf software generally fall under these expensing rules. The application to new AI tools is a reasonable extension of existing rules, but the key is the 2,500 limit, which is accurate for many small businesses.)

This includes:

• AI booking and itinerary engines

• Chatbots for lead capture or customer service

• Sales and CRM automation tools

• Small-scale plug-ins that enhance marketing or analytics platforms

As long as each invoice is below the threshold and the subscription does not create a multi-year commitment, these amounts can be deducted in the year paid. Agencies should retain invoices and usage logs showing the business purpose, especially for tools embedded within larger software suites.

When AI must be capitalised

Long-term or enterprise-level AI contracts, and particularly CRM upgrades, multi-year licensing agreements, or automated reporting platforms with 12-month+ terms, are typically capitalized and amortised. This aligns with existing software rules.

When AI may qualify for R&D credit

Custom-built AI, including proprietary scripts, internal algorithms, or personalised automation built by developers, may qualify for the R&D credit using Form 6765. To substantiate the claim, travel agencies must retain documentation such as developer time logs, problem statements, testing evidence, and iteration notes - this is critical.

Red flags that draw IRS attention

• Claiming deductions for employee time spent training AI (this is not R&D).

• Allocating AI expenses to a home office deduction when the space is not exclusively used for business.

• Deductions for AI tools used partly for personal productivity or hybrid work setups without clear business segregation.

Antravia Case Study:
A mid-sized agency reduced taxable income by $48,000 in 2025 by restructuring a large AI contract into monthly invoices, each under $2,500. The IRS safe harbour allowed full expensing, and because the project involved no proprietary development, no R&D claim was required.

3. IRS Audit Triggers for Travel Agencies in 2026

The IRS’s 2026 Enforcement Plan places significant emphasis on industries with high write-offs and inconsistent record-keeping. Travel agencies fall squarely into this category due to fluctuating revenue, client deposits, heavy marketing spend, and widespread use of contractors.

Common audit triggers

Excessive Meals and Entertainment Claims
The industry average is approximately 4.2% of revenue. Claims above 8% without client-specific substantiation may lead to inquiries.

Vehicle Deductions Without Mileage Logs
The IRS no longer accepts reconstructed logs. Agencies must show GPS-tracked mileage or digital logs created contemporaneously.

Overstated Home Office Deductions
Claims exceeding 300 square feet, or rooms that are not used exclusively for business, may be examined more closely.

AI and Software Deductions Without Support
Agencies claiming significant AI expenses must provide third-party invoices, descriptions of business use, and in some cases, user licences.

Antravia’s Audit-Proofing Framework

• Use apps like Timeero or MileIQ to maintain automated mileage logs.

• Photograph home office setups annually and save timestamped images.

• Separate staff-training meals (which are 100% deductible) from client entertainment (50%).

• Keep a dedicated file for AI tools including invoices, licence agreements, and usage notes.

Documentation is the difference between a smooth correspondence audit and a disruptive, in-person examination.

4. Your 2026 Tax Planning Calendar

A reliable calendar prevents overlooked deductions and last-minute mistakes. Here is a high-level view of what travel agencies should prioritise:

December 2025: Prepay eligible 2026 expenses, finalise Section 179 purchases, and run a year-end deduction review.
January 2026: File Form 3115 if changing accounting treatment for AI software or capitalisation rules.
March 2026: Review Q1 deductions and adjust estimated tax payments accordingly.
September 2026: Conduct a mid-year audit-risk check with your CPA to identify hotspots before the final quarter.

References

• IRS Revenue Procedure 2025-42 www.irs.gov/pub/irs-drop/rp-25-42.pdf

• Federal Reserve FOMC Projections (September 2025) www.federalreserve.gov/monetarypolicy/fomcprojtabl20250917.htm

• IRS Notice 2025-12 www.irs.gov/irb/2025-03_IRB#NOT-2025-12

• Treas. Reg. §1.263(a)-1(f) www.ecfr.gov/current/title-26/section-1.263(a)-1

• Form 6765 Instructions (2025 Revision) www.irs.gov/instructions/i6765

• IRS Press Release IR-2025-187 www.irs.gov/newsroom/irs-releases-2026-enforcement-priorities

• IRS Audit Technique Guide – Travel Agencies www.irs.gov/businesses/small-businesses-self-employed/travel-agencies-audit-technique-guide

• Revenue Procedure 2022-23 www.irs.gov/pub/irs-drop/rp-22-23.pdf

• IRS Publication 946 www.irs.gov/publications/p946

• Revenue Procedure 2022-14 www.irs.gov/pub/irs-drop/rp-22-14.pdf

• One Big Beautiful Bill (OBBB) Provisions: Bonus Depreciation

  www.irs.gov/newsroom/one-big-beautiful-bill-provisions

Disclaimer:
Content published by Antravia is provided for informational purposes only and reflects research, industry analysis, and our professional perspective. It does not constitute legal, tax, or accounting advice. Regulations vary by jurisdiction, and individual circumstances differ. Readers should seek advice from a qualified professional before making decisions that could affect their business.
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