6 Tax Deductible Business Entertainment Expenses
As a small business owner, you are probably aware that the IRS allows you to write-off 50 percent of meals and entertainment as expenses every year. These types of events can happen before, during or after business hours with either your employees or your clients. However, with entertainment being such a large category, it’s hard to determine what is tax deductible and what’s not. We have provided you with a list of six types of tax deductible business entertainment expenses that can be written off.
1. Restaurants
According to the IRS, meals are typically considered a form of entertainment. If you are regularly dining out with prospects, clients and employees to discuss business or team building, half of the bill qualifies as a business entertainment expense. Though this may seem like a simple write-off, meals are often an audited item. Make sure to keep a log noting the date of the meal, who you met, and what was the purpose.
2. Sporting Events
Planning on spending an afternoon enjoying your favorite sport? Whether you’re treating your company to a round of hotdogs and baseline seats or taking a business associate to a tennis match or golf tournament, sporting events are considered a form of entertainment. In this case, the tax deduction applies to the tickets and the food.
3. Concerts or Music Events
Do you find that music always seals the deal? If you are planning on taking your employees or clients out to a concert or live music event, we recommend that you save your receipts. Approximately 50 percent of the ticket, food and beverages count as tax deductible.
4. Private Yachts
If you happen to own a boat or a yacht and use it for business-related activities, it is also considered tax deductible. Half of the cost of food and drinks served during this type of outing can be written off.
5. Nightlife Activities
Taking a business client or prospect to a lounge or nightclub for food and entertainment can be written off as a business tax deduction, with the 50 percent deduction limit applied.
6. Gifts
Planning on giving an employee a birthday gift? How about sending a client a thank you? The IRS allows a deduction of up to $25 per person per year for gifts. Use this if your expenses are low. For bigger items, plan to use the business entertainment deduction and gift a memorable experience instead. This will help with savings and can be beneficial team-building and winning over clients!
Make sure to save all relevant receipts and keep proper documentation of any events that you plan to write-off come tax time. Entertainment expenses are only valid if they are properly accounted for and relevant to business. As with anything related to the IRS, it’s also a good idea to review the IRS Publication 463, Travel, Entertainment, Gift and Car Expenses to discuss any questions or comments you may have with your tax professional.
At Verdeja, De Armas & Trujillo, LLC, our team of Miami tax consultants is dedicated to providing independent and unbiased tax recommendations for businesses and business interests of all sizes. Contact us today for a tax consultation.