Cash Flow Planning for Life - Helping you reach your personal & professional financial goals.

Cash Flow Planning for Life

Helping you reach your personal & professional financial goals.

Entertainment and Meal Deductions

Posted by Mark On January 26th

The expense for meals and entertaining clients, customers or employees can qualify…

This is part 6 in my 7 part series “7 Things Every Small Business Owner Needs To Know”.  You can download this entire series in my eBook on my web site – www.Makara-Assoc.com.

…as an ordinary and necessary business expense, usually limited to a 50% tax deduction of the total cost.

These entertaining activities include the cost of the meals and/or tickets (food, beverages, tax and tips) incurred at:

  • nightclubs,
  • social clubs,
  • sports facilities,
  • hunting,
  • fishing trips, or
  • vacations.

However, the expense should not include the cost of renting or owning an entertainment facility, explained below —

To qualify for a deduction, the entertainment expenses must be directly related to the generation of business income and the taxpayer must actively engage in the discussion at the meeting or event.

This must be documented on a receipt as to the:

  • individuals that were present,
  • business discussed and
  • date of the event.

Documentation is the key when supporting these expenses.

As mentioned above these entertaining expenses are limited to 50% of the total cost for tax purposes, however there are limited exceptions such as:

  • meal’s provided on the employer’s premises, for more the 50% of the employee’s, for the employer’s convenience,
  • promotional activities made available to the general public;
  • employer-provided social event for the benefit of employees (such as summer picnic or holiday party).

No tax deduction is allowed for owing or renting and entertainment facility.

Examples of entertainment facilities include luxury boxes, boats, hunting lodges, gulf and athletic club memberships, swimming pools, airplanes and homes in vacation resorts.

The expenses associated with owing or renting these types of personal or real property should be keep separate from the food, beverages, gas, and bait used, as these expenses would still be allowed as an entertainment expenses subject to the 50% limitation.

If you have any questions about entertainment and meal deductions, or what’s deductible – please give me a call at (239) 384-9688 or visit my web site at: www.Makara-Assoc.com.

– Mark

This information is based on facts, assumptions and representations as stated and authorities that are subject to change.  We will not update this information for subsequent legislative or administrative changes of future judicial interpretations.

LEGAL NOTICE AND DISCLAIMER:  The information within this eBook is for informational and educational purposes only and is not tax advice and should not be used as such.  The facts of each individual situation can have significantly different outcomes when applying tax law.  The hiring of a CPA is an important decision not to be based solely on advertisements.

Leave a Reply