Generally, a business can deduct 50% of its entertainment and meal expenses that either follow or precede a substantial business discussion with a client. Example: If you treat a group of clients to a dinner costing $500 after you’ve wrapped up a business deal, you can claim a $250 deduction (50% of $500).
If a client visits from a distant location, the entertainment may take place either the day before or after the substantial business discussion.
Strategy: Invite top clients to a house party. The cost of home entertainment attributable to your business guests is deductible, even if you never actually discuss business during the gathering itself.
For this purpose, your business guests may include your client, his or her associates, you and your staff members and everyone’s spouses.
Since things tend to get hectic around the holidays, make your plans now. This will enable you to maximize entertainment expense deductions for 2008.
Tip: If you throw a holiday party for employees—either at home, at work or another location—you can deduct 100% of the cost. Plus, you may invite business guests as long as the primary motivation is to benefit employees.
- Small Business Tax Deduction Strategies No matches