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Entertainment expenses: year-end tax strategy

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in Small Business Tax

Your business can deduct 50% of its entertainment and meal expenses that either follow or precede a substantial business discussion with a client. For instance, if you wrap up a business deal and then treat the client to a dinner costing $300, you can claim a $150 deduction (50% of $300).

If the client is visiting you from out-of-town, the entertainment may take place either the day before or after the substantial business discussion.

Strategy: Invite clients to a dinner party at your home. The cost of home entertainment attributable to your business guests is deductible (subject to the 50% limit) even if you never discuss business during the night.

For this purpose, “business guests” may include your client, his or her associates, you and your staff members and spouses. But the cost attributable to any personal guests, like your neighbors, is nondeductible.

Note that a holiday party for your entire staff is 100% deductible.

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