Business Meals, Entertainment,
Client Gifts & Club Dues
Expense Summary
100% Deductible
- Business Meals
- Meal for employee working overtime if work is necessary
- Meal ordered in for staff meeting
- Employee recreation (picnics, holiday parties, etc.) primarily for the benefit of employees other than highly compensated employees
- Travel Expenses
- Transportation to/from restaurant for business meal
- Transportation and lodging expenses for a business trip
- Gifts to Clients
- Only up to $25 per client per year, any amount over $25 is not tax deductible
50% Deductible
- Business Meals
- Meals eaten alone while traveling for business purposes
- Meal with employee where business is discussed if infrequent
- Meal with customer/client, business discussed
- Entertainment (Includes any activity generally considered to provide entertainment, amusement, or recreation.)
- Transportation to/from event
- Parking at the event
- Ticket price or cover charge for event (including tax) when associated with business discussion
- More than one event – deduction limited to cost of non-luxury box seats
Not Deductible
- Business Meals
- Meal with customer/client, no business discussed
- Meal with employee, no business discussed
- Entertainment and Clubs
- Country club or golf club dues and fees primarily established for recreational and entertainment activities
- Health club dues unless cost is added to employee’s W-2 and applicable taxes are paid
- Airline or hotel clubs
Deduction Tips
Make sure the environment is conducive to conducting business
- An overly-boozy brunch, for instance, wouldn’t qualify.
- The IRS once rejected a deduction of tickets to a baseball game because the volume levels at a ball park don’t allow for a comprehensive business discussion.
Make sure the meal/entertainment is aligned with your company’s budget and wouldn’t be considered lavish or extravagant.
Be prepared to defend your deductions in the case of an IRS audit. In addition to the detailed receipt, make sure you have adequate records and documentation of client names, business purpose of meeting, etc.
Want a copy for your records? Download this page as pdf here.
