Small Business Questions & Answers


Filed under Managing Your Taxes

Ask Toolkit About Entertainment Expenses

by Need Help | May 20, 2012

Subject :Taxes

Dear Toolkit,

How can I get more bang for my business promotion buck? I can't deduct my cost of taking customers out for meals and entertainment unless I collect a bushel basket of receipts, and even if I keep all those little tickets, the IRS only lets me deduct 50 percent. How can I please my clients without seeming like a cheapskate, while at the same time please my Uncle Sam without drowning in bushel baskets?


Need Help

Dear Need Help,

How laudable of you to indulge your fortunate customers in feasting and frolic, and how frugal of you to wish your Uncle would share the expense. I believe a chap named Robin Hood had much the same philosophy. Luckily, we can help you with a couple of tiny suggestions.

First, give a thought to expanding your concept of client "entertainment." For example, why not "say it with flowers?" Or candy, or single malt Scotch, or theater tickets? These entertaining items can make as big an impact on a customer as a restaurant meal and you can deduct them to the tune of $25 per person.

Better yet, there's no limit to the size of deductible gifts you can make to a business entity. For example, if you give 10 NBA tickets worth $75 apiece to an organization you do business with, and you don't know exactly who they give those tickets to, your business can deduct the full $750 cost. (Remember, if you give the tickets to individuals, you can only deduct $25 of the cost per ticket.)

Second, be aware of the fact that even if you lose some business entertainment receipts, you won't necessarily lose your deduction as long as that expense was under $75. The IRS no longer requires you to provide receipts for deductible expenses under $75. But. . .you are required to keep a log of the date, location, amount, name of person entertained and business purpose of the expense. Keep your log faithfully and you'll be rewarded at tax time.

And finally, for more than you'll ever want to know about entertainment and gift deductions, you can go to this IRS site.

Enjoy your entertaining and if you have any extra Super Bowl tickets, you know my e-mail address!