Meals, Entertainment and Gifts
Did you know fifty percent
(50%) of legitimate business meals and entertainment expenses are
deductible if directly related to conducting business including
meals for business travel?
To documentation these expenses you may
use:
Business meals and entertainment are deductible
subject to certain restrictions which are:
- The expense must be necessary to conducting
business or while traveling for business purposes.
- The business purpose must be documented.
For example if you are having a business meeting at lunch, you
must document with whom you had the meeting and what was discussed
at the meeting.
When using a deduction the following rules
apply:
- A business would deduct the expense from
the business income.
- An employee is able to use the deduction
if the expenses are not reimbursed by their employer. The expenses
are deductible as an itemized deduction. The 2106is form is used,
and is subject to the 2% rule. (Note: the 2% rule states that miscellaneous
itemized deductions, including business deductions by employees,
are reduced by 2% of your adjusted gross income.)
- Purchasing tickets (i.e. ball game, concert,
etc.) and giving them to a client, customer, or employee is not
considered a business expense, therefore not deductible.
- If the tickets are given to an employee
as a bonus for services performed, you are required to include
the value in the employees income and it is subject to all payroll
taxes. It then becomes deductible.
- Memberships of clubs are not deductible
for tax purposes.
- A gift for business purposes is limited
to $25 per recipient. (Regardless of what the gift is)
- Items that are clearly for marketing purposes,
such as pens with your company name on them are not considered
gifts.
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