Your guide to business meal, entertainment and travel deductibility
By: The Wipfli Editorial Team
Not all business takes place in the office or boardroom. That’s why Congress allows a percentage of business meals, entertainment and travel costs to be deductible.
To get the maximum tax benefit — and avoid surprises during filing — business owners need to carefully review the current deductibility percentages and rules.
For example:
- Company holiday parties and picnics are the only business meals that are 100% deductible under the current rules.
- Business meals are generally 50% deductible (including taxes and tip). A taxpayer must be able to prove there was a valid business purpose for the event (e.g., a discussion, meeting, transaction or negotiation). Meals cannot be lavish or extravagant.
- Entertainment expenses are not deductible, even if business is discussed, with two exceptions: 1) transportation to and from a sporting event is 100% deductible, minus parking costs, and 2) meals at an entertainment facility that are invoiced separately from the ticket price may be 50% deductible.
- Travel and lodging expenses for business trips are 100% deductible, provided they are not considered lavish or extravagant. If nonemployees, such as a spouse, incur travel expenses, those are not deductible.
Download Wipfli’s one-page overview guide.
How to benefit from business meal, entertainment and travel deductions
To benefit from the tax deduction, business owners need to keep accurate records of their business events. While records can be produced after the fact, the IRS gives more credence to contemporaneous records. Written or electronic evidence is better substantiation for the IRS than “oral history.” In general, records should indicate time, place, amount, persons attending and business purposes.
How Wipfli can help
Our tax specialists are knowledgeable about meals and entertainment deductions — and other ways to minimize your tax exposure. We take a proactive and comprehensive approach to tax planning, so you can take advantage of every opportunity. Contact us today to learn more.
Download Wipfli’s business meal, entertainment and travel deductibility guide.
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