Here are some quick facts about business entertainment expenses that small business owners should keep in mind.
– Typical types of deductible entertainment expenditures are sporting events, rounds of golf, hunting, fishing, theater, social clubs, nightclubs, and concerts.
– Club dues are not deductible. You cannot deduct hunting leases, nor dues paid to country clubs, athletic clubs, airline clubs, hotel clubs, or luncheon clubs.
– Entertainment facilities are generally not deductible. If you own a yacht, hunting lodge, tennis court, or other such facilities, you will not be able to deduct their costs.
– Requirements for Deducting Entertainment Expenses. The event must be directly associated with the active conduct of your business (i.e., the production of revenue). You must actively engage in a meeting, discussion, or other business transaction during the entertainment event, immediately prior to, or immediately after the event. You must have something more than a general expectation of receiving income or some other specific business benefit in the future.
– The Substantiation Requirements are similar to those for meals (i.e., date, amount paid, who attended, and business purpose). Deductions for entertainment expenses are also limited to 50% of your actual costs.