Taking a client to a ball game feels like a classic business move, but the tax rules have changed. Many entrepreneurs still ask, are sports tickets tax deductible? The simple answer is no. Since the Tax Cuts and Jobs Act, you can no longer write off the cost of the actual tickets. But what about the hot dogs and drinks you bought at the game? That’s where the confusion really starts. The line between a deductible business meal and non-deductible entertainment is incredibly fine. This article will show you exactly what you can and can’t claim, so you can keep your books clean and avoid any costly surprises from the IRS.
Key Takeaways
- Focus on meals, not entertainment: The IRS has eliminated deductions for entertainment expenses like concerts or sporting events. You can, however, still deduct 50% of the cost of a qualifying business meal where substantial business is discussed.
- Document the details, not just the dollars: To protect your deductions, a receipt isn’t enough. You must also record the business purpose of the meal, the date and location, and who was present for the discussion.
- Know the difference between client and employee events: While client meals are typically 50% deductible, events for the benefit of your employees, like a company holiday party, are often 100% deductible.
Let’s Talk Entertainment Tax Deductions
When you’re running a business, connecting with clients and partners is part of the job. Often, that involves meals or events. It’s a common assumption that if an activity is related to work, the cost must be a tax write-off. However, the IRS has very specific rules about what qualifies as a deductible business expense, and many business owners are surprised to learn what’s no longer allowed. Misunderstanding these rules can lead to disallowed expenses, an unexpected tax bill, and compliance headaches you just don’t need.
Entertainment business tax deductions are specific, IRS-approved expenses that you can subtract from your business’s income to lower the amount of tax you owe. The key is that these expenses must be considered both “ordinary and necessary” for your business operations. While that might sound straightforward, the regulations have become much stricter in recent years. Knowing the difference between a deductible business meal and a non-deductible entertainment expense is essential for accurate bookkeeping and effective business tax planning. Getting it right means you can confidently claim the deductions you’re entitled to without worrying about future issues.
Does Your Business Qualify?
For an expense to be deductible, it needs a clear business purpose. The IRS requires more than just a general hope of getting some future business benefit or building goodwill with a client. To qualify, you must prove that business was discussed before, during, or immediately after the meal or event. This means you need to be able to show a direct connection between the expense and your business operations. Simply taking a client out for a good time isn’t enough to make the expense deductible; there has to be a substantial business conversation involved.
Don’t Fall for These Entertainment Tax Myths
One of the biggest myths is that all business meals and entertainment are 100% deductible. This is simply not true. For qualifying business meals, the deduction is typically limited to 50% of the cost. Another common point of confusion involves events where food and entertainment are combined. For example, if you take a client to a sporting event in a suite that includes food and drinks, you can only deduct 50% of the meal portion if its cost is stated separately from the entertainment on the invoice. If the costs are lumped together, you generally can’t deduct any of it.
How Tax Law Changes Impact Your Deductions
The rules for these deductions changed significantly with the Tax Cuts and Jobs Act (TCJA) of 2017. Before this change, businesses could generally deduct 50% of qualifying meal and entertainment expenses. Now, the rules are much tighter. The deduction for entertainment expenses has been completely eliminated. This includes things like tickets to concerts, sporting events, or golf outings with clients. The 50% deduction for business meals is still allowed, but the distinction between a meal and entertainment is more critical than ever. Understanding this shift is key to staying compliant and avoiding issues that could require audit representation.
Can You Write Off Sports Tickets? What’s Still Deductible
Figuring out which business expenses you can write off can feel like a puzzle, especially when it comes to meals and entertainment. The rules have changed over the years, and it’s easy to get tripped up. Getting it right is key to accurate bookkeeping and a stress-free tax season. Let’s break down what you can and can’t deduct, so you can feel confident about your spending and your records.
Your List of 100% Deductible Expenses
While most business meals have limits, some are 100% deductible. These are usually expenses directly related to your employees. For example, the cost of an office holiday party or a summer picnic for your team and their families is fully deductible. The same goes for any food and drinks you provide for the convenience of your staff on-site, like stocking the breakroom with coffee and snacks. If you provide meals to employees as part of their taxable compensation or reimburse them under an accountable plan, you can also deduct the full cost. These exceptions are designed to support company culture and employee benefits, making them a valuable part of your business accounting.
Meals for Promotional Events
If you host an event that’s open to the general public to promote your business, the food and drinks you provide are fully deductible. This is a key exception to the 50% rule because the purpose is marketing, not entertaining a specific client. Think of an open house you host to attract new customers or providing snacks at a community event where you have a booth. The key distinction is that the event is available to anyone, not just a select group of clients or partners. This makes it a powerful tool for both marketing and effective business accounting, allowing you to get a full tax benefit for your promotional efforts.
Meals at Charity Sporting Events
While taking a client to a regular season game is no longer deductible, there’s a special exception for charity events. If you buy a package for a charity fundraiser that includes tickets to a sporting event, you can deduct 100% of the meal cost. The IRS allows this because the primary purpose of the expense is to support a charitable organization, not to entertain a client. This is a fantastic way to support a cause you care about, network with community members, and still receive a tax benefit for the food portion of the event. It’s a perfect example of how strategic tax planning can align with both your business and community engagement goals.
Entertainment as Your Primary Business
The rules we’ve discussed apply when you use entertainment to build client relationships. But what if entertainment *is* your business? If you own a nightclub, promote concerts, or run a charter fishing boat, your expenses are viewed differently. The costs of providing that entertainment—like hiring a band or fueling the boat—are considered ordinary and necessary operating expenses, not the “entertainment expenses” that the IRS has disallowed. This is a critical distinction for anyone in the hospitality or events industry. These costs are fundamental to your operations and are fully deductible as part of your regular business management.
Reimbursed Meal Expenses
You can also secure a 100% deduction for meals provided to your employees if you treat the cost as taxable compensation. When you include the value of a meal in an employee’s wages on their W-2, your business can deduct the full expense. This approach essentially makes the meal part of their pay package. While this means the employee will pay income tax on the value of the meal, it allows your business to write off the entire cost. It’s a different strategy than a standard meal reimbursement for travel but can be useful in certain compensation structures. Properly handling these details is a key part of business accounting to ensure the expense is fully accounted for as a deductible business cost.
How the 50% Meal Deduction Rule Works
For most other business-related meals, you can typically only deduct 50% of the cost. This rule applies to “ordinary and necessary” meals where business is conducted. Think of taking a client out to lunch to discuss a project or grabbing dinner with a partner to strategize. The meal can’t be overly lavish or extravagant, and you (or an employee) must be present. This 50% limit also applies to meals for employees traveling for work. Careful business tax planning is essential to make sure you’re correctly applying this rule and not leaving money on the table or claiming more than you should.
What About Meals Eaten Alone?
It might seem odd to claim a meal for one as a business expense, but it’s perfectly legitimate when you’re traveling for work. If your business requires you to be away from your tax home overnight, the cost of your meals is considered a travel expense. This isn’t about entertaining a client; it’s about the necessary cost of sustaining yourself while conducting business on the road. The IRS allows you to deduct 50% of these meal costs. Just remember, this applies only when you are officially in travel status. Grabbing lunch alone in your hometown between meetings doesn’t count. Keeping these travel expenses organized is a fundamental part of effective business accounting and management, ensuring you capture all eligible deductions without crossing any lines.
Entertainment Costs You Can’t Write Off
This is where many business owners get confused. Since the Tax Cuts and Jobs Act of 2017, most entertainment expenses are no longer deductible. This means you can’t write off the cost of tickets to a concert, sporting event, or golf outing, even if you’re there with a client. The IRS is very clear on this: if the activity is primarily for amusement or recreation, it doesn’t qualify. Misunderstanding this rule can lead to disallowed expenses and potential penalties during an audit. If you receive a notice, having professional audit representation can make all the difference.
Exceptions to the Rule: When Entertainment Is Deductible
Tax laws can have special conditions, and it’s important to stay current. You might remember that for 2021 and 2022, businesses could temporarily deduct 100% of the cost of food and beverages from restaurants. This was a temporary measure to help the restaurant industry. However, that special rule has expired. For 2023 and onward, qualifying business meals from restaurants are back to the standard 50% deduction. Keeping track of these changes is crucial for accurate tax filing. Always double-check the rules for the current tax year to ensure your business stays compliant and avoids any unwelcome surprises.
The College Sports Ticket Exception
The idea of a special write-off for college sports tickets often comes up, but it’s a common point of confusion. Let’s be clear: the cost of the ticket itself is not a deductible entertainment expense. However, there is a specific nuance here. If you purchase premium seats, a portion of your payment might be classified as a charitable donation to the university’s athletic department. This is the part you can potentially deduct—the donation, not the ticket. To claim this, you’ll need official documentation from the university that explicitly separates the ticket’s value from the contribution amount. It’s a detail that highlights why careful tax planning is so important.
How to Keep Impeccable Records for Tax Time
Claiming deductions is one thing, but proving them is another. The key to confidently writing off your business expenses lies in meticulous record-keeping. If the IRS ever comes knocking, a clean set of books is your best defense. Think of it less as a chore and more as a financial best practice that protects your business and ensures you get every dollar you’re entitled to. Keeping organized records year-round saves you from a frantic scramble during tax season and provides a clear picture of your business’s financial health. It’s about creating a system that works for you—one that’s simple, consistent, and thorough. Let’s break down exactly what you need to do to keep your records in perfect shape.
What Records Do You Actually Need?
Great records go beyond just saving receipts. For every expense, you need to document the story behind it. The IRS wants to see proof that it was a legitimate business cost. Always keep detailed records of your expenses, including the business reason for a meal or event and a list of who was there. A credit card statement showing a charge from a restaurant isn’t enough; you need to note that you were meeting with a potential client, Jane Doe, to discuss a new project. Your records should always include the amount of the expense, the date and place it occurred, and a clear description of its business purpose. This habit is crucial for all your expenses but especially for meals, where the line between business and personal can easily blur.
How Long to Keep Your Records
So, how long do you need to hang onto that growing pile of receipts and documents? The general rule from the IRS is to keep your records for three years from the date you filed your tax return. This is the typical window the IRS has to audit you. However, there are important exceptions. If you underreport your income by more than 25%, the IRS has six years to take a look. You should also keep records for seven years if you file a claim for a loss from worthless securities or a bad debt deduction. For property you own, like buildings or equipment, keep those records until you sell or dispose of the asset, plus the standard three years. Proper business accounting and management means having a system to organize and store these documents, so you’re always prepared and never caught off guard.
Simplify Your Life with Expense Tracking Apps
The shoebox full of crumpled receipts is a thing of the past. The easiest and smartest way to track expenses is with a digital system. Modern accounting software lets you snap a picture of a receipt with your phone, automatically pulls the key details like the date and vendor, and stores it securely in the cloud. This not only saves you from manual data entry but also makes it incredibly easy to find a specific transaction later. When it’s time to file your taxes, you can generate reports for your accountant with just a few clicks. Investing in the right tools is a game-changer for efficiency and accuracy. We can even help you with accounting software implementation & support to get you started on the right foot.
A Simple System for Categorizing Expenses
Properly categorizing your expenses is a simple step that makes a huge difference at tax time. When you track your spending, group your expenses into categories that align with those on the IRS tax forms. This makes the process of filling out your tax return much more straightforward. For an entertainment business, common categories might include travel, meals, marketing, professional fees, venue rentals, and equipment costs. By being consistent with your categories throughout the year, you create a clear and organized financial story. This not only simplifies tax preparation but also gives you valuable insights into where your money is going, helping you manage your business accounting more effectively.
Creating Separate Accounts for Meal Deductions
One of the smartest habits you can build is to create a separate account or category in your books specifically for meals. This simple step provides incredible clarity and makes tax time much less of a headache. Since most business meals are only 50% deductible, having them isolated allows you to easily total them up and apply the limitation. More importantly, it keeps them separate from entertainment costs, which are no longer deductible at all. Remember, a receipt is just the start. For every meal, you must also document the business purpose, the date and location, and who attended the meeting. This level of organization is fundamental to sound business accounting & management and proves you’re handling your deductions correctly.
How to Report Meals on Your Tax Forms
When it’s time to file, you don’t report just half the cost of your meals. You should track 100% of your qualifying meal expenses in your accounting records throughout the year. The 50% limitation is then applied on your tax return itself. This is a critical distinction that ensures your books accurately reflect your total spending. The current rules, shaped by the Tax Cuts and Jobs Act (TCJA), are strict about separating meals from the now non-deductible entertainment expenses. It’s also important to remember that the temporary 100% deduction for restaurant meals has expired. As of 2023, the standard 50% rule is back in effect. This is where accurate records and strategic business tax planning come together to ensure you file correctly and confidently.
Which Supporting Documents Do You Need?
While it’s best to get a receipt for everything, sometimes it’s not possible, especially for small cash purchases. Even when a receipt isn’t required (like for most expenses under $75), you still need to document the transaction. You should make a note of the amount, date, location, and business purpose of the expense right away. If the expense involved other people, like a client lunch, be sure to write down who was there. This is called a contemporaneous record, and it’s a valid form of proof. The goal is to create a clear paper trail that justifies every deduction, which is your strongest defense in the event you receive a tax notice.
Training Your Staff on Proper Documentation
Your team is your first line of defense when it comes to accurate record-keeping. If your employees are taking clients out for meals, they need to understand that a receipt alone isn’t enough. It’s essential to train them on a simple, consistent documentation process. For every business meal, they must record the date and location, the total cost, the names of everyone who attended, and most importantly, the specific business purpose. A note that says “client lunch” won’t cut it. They need to briefly describe what was discussed, like “discussed Q3 project proposal with Jane Smith.” Without this level of detail, you risk having those expenses disallowed during an audit, which can be a stressful and costly experience that may require professional representation. Making this a standard part of your expense reporting process protects your business and empowers your team to do the right thing.
Is It a Business Meal or Entertainment?
Knowing the difference between a business meal and entertainment is one of the trickiest parts of handling your taxes. The IRS has specific rules for each, and a mix-up can lead to disallowed deductions and a surprise tax bill. Many business owners mistakenly assume any client-related expense is deductible. Let’s clear up the confusion. The key is understanding that while business meals are often deductible, most entertainment expenses are not. Properly tracking these costs is a core part of smart business tax planning that keeps your company financially healthy.
What Makes a Meal a “Business Meal?”
Generally, you can deduct 50% of the cost of business meals. For a meal to qualify, it must be an “ordinary and necessary” business expense, and you or an employee must be present. The meal can’t be overly lavish or extravagant. Think client lunches to discuss a project or dinner meetings with partners. The key is that business must be the primary purpose. Always keep records of who attended and the business topics discussed to support your deduction.
Defining “Entertainment” for Tax Purposes
Unlike meals, most entertainment expenses are no longer deductible. This includes costs for things like tickets to sporting events, concerts, or golf outings, even if you discuss business with a client. Misunderstanding this rule is a common pitfall that can lead to disallowed expenses and issues during an audit. If you find yourself facing questions from the IRS about past deductions, seeking professional tax notice & audit representation can help you resolve the matter effectively.
Handling Expenses with Business and Personal Use
What if a meal is part of an entertainment event? You can still deduct 50% of the meal cost, but only if it is stated separately from the entertainment cost on the bill or invoice. For example, if you buy tickets to a game and then go out for dinner, the dinner is deductible but the tickets are not. If the tickets include food in a suite, you can only deduct the food portion if its cost is itemized. Always ask for a separate, itemized receipt to make tracking easy.
Are Company Parties and Client Events Deductible?
There are a few exceptions where you can deduct 100% of food and beverage costs. This rule primarily applies to company-wide employee events, like a holiday party or summer picnic. Since these events are for the benefit of your employees, they are considered a fully deductible expense, not client entertainment. This is a great way to build team morale while taking a full tax deduction. Proper tracking is a key part of your overall business accounting & management strategy.
How to Maximize Your Business Deductions (Legally)
Knowing which expenses to deduct is the key to lowering your taxable income. For your deduction to count, the IRS requires it to be both “ordinary” (common for a business like yours) and “necessary” (helpful and appropriate for your work). This doesn’t mean an expense has to be indispensable, just that it should be a reasonable cost to incur while running your business. Let’s break down some of the most significant categories for entertainment professionals.
Can You Deduct Venue and Equipment Rentals?
Whether you’re renting a theater for a performance, a studio for a photoshoot, or sound equipment for a gig, these costs are generally deductible. This category also includes the gear you buy or lease, like cameras, lighting, computers, and specialized software. The key is to maintain meticulous records that prove these expenses are directly tied to your business activities. Proper business accounting and management will ensure you have the documentation to back up every claim, making tax time much smoother and less stressful.
Don’t Forget Marketing and Professional Services
Getting the word out about your work is essential, and thankfully, most of those costs are deductible. Expenses for advertising, creating and maintaining your website, running social media campaigns, and even printing headshots or business cards can be written off. Don’t forget about the professional services you rely on to run your business. Fees paid to agents, managers, lawyers, and publicists are all deductible. The same goes for the cost of professional business tax planning, which helps you save money in the long run.
How to Claim Travel for Business Events
If you travel for work, you can deduct many of the associated costs. This includes transportation expenses like airfare or car mileage, lodging, and even baggage fees. When you’re on a business trip, your meals are typically 50% deductible. Just be sure the primary purpose of the trip is for business. If you fly to New York for a week of auditions but spend a few days sightseeing, you can only deduct the costs from your business-related days. Keep your itinerary and receipts organized to clearly separate personal and professional expenses.
Vehicle Expenses: Standard Mileage vs. Actual Costs
When you use your car for business travel, you have two options for claiming expenses: the standard mileage rate or the actual cost method. The standard mileage rate is the most straightforward approach; you simply track your business miles and multiply that total by the annual rate set by the IRS. The actual expense method requires more detailed tracking, as you’ll add up all your vehicle-related costs, including gas, insurance, maintenance, and even depreciation. The best choice often depends on the value of your car and how many miles you drive. No matter which method you use, keeping a meticulous mileage log is essential to substantiate your claims.
Deductible Travel Fees vs. Non-Deductible Fines
While you can deduct most legitimate travel costs, it’s critical to know where the IRS draws the line. Your airfare, lodging, and 50% of your meal costs are typically deductible. However, fines and penalties are never considered a business expense. This means that parking ticket you got while running late to a meeting or the speeding ticket from a cross-country drive are not write-offs. This is a non-negotiable rule, and confusing these costs can lead to disallowed deductions and other complications. If you do receive a letter from the IRS, having professional tax notice & audit representation can help you address the issue correctly.
Using Per Diem Rates to Simplify Travel Expenses
If tracking every coffee and sandwich on a business trip sounds exhausting, you might prefer using per diem rates. This method allows you to claim a fixed daily allowance for your lodging, meals, and incidental expenses instead of keeping every single receipt. The rates are set by the government and vary depending on where you travel. For frequent travelers, this can be a massive time-saver that simplifies record-keeping while ensuring you still capture your deductions. Incorporating per diem rates can be a smart move in your overall business tax planning, helping you stay organized and compliant without the headache of tracking minor expenses.
Are Employee Perks and Benefits Deductible?
While client entertainment is no longer deductible, expenses for employee events are a different story. The cost of a company holiday party or a summer picnic for your team is 100% deductible. Some business meals can also be fully deducted, such as those provided for the convenience of the employer on business premises or meals that are included as taxable compensation for an employee. Understanding the nuances between 50% and 100% deductible expenses is crucial for compliance and making the most of your available write-offs.
Look for These Industry-Specific Deductions
The entertainment industry has a host of unique expenses that may be deductible. This can include everything from costumes and stage makeup to union dues and subscriptions to trade publications. You might also be able to deduct the cost of tickets to films or shows if you can prove it’s for research directly related to your work. Because these deductions can be specific, it’s important to know what applies to you. Getting it right helps you keep more of your earnings and reduces the risk of facing an IRS inquiry or needing audit representation down the line.
Using the De Minimis Safe Harbor for Small Purchases
Tracking depreciation for every small piece of equipment you buy can be a major bookkeeping headache. Thankfully, the IRS offers a shortcut called the De Minimis Safe Harbor. This rule allows you to immediately deduct the full cost of inexpensive items in the year you purchase them, rather than depreciating them over several years. For most businesses, this applies to any single item or invoice up to $2,500. This means you can write off the entire cost of a new laptop, office furniture, or small piece of equipment right away, simplifying your records and potentially lowering your current year’s tax bill. The key is that you must have a formal accounting policy in place at the beginning of the year stating you will use this safe harbor. Setting this up correctly is a fundamental part of effective business tax planning and ensures you can confidently apply this rule to your purchases.
Plan Ahead: Smart Tax Strategies for Your Business
Being proactive with your finances is the best way to handle your tax obligations without the stress. Instead of scrambling when the tax deadline looms, a year-round strategy helps you make informed decisions that can lower your tax bill and keep your business financially healthy. This means looking beyond just recording expenses and thinking about the timing of your income and deductions, understanding when to call in an expert, and knowing which common errors to sidestep. A smart approach to taxes isn’t about finding loopholes; it’s about understanding the rules and making them work for you throughout the year.
Effective business tax planning involves a bit of foresight. For instance, if you know you’re approaching a higher tax bracket, you might decide to push certain expenses into the current year to lower your taxable income. On the other hand, if you anticipate a more profitable year ahead, you might defer some deductions to offset that higher income. It’s all about creating a plan that aligns with your business goals and the realities of the tax code. With a solid strategy, you can feel confident that you’re not leaving money on the table or opening yourself up to unnecessary risk.
Why Timing Your Deductions Matters
Timing is everything, especially when it comes to your deductions. By strategically deciding when to incur and pay for expenses, you can influence your taxable income for a given year. For example, if you know a big project is coming up, you might purchase necessary supplies or equipment before the end of the year to claim the deduction sooner. The IRS encourages businesses to plan ahead to take full advantage of available benefits. This could mean paying for a business conference in December for a February event or stocking up on office supplies. Thoughtful timing allows you to manage your tax liability and improve your cash flow.
Do You Need to Hire a Tax Professional?
While it’s tempting to handle everything yourself, the complexities of tax law make a strong case for professional help. Tax codes, especially those around meals and entertainment, can be tricky. Rather than guessing what’s deductible, working with an accountant ensures you stay within IRS guidelines while still making the most of every legitimate deduction. A tax professional can offer personalized advice, identify deductions you might have missed, and help you structure your finances for long-term success. Think of it as an investment in your peace of mind and your business’s financial future.
Common (and Costly) Deduction Mistakes to Avoid
A few common missteps can cause major headaches for business owners. One of the biggest is assuming that any work-related entertainment is automatically tax-deductible. This misunderstanding can lead to disallowed expenses and an unexpected tax bill. Another frequent mistake is mixing business and personal finances. The cleanest way to avoid this is by opening a separate bank account and credit card specifically for your business. This not only simplifies bookkeeping but also creates a clear, defensible record of your business expenses if you’re ever questioned.
Understanding IRS “Red Flags” Like Sports Tickets
Trying to write off tickets to a sporting event or concert is one of the quickest ways to get the IRS’s attention, and not in a good way. Since the tax laws changed, the deduction for entertainment expenses has been completely eliminated. Claiming a deduction for sports tickets signals to the IRS that you may not be current on the rules, which could prompt them to look closer at your entire return. If an activity’s main purpose is amusement or recreation, it simply doesn’t qualify as a deductible expense. Misunderstanding this can lead to disallowed expenses and an unexpected tax bill, potentially requiring professional audit representation to resolve the issue.
How to Stay Audit-Ready, Just in Case
Staying organized is your best defense against tax-time stress and potential audits. Always keep detailed records of your expenses. For every business meal or event, your documentation should include the cost, date, location, the business purpose, and who attended. You need to show more than a vague hope of getting a business benefit; your records should prove a substantial business discussion took place. Should you ever face a review, having this information readily available makes the process much smoother. Professional audit representation can also provide critical support if you receive a notice from the IRS.
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Frequently Asked Questions
So, can I no longer deduct tickets to a game or concert with a client? That’s correct. Since the tax law changes in 2017, expenses for activities considered amusement or recreation are no longer deductible. This includes things like tickets to sporting events, concerts, or golf outings, even if you spend the entire time discussing business with a client. The IRS now makes a very clear distinction between deductible business meals and non-deductible entertainment.
Are there any situations where I can deduct 100% of a meal’s cost? Yes, there are a few specific cases where you can. The most common example is when the expense is for an event for your employees, like a company-wide holiday party or a summer picnic. These events are considered fully deductible because they benefit your team. Food and drinks you provide to your staff at your place of business, like coffee and snacks in the breakroom, are also 100% deductible.
What’s the bare minimum I need to write down for a business meal to be deductible? To properly document a business meal, you need more than just a receipt. For each expense, you should record the cost, the date and location of the meal, the specific business topics you discussed, and the names and business relationships of everyone who attended. This creates a clear record that proves the meal had a substantial business purpose, which is exactly what the IRS looks for.
What happens if food is included with an entertainment event, like in a suite at a stadium? This is a tricky area, but the rule is straightforward. You can deduct 50% of the cost of the food and beverages, but only if the cost is stated separately from the entertainment on the invoice. If the ticket price includes the food and drink as a single, bundled cost, then you generally cannot deduct any of it. It’s always a good idea to ask for an itemized receipt in these situations.
My record-keeping isn’t perfect. Is it too late to get things in order for tax season? It’s never too late to start building better habits. The best first step is to gather all the documentation you have and organize it as clearly as possible. Working with a tax professional can help you make sense of your records, identify all the legitimate deductions you can still claim, and set up a simple system to make tracking your expenses effortless going forward.
The Consequences of an Audit
An audit is more than just an inconvenience; it can have serious financial repercussions. Misunderstanding these rules can lead to disallowed expenses, an unexpected tax bill, and compliance headaches you just don’t need. If the IRS determines your write-offs aren’t legitimate, you’ll have to pay back the taxes you thought you saved, plus interest and penalties that can add up quickly. The process itself can be time-consuming and stressful, pulling your focus away from running your business. Having a professional on your side can make all the difference, which is why having access to professional audit representation is so valuable for peace of mind.
What’s Changing for Deductions in 2026?
Tax laws are always evolving, and it’s important to look ahead. The rules for deductions changed significantly with the Tax Cuts and Jobs Act (TCJA) of 2017, which eliminated the deduction for most entertainment expenses. While that change appears permanent, many other TCJA provisions affecting individuals and small businesses are set to expire at the end of 2025. This means tax rates and other key deductions could shift again. Staying informed and working with a professional on proactive business tax planning is the best way to prepare your business for whatever changes may come, ensuring you’re always in the best possible financial position.