Julian Block for AccountingWeb writes: It's common knowledge that there's a cap on deductions for business meals and entertainment: Winers and diners get to deduct only 50 percent of their expenses. But it can be a little unclear about what is and is not included in the 50 percent category. For example, besides meal and entertainment charges, expenses subject to the ceiling include meal- or entertainment-related taxes and tips, cover charges for night club admissions, room rentals for dinners or cocktail parties and parking at sports arenas.
However, transportation to and from business meals, such as cab fares to restaurants or theaters, is not subject to the limit.
For instance, the charge for a business meal comes to $100, comprising $80 for food and beverages, $6 for sales taxes and $14 for tips. The limit on the deduction is $50, half of $100. However, cab fare to the restaurant of $10, including tip, is 100 percent deductible.
But what about using your home to entertain clients, customers, or other business associates? That's permissible, but whether you have at-home gatherings to keep clients or woo new ones, you should be up to date on stringent rules for business-entertainment deductions.
Like other kinds of meals and entertaining, home entertaining has to satisfy either of two requirements: It must be "directly related" or "associated with" the active conduct of business; and there has to be a substantial and bona fide business discussion directly before, during, or after the dining or entertaining. However, IRS regulations make an important exception when you're host to business guests from out of town: They allow you to deduct entertaining that takes place the day before or after the business discussion.
Even though the event takes place in your home, you don't have to limit your write-offs to modest home-cooked meals for yourself and your business guests. It's still possible to host catered affairs at your home before or after business discussions, invite a few friends, and deduct 50 percent of your qualifying expenditures. [snip]. The article continues @ AccountingWeb.com, click here to continue reading.
About the author:
Julian Block writes and practices law in Larchmont, New York, and was formerly with the IRS as a special agent (criminal investigator) and an attorney. More on this topic is available from " Julian Block's Year Round Tax Strategies," available for Kindle at Amazon.com and as a print copy at julianblocktaxexpert.com.
Julian Block writes and practices law in Larchmont, New York, and was formerly with the IRS as a special agent (criminal investigator) and an attorney. More on this topic is available from " Julian Block's Year Round Tax Strategies," available for Kindle at Amazon.com and as a print copy at julianblocktaxexpert.com.
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