Deducting Your Entertainment Costs
How much is it legal to deduct?
On the entertainment side, tax law allows you to deduct 50 percent of meals and entertainment expenses that are business-related. To qualify, you must be able to show that the expense directly preceded or followed a substantial, bona fide business discussion or that it's directly related to the active conduct of your trade or business. You must keep good records, which include a receipt for any expenditure of $75 or more. Holiday parties, picnics and other social events you put on for your employees and their families are an exception to the 50 percent rule. Such events are 100-percent deductible.
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