Summer Entertainment Deductions

Summer's almost here, and you're probably looking forward to some summer entertaining. So today we'll review the rules for making the most of your summer fun expenses.
Meals and entertainment you host in the course of your business are deductible if they're directly related to the active conduct of your business or they take place directly before or after a substantial, bona fide discussion directly related to the active conduct of your business. That means, clients, customers, or patients; prospective clients, customers or patients; referral sources; and other business relationships (vendors, professional colleagues, etc.).
The general rule is that you can deduct 50% of most meals. Specific deductions include meals, drinks, taxes and tips. Now for the fine print:
You'll need a diary, day planner, or similar log to verify your deductions. IRS Publication 463 directs you to record the cost of the meal, date of the meal, establishment where the meal takes place, the business purpose for the expense (or business benefit you gain or expect to gain from the meal), and your business relationship with your guest.
You'll need receipts for expenses over $75. (Many clients mistakenly think they have to keep receipts for expenses over $25.) Credit card statements work if you corroborate them by recording the business purpose of the expense in your business diary.
You can't deduct meals with your spouse unless you're traveling together for business. However, you can include the cost of a spouse or other "closely connected" person (such as children or parents) if your guest brings their spouse.
Too many clients forget the cost of entertaining at home! You can deduct costs for small gatherings at your home under the same rules that apply when you go out to eat. If you invite more than 12 guests, you can deduct "reasonable" costs if your primary purpose is business. To prove your primary purpose is business, include your employees; let your guests know your business purpose; and discuss or display your product or service at the event.
Expenses for sporting and theatrical events, golf and boating outings, and similar entertainment are also 50% deductible if they take place directly before or after a substantial, bona fide discussion directly related to the active conduct of your business. You can deduct the face value of tickets (but not a scalper's premium) to sporting and theatrical events, food and beverages, travel and parking expenses, taxes, and tips.
Meal and entertainment expenses are easy to overlook -- especially when it comes to entertaining at home. But over time, those little expenses add up. Don't lose out on those easy savings!