This Deduction will make your Business Taxes go UP
“Dude, you should buy box seats to the Avs game with your business account and take me. It’s a business expense!”
Stop. Put the credit card down.
First, I apologize for assuming that people who watch the Colorado Avalanche refer to people as “dude.” But it’s hockey, so it seems fair.
Now on to the real issue: Entertainment Business Expenses
Entertainment: Deduction No Longer
Box seats and court side seats used to be the stuff of corporate dreams. I even got to sit in one once when I worked for a big one.
The formula makes sense: something you love + something your client loves + 50% Meals & Entertainment tax deduction = a whole lot of love. Assuming, of course, business was discussed at the game (did you see how Burakovsky got hit in the face with the puck! That’s like how you’ll get hit in the face by the competition if you don’t use our services!)
Thanks to the Trump era tax reform, entertainment is no longer deductible.
That means no deduction for sports tickets (the most common type of business entertainment). That means no Opera or art shows or Disneyland trips paid for out of your business account partially covered by the IRS’s reduced bill.
Should the Indiepreneur Skip Entertainment?
Does something not being deductible mean your business shouldn’t expense it?
Of course not!
Many people get caught in the idea of deductibility. That’s the wrong way to think about it! The first question you need to ask if the expense is important to your business. If the answer is yes, figure out deductions later. I’ll touch on this a lot more in a later post.
This is how your Entertainment expense should work, too. Will you only land this client because you take them to a game? Or take them to Hamilton? Do you need to take them to the Monet exhibit?
SIDE NOTE: If you buy food while enjoying the entertainment, that still falls under the 50% Meals deduction. Just note that the meals purchase needs to be a separate purchase from the entertainment, or clearly broken out on your ticket.
