Starting Your Business/Keeping Records
What are Business Expenses
Entertainment

You may be able to deduct business-related entertainment expensesyou have for entertaining a client, customer, or employee.

Zimmer mit Fruhstuck KastrupTo be deductible, the expense must be both ordinary and necessary.An ordinary expense is one that is common and accepted in your field of business, trade,or profession. A necessary expense is one that is helpful and appropriate for yourbusiness. An expense does not have to be indispensable to be considered necessary.

In addition, the entertainment expense must meet one of two tests:

1. Directly-related test, or

2. Associated test.

ERROR MSGEven if you meet all the requirements for claiming a deduction forentertainment expenses, the amount you can deduct may be limited. Generally, you candeduct only 50% of your unreimbursed entertainment expenses.

To meet the directly-related test, you must show that the mainpurpose of the combined business and entertainment was the active conduct of business, youdid engage in business with the person during the entertainment period, and you had morethan a general expectation of getting income or some other specific business benefit atsome future time.

discount hotels in BrusselsTo meet the associated test, you must show that the entertainment isassociated with your trade or business, and directly precedes or follows a substantialbusiness discussion.

hotels CordobaTable 2 When areEntertainment Expenses Deductible?

Important References:

Publication 463       Travel, Entertainment, Gift, and Car Expenses