Deductions for Business Meals and Entertainment: The 50% Rule
In most cases, you can deduct no more than 50% of certain unreimbursed business-related meals and entertainment expenses on your income tax return. This limit applies to employees or their employers, and to the self-employed.
However, you may be able to deduct more than 50% of an expense if it meets one of the following exceptions:
- Your employer reimburses you for the expense under an accountable plan
- Your business entails the sales of meals or a form of entertainment
- The expense is for a charitable sporting event
- The expense is for advertising
- You are self-employed
If you are self-employed, you may be exempt from the 50% limit if:
- Your expenses are because you are an independent contractor
- Your client reimburses you for your expenses
- You provide adequate records of these expenses to your customer or client
You must meet all three of these requirements in order to be exempt from the 50% limit rule.
Usually, you cannot deduct more than the face value of a ticket that you claim as an entertainment expense. You cannot deduct service fees or any amount over the face value that you may have paid a scalper.
However, if the ticket is for a sports event that benefits a charitable organization, you may consider the full cost of the ticket, even if it is more than face value, if:
- The event’s main purpose is to benefit a qualified charitable organization
- Entire net proceeds go to the charity
- The event uses volunteers to perform substantially all the event’s work