Running a business is never just limited to work and the office or factory/shop floor. There is so much more that keeps it going – especially when it comes to keeping employees motivated and happy, keeping clients and customers satisfied, and coming back for your products/services. A major part of this includes entertainment and hosting meals.
But are these expenses part of the cost of your business? Can you claim tax deductibles on these costs? How do you account for these expenses to make sure you can claim whatever deductible is possible? These are common questions that every business owner asks when it is a question of filing taxes. How much of an expense is tax-deductible largely depends on the nature of the expense and the circumstances under which the expense has occurred. Generally, meals are 50% deductible in circumstances where an employer and/or employee and a client are present and business is discussed. However, it must be noted that meals that qualify as extravagant cannot be deducted and personal outings for meals cannot be deducted.
In the case of entertainment expenses that can be deducted and those that do not qualify as deductible, again a lot of factors come into play. Tickets to sporting events and theatres no longer qualify as deductibles. The same also applies to tickets to charity shows and events. However, the expenses incurred in throwing holiday parties or other employee-related outings such as team building activities, office picnics, and so on are 100% tax-deductible. There is also the question of meals consumed during the entertainment event that should be taken into consideration. For instance, visiting the theatre with clients does not qualify as a deductible but any meals are taken from the theatre restaurant along with the client and treated as a business outing can be claimed.
There have also been some recent changes in the generally accepted deductibles during the pandemic years of 2021 and 2022, where certain meals and expenses which were only 50% deductible earlier are now 100% deductible.