Writing Off Entertainment Expenses

By Sandy Botkin

Now that some of you have shelled out at least $2,000 or more for those Super Bowl seats (which means you have more money than sense), it would be a lot better in the future if you could at least write off that expense. Tax law in both the U.S. and Canada allows a deduction for associated entertainment. What is "associated entertainment" you ask? Good question. Associated entertainment means fun! You can write off fun such as Super Bowl tickets if you discuss business with a prospect who you go to the fun with, within 24 hours of the fun! However, it can't be at the fun event. It has to be during some quiet time. Thus, if you talk business with a friend or distributor in the morning and then go to the game or to a play or play golf, the fun can be deducted at 50% in both the U.S. and Canada, although Canadians can't deduct green fees. The key is that you have the burden of proof that you discussed business within the same 24-hour day as the fun.

The next question is, "How do you do this?" The answer is that EVERYONE should have a tax tracker such as Taxbot (which can be gotten at www.taxbot.com and typing in the coupon code "save50" to get it at 50% off) that contains all of the required questions for both IRS and CRA. Thus, you would need to show: who was entertained, what was discussed in some specificity, when the business discussion took place, where the business discussion took place, how much was spent, and what type of entertainment was involved. Doing this in a tax tracker will make you audit proof, give you peace of mind of not having to worry about an audit, and make your life less taxing.

Material derived from my book, "Lower Your Taxes - Big Time" and my audio and video series, "Tax Strategies for Business Professionals."