Deducting Entertainment Expenses

By Sandy Botkin

Knowing when to discuss business and how to document it can make a HUGE difference as to whether you can deduct your golf game or costs for attending a sporting event such as a football game or even attending a play. To deduct fun activities such as tickets to a football game or golf costs, these are the overriding rules:

1. You have to discuss business during the same day as the activity, but it can't be during the fun activity; it has to be either before or after the fun in a business setting.
2. You document this correctly in a tax tracker, such as Taxbot.
3. You can usually only deduct 50% of the costs.

Golf is an expensive hobby. However, everything becomes a LOT less expensive when you get a deduction. Golf costs include green fees, guest fees, cart rental fees, tees, balls, gloves, depreciation of golf clubs and also beverages, snacks, lunches and dinners at the club. NOTE that you can deduct these costs even if you pay only for yourself and not for your prospect. However, paying for the other party and his or her spouse would also be deductible. Moreover, if you entertain another couple, you can bring your own spouse or significant friend and deduct their costs, too. Think about this. With the right knowledge, you can literally golf away your taxes. We really do have some great tax laws.

Also as noted above, you have to talk business on the same day as the fun activity either before or after the fun. The IRS will NOT accept that you had a business deduction while schmoozing with prospects on the golf course. Moreover, the business discussion has to be in a quiet conducive surrounding. This means that you need to take your prospect to a restaurant or quiet bar to discuss business without having a floor show or theatrical show interfering with your discussion.

The key is that you have the burden of proof to show that you met these rules. So here is what you need to write in your tracker:

* Names of people entertained.
* Where the entertainment took place.
* When the entertainment and business discussion occurred.
* Why you entertained these people. [You need to be specific. Simply saying prospect or good will in your tracker won't be good enough.]
* How much the entertainment cost.

Example: Marc and I play golf, where I probably frustrated both of us with my lack of talent. We then went to a restaurant to have dinner and discuss business, which I documented in my tracker. I would be able to deduct 50% of the golf costs and 50% of the dinner. However, if I simply discuss business between holes 12 and 13 and document it, I can't deduct the golf expenses. The key is that the business discussion must occur either before or after the fun activity in a quiet business setting.