Entertainment

Most people understand what a business meal is, but what is business entertainment? Entertainment can be a variety of things, from an opera to a concert or basketball game. Are these deductible? Yes under the same conditions as for meals. The entertainment has to be with other people, you have to discuss or conduct business and you are allowed to deduct 50% of the expense on your tax return. On your books it would be at 100%. However you going to the movies every weekend with your girlfriend or boyfriend does not count; so don’t try to pull that one. You also need to document in a calendar or other record who the event was with and for what purpose.

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Meals

Meals are considered a business expense under certain conditions. 1st, the meal you are having should be business related where your business is discussed and 2nd it should be with another person. This does not mean a meal with yourself; it has to be with another person. However, if you are traveling away on business then the meal is deductible even if you are only paying for yourself. If you are buying breakfast every morning at McDonalds for yourself that does not count as a business expense. That would be a personal expense. If you buy food for someone else, such as an employee or a client, then that is a business expense. The IRS only allows 50% of the expense to be deducted on your tax return in most cases, so consider that before spending on that lavish meal, it is not 100% deductible. For bookkeeping purposes it is. That is where there is a difference between company books and the tax return for yourself or the company.

There are some other classifications for meals that are expensed under other conditions for people who regularly travel as part of their job which I will not discuss here. However, if you fall under that category as a regular traveler, you will want to look into what is called per diem expenses.

Travel

Travel usually entails for most business owners, things such as going to a seminar or trade show in another city, like Las Vegas, the capital of trade shows. Travel expenses include car rentals, plane tickets, hotel charges, etc. You cannot deduct travel that you are taking for a personal vacation, even if you make phone calls to your business while you are away. The travel has to be for a business purpose. If you travel regularly for business such as sales calls to clients/customers out of town this may be a major expense category for you. Meals are expensed in its own category, not under travel.