Question: What kind of deductions can result from taking business clients out?
Answer: Entertainment is deductible only if you discuss business before, during or after the event, said Phyllis Burlage, a certified public accountant and member of the Maryland Society of Accountants. “There are no rules saying how long the discussion must be, but there has to be business talk,” she said.
You have to have a clear reason to expect income or some other business benefit from the person you are entertaining.
“So if you go to the concert with your customer, and talk business during intermission, the ticket can only be deducted as entertainment expense,” Burlage said.
Taking a customer out for dinner or drinks ? but skipping the concert ? means you can take the deduction either as a business gift or entertainment.
“If all you do is give your customer the tickets, then you could only take a gift deduction,” she said.
Burlage said the reason the distinction matters is that gifts are completely deductible but limited to $25 per year, and entertainment is 50 percent deductible, if the discussion requirement is met.
