Business meals and entertainment can be deducted (generally 50% limit applies) if strict rules are followed.
Strategy: The Sandwich Technique
To deduct entertainment expenses (like golf, theatre, or sporting events), the entertainment must strictly be "associated with" the active conduct of your trade or business. This means the entertainment must directly precede or follow a substantial and bona fide business discussion.
By scheduling a business meal before or after the entertainment event where you discuss specific business matters, you can often justify the deduction for both the meal and the entertainment.
Documentation is Key
You must record:
- The amount of each expense.
- The date.
- The name and location of the place.
- The business purpose.
- The business relationship of the persons entertained.