Deducting Entertainment Expenses

Deducting Entertainment Expenses

Deducting Entertainment Expenses - Expenses for entertaining clients, customers or employees may be deducted if they are both ordinary and necessary and meet one of the following tests:

Deducting Entertainment and Related Expenses

Directly-related test:

  • The main purpose of the entertainment activity is the conduct of business, business was actually conducted during the activity and the taxpayer had more than a general expectation of getting income or some other specific business benefit at some future time.

  • Associated test: The entertainment was associated with the active conduct of the taxpayer’s trade or business and occurred directly before or after a substantial business discussion.

Publication 463 provides more extensive explanation of these tests as well as other limitations and requirements for deducting entertainment expenses. See below.


Deducting Entertainment Expenses