You've just had the company holiday party and it was a big success. The caterer was top-notch, the DJ kept everyone dancing, and the open bar was flowing all night long. But as you wake up the next morning with a slight hangover, you start to wonder...can corporations deduct entertainment expenses?
The answer is complicated, but we'll do our best to explain it in layman's terms. In short, the answer is yes...and no. It depends on a few key factors, which we'll outline below.
What Kind of Entertainment Expenses Are We Talking About?
Before we get into whether or not corporations can deduct entertainment expenses, it's important to understand what kind of expenses we're talking about. For the purposes of this discussion, we're going to focus on three main types of entertainment expenses:
1. Business Meals: These are meals that are incurred while conducting business, such as a business lunch or dinner. Generally speaking, 50% of the cost of business meals can be deducted.
2. Business Entertainment: This includes expenses related to entertaining clients or potential clients, such as tickets to a ball game or show or paying the DJ. Generally speaking, 100% of business entertainment expenses can be deducted.
3. Personal Entertainment: This includes expenses related to entertaining employees, such as a company holiday party. Personal entertainment expenses are generally not deductible.
Whatever expenses you find you can deduct. If for any reason you were unhappy with your entertainment at the party, click here to book next year's entertainment.