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Tax breaks: Bait and switch
As a businessperson, cultivating good relationships with clients is critical. Thank goodness you can deduct all those business meals and entertainment costs.
Not so fast, Mr. or Ms. Entrepreneur. This seemingly helpful tax break is full of requirements.
The major tax-deduction hurdle is that you and your business client can’t just enjoy your dinner or lunch or the big game. You and your guest must talk business. You don’t have to necessarily ruin the event; the work-related discussion can be before or after you eat or the kickoff. But it has to be directly related to the running of your trade or business.
Also, don’t go overboard. If you take your business client to that posh new eatery, the Internal Revenue Service could deem the expense lavish and disallow at least part of the expense.
But the biggest tax-break switch here is that even when you do follow the IRS meals and entertainment rules, you can only write off half of these costs. That’s right. Only 50 percent of these business expenses are deductible.