Is Client Entertainment Tax Deductible? Usually, No

If you regularly have to entertain clients for work (for example, maybe you enjoy taking your prospects golfing), you likely want to know: Is client entertainment tax deductible?

The short answer is no, most entertainment expenses aren't deductible anymore. That said, there are exceptions that can still save you quite a lot of money.

The Tax Cuts and Jobs Act of 2017 eliminated most entertainment deductions, but meals and certain events still qualify under the right circumstances. Here's everything you need to know!

Can I Claim Client Entertainment as a Business Expense?

Usually, no. The Tax Cuts and Jobs Act changed the rules in 2017 and 2018, eliminating entertainment deductions that many business owners used in the past.

Before, you could deduct 50% of entertainment expenses if they had a business purpose. For example, taking a client to a baseball game or buying them concert tickets was deductible.

The IRS allowed these write-offs as long as you could show that the entertainment was directly related to your business.

That's gone now, and entertainment expenses are no longer deductible.

Sporting events, concerts, theater performances, golf outings, shows, amusement parks, and any similar activity meant for entertainment or recreation count as entertainment under the new rules.

Basically, if you're buying tickets to something fun, it's not deductible.

The IRS made this change because entertainment deductions were being abused. Too many business owners were writing off personal entertainment by claiming that it had a business purpose.

Proving that a conversation at a football game truly involved business was nearly impossible to verify, so the IRS eliminated the deduction because there wasn't a good way to check its legitimacy. 

But while entertainment expenses are out, food and beverage expenses are still deductible, and this is where many of the exceptions come in.

Let's take a closer look at meal expenses and other legal tax loopholes for small business owners:

Are There Any Entertainment Expenses That ARE Deductible?

Yes, but you need to separate what you're deducting. The entertainment isn't deductible, but certain related expenses still qualify.

Meals During Entertainment

Meals can be deductible if the food and beverage costs are stated separately on your receipt.

For example, if you attend a sporting event with a client, the $100 ticket isn't deductible. But if you buy $40 worth of hot dogs, drinks, and nachos at the stadium, and the receipt shows that food cost separately from the ticket, you can deduct 50% of the $40 ($20 deduction).

The IRS treats meal costs as a business meal expense, even though it happened during entertainment.

Business Meals Without Entertainment

Business meals are 50% deductible. If you're taking a client to dinner at a restaurant to discuss a project, that's a pretty straightforward business meal.

You can deduct 50% of the cost as long as it has a legitimate business purpose and you document who attended and what you discussed.

Learn more about writing off alcohol as a business expense.

Recreation Expenses for All Employees

If you host a company-wide holiday party, summer picnic, or team-building event that's open to all employees, the expenses are 100% deductible. But it must benefit your entire workforce and not just a select group of clients or executives.

In other words, taking three clients for a private event isn't deductible, but throwing your annual company barbecue with food, drinks, and activities for everyone is fully deductible.

Marketing and Promotional Events

You can usually deduct these kinds of events as advertising expenses, not entertainment, if they're open to the general public.

For example, if you're sponsoring a community event where you're promoting your business to potential customers, those costs fall under marketing and not entertainment expenses.

In other words, events that serve a clear business function, such as employee morale or legitimate business discussions over meals, can still qualify for deductions.

But pure entertainment for the sake of entertaining clients doesn't get you any tax savings anymore.

When Client Entertainment Is NOT Deductible

Most entertainment expenses don't qualify for any entertainment tax deductions, even if you're with a client and even if you discuss business.

Here are entertainment expenses that you can't deduct:

• Sporting event tickets: Basketball, baseball, football, hockey, and all other sporting event tickets are non-deductible, even when you're with a client.

• Concert, theater, and show tickets: Taking a client to a Broadway show or concert doesn't qualify for any deduction.

• Golf outings: Greens fees, cart rentals, and club memberships used for client entertainment aren't deductible (but you can deduct 50% of separately itemized clubhouse meals).

• Entertainment venues: Comedy clubs, amusement parks, bowling alleys, and casinos are non-deductible entertainment expenses.

• Skybox or luxury suite rentals: Stadium and arena skybox rentals aren't deductible, even when you're hosting clients.

• Country club memberships: Memberships used for entertaining clients are personal expenses with no business deduction.

For example, you may pay $5,000 for a skybox at a football stadium for a season and use it exclusively to entertain clients. You bring different clients to every game, discuss business, and build relationships, but the $5,000 is non-deductible. The IRS still sees it as just entertainment.

How to Handle Mixed Meals and Entertainment Expenses

Entertainment and meals often happen together, so what do you do then? This is when receipts become very important.

If the costs are separated, you can deduct 50% of the meal portion, but if everything is bundled into one price, then you lose the deduction.

For example, you pay $150 for greens fees and $60 for clubhouse lunch. A receipt showing "$150 - Golf" and "$60 - Lunch" as separate lines lets you deduct $30 (50% of lunch). A receipt showing "$210 - Golf Package" with no breakdown means zero deduction.

Learn more about how to categorize receipts for taxes as a small business owner.

What You Need to Claim Deductible Entertainment Expenses

You won't be able to qualify for any deductible meal expenses and other entertainment-related expenses without clear documentation. 

Here's what you need:

• Itemized receipts: You need receipts breaking down tickets versus food and beverages.

• Attendee information: Write who attended and their business relationship on the receipt or in a separate log.

• Business purpose: Note what you discussed, like "Reviewed contract terms."

• Separate accounting categories: Track "business meals" (50% deductible) and "entertainment" (not deductible) as different categories.

It's also important to keep all your receipts, notes, and records for at least three years in case of an audit.

So, Is Client Entertainment Tax Deductible?

In most cases, client entertainment expenses are not deductible.

The Tax Cuts and Jobs Act eliminated these deductions, but there are still entertainment-related expenses you can deduct, such as business meals that happen with entertainment (if properly itemized) and company-wide employee events.

If you want to be able to take advantage of meals and other deductible expenses, you'll need to pay a lot of attention to details because mixed expenses like that are easy to mess up. You need to know how to properly document everything and structure expenses.

A tax professional helps you navigate these rules, maximize the deductions you qualify for, and avoid mistakes that trigger audits or penalties.

Learn more about our tax services or schedule a consultation with our team to create a unique strategy for your business!