By Howard Scott. Many business-related meals or entertainment expenses are fully or partially deductible. For example, if you take a client out to lunch and talk business, the meal is 50% deductible. The same is true if you buy tickets for a sports event for your subcontractors or buy your hardworking crew a pizza. The test is whether the expense will help your business in some way. If it will win clients, motivate employees, or maintain business relationships, it's 50% deductible. This also applies to dues to organizations that may help your business but not to dues to country clubs, social clubs, and athletic clubs.
A similar rule allows you to deduct up to $25 per client per year for gifts. When deciding between the $25 gift rule and the 50% entertainment rule, choose the rule that maximizes deductions. --Howard Scott is a business writer and small business tax preparer in Pembroke, Mass.