|Tax Topic #512
||2008 Tax Year
Topic 512 - Business Entertainment Expenses
Entertainment expenses that are both ordinary and necessary in carrying
on a trade or business may be deductible if they meet one of the two tests
discussed in Publication 463.
You must have records to prove the business purpose (under the applicable
test) and the amount of each expense, the date and place of the entertainment,
and the business relationship of the persons entertained. For further information
on record keeping, refer to Topic 305.
Generally, only 50% of food and beverage ("meal") and entertainment expenses
are allowed as a deduction. For exceptions to the 50% limitation, refer to Publication 463, Travel, Entertainment, Gift and Car Expenses.
If you are an employee whose deductible business entertainment expenses
are fully sustained and reimbursed under an accountable plan, the reimbursement
should not be included in your wages on Form W-2 (PDF) and
you should not deduct the expenses. If you are not reimbursed fully under
an accountable plan, your expenses exceed the reimbursement you received under
an accountable plan, or you are not reimbursed at all, use Form 2106 (PDF), or Form 2106-EZ (PDF) to report
business entertainment expenses. These expenses, including expenses that exceed
the reimbursement under an accountable plan, are carried over to Form 1040, Schedule A (PDF), and are generally subject
to the 2% of adjusted gross income limit. Refer to Topic 508 for
more information on the 2% limit, Topic 305 for more information
on record keeping requirements, and Publication 463 for a
definition of accountable and nonaccountable plans.
If you are self–employed, use Form 1040, Schedule C (PDF),
or Form 1040, Schedule C-EZ (PDF), or if you
are a farmer, use Form 1040, Schedule F (PDF) to
deduct these expenses.
For more information on meal or entertainment expenses, refer to Publication
Page Last Reviewed or Updated: December 22, 2008
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