The thrill of a live sports game is unmatched – the roar of the crowd, the excitement of a last-minute touchdown, and the smell of nachos. But, think twice before writing off season tickets on your taxes. The IRS has strict rules on what you can deduct as entertainment expenses. Figuring out if your season tickets are deductible can be as tough as a close game for a Dallas Cowboys fan.
Before, you could deduct 100% of restaurant meals in 2021 and 2022. But now, it’s only 50% from 2023 on. Taking clients to games doesn’t help with deductions either; those tickets don’t count. So, during the game, remember: entertainment expenses don’t help with your taxes.
For employees, it’s a different story. Holiday parties for employees are fully deductible. But, free tickets for business purposes can be tricky. Always keep good records of your business expenses. If you can’t prove them, you might have to pay back taxes, penalties, and interest – not a good outcome.
Key Takeaways
- Entertainment expenses, including sports tickets, are generally non-deductible.
- From 2023 onwards, meals purchased from restaurants for business are only 50% deductible.
- Holiday parties for employees remain 100% deductible.
- Keep thorough records to substantiate all claimed deductions.
- Employee fringe benefits can include non-taxable perks like gyms or retirement planning support.
Understanding the Basics of Entertainment Deductions
Exploring entertainment deductions can seem tough, but it’s key to understanding the IRS rules on season ticket deductions and the tax benefits of season tickets. Knowing the details helps you manage your taxes better and grasp the possible benefits.
The IRS and Entertainment Expenses
The IRS has strict rules for entertainment expenses, especially for businesses with season tickets. Before, all business meals and entertainment were fully deductible. But, the Tax Cuts and Jobs Act (TCJA) changed that. Now, only 50 percent of business meal costs can be deducted. Yet, entertainment related to sports events is no longer deductible.
It’s clear that traditional entertainment like concerts and golf games aren’t deductible from 2018 to 2023. But, office snacks and business meals are still 50 percent deductible. There was a full deduction for these from 2021-2022.
Changes with the Tax Cuts and Jobs Act
The TCJA brought many changes. Sources like Cain Watters noted that restaurant meal deductions were fully deductible before but not anymore. Now, meals for work travel, conferences, and meetings are only 50 percent deductible.
Also, the TCJA made it clear that using season tickets to entertain clients is no longer deductible. So, the tax benefits of season tickets mainly come from spending on employee events like company parties, which are fully deductible.
When are Season Tickets Tax Deductible?
Understanding season ticket tax deductions can greatly help your business’s finances. The IRS has clear rules to follow for these deductions. It’s key to keep detailed records and ensure the tickets are for business reasons to save more on taxes. Let’s look at what you need to know about deducting these tickets.
Business Use of Season Tickets
Season tickets are only deductible if they’re for business. This includes rewards for employees, team-building, or entertaining clients with serious talks. Mark E. Battersby says these costs are for promotions if they’re clearly tied to your business. The IRS lets you deduct 50% of these expenses if they meet their rules.
Documentation and Compliance
Keeping accurate records is crucial for deducting sports tickets on your taxes. You must detail the business reason, who went, and the event’s purpose. This proves the costs are for business, not fun. To figure out the cost per ticket, divide the total price by the number of events.
Employee Fringe Benefits
Think about how season tickets affect employee benefits. Sometimes, giving out a few tickets can be deducted as small gifts. But remember, not all season tickets are seen as gifts. The IRS is strict on what counts as a business meal versus entertainment. Only certain team-building activities might be fully deductible.