Larry, Are parties in the home for my employees (Employee Appreciation events like BBQ's, Christmas Parties, etc.) deductible as entertainment expenses? If so, at what percentage? Should I track these costs under Entertainment Expense or Meals Expense? What about gifts given to employees at something like a Christmas party? Oh, you might need to know that I'm a Sole Proprietor. Thanks! David
David, Okay, here is the deal. Since you are a sole proprietor you need to determine what the fair value of your home is to rent out for one day. You can document this by checking with a hotel or other venue that rents space. You can then have the business write you a check for that amount. This expense will be deductible to the business but, since you are renting out your home for less than 14 days, it is considered deminimus (big word for small) therefore it is not taxable to you. I would always try to be on the high side of reasonable.
Regarding all of the food and beverages, again have the business purchase. Since this is a company wide event, such as a party or picnic, the entire amount is deductible. It is not subject to the 50% limit for meals and entertainment. Enjoy the leftovers.
Finally, document the event with a written list of who is there. Pictures also serve as good documentation.
It is a pleasure serving you.
Larry Kopsa CPA
