Don’t play fast & loose when claiming entertainment deductions

Football season is right around the corner, and millions of fans (fanatics in many cases) can hardly wait to attend NFL games to root for one of 32 teams - Go Eagles! 

But the cost to attend an NFL game can be steep.  For example, a family of four would pay almost $700 for tickets to a San Francisco 49ers game.  

That’s what makes season ticket purchases a solid business investment. Business owners can give tickets as gifts for clients and employees. This is a great way to firm up a relationship with a client or reward a high performing employee. It may also count as a tax deduction. 

Sports ticket purchases can be considered entertainment expenses, but there are some rules everyone must follow for game day.  According to IRS Publication 463 (Travel, Entertainment, Gift, and Car Expenses), a business can deduct ordinary and necessary expenses to entertain a client, customer, or employee if the expenses meet the business-related sniff test.  Ordinary expenses are those that are common and accepted in your trade or business; necessary expenses are those that are “helpful and appropriate.” Here’s a brief chart with some game day related deductions.

50% Limit  

  • Cover charges for admission to a sporting event 
  • Sports arena parking expenses  

100% Limit  

  • Some transportation costs to and from a business meal or entertainment activity 
  • Employer-provided social/recreational expenses primarily for the benefit of employees who are not highly compensated, such as a summer picnic or holiday party 
  • Business gifts (up to $25) to any one individual per tax year 
  • Tickets to charitable fundraising sports event    

Nondeductible Items  

  • Ticket price for sporting event that you  do not attend 
  • Lunch with customer, client or employee without a business purpose/discussion 
  • Lavish or extravagant entertainment expenses   

If a recent poll by Harris is any guidance, most of us will be watching the NFL every Sunday as it has twice the popularity of Major League Baseball for the 30th year in the row.  Who are you rooting for this season?