My latest article for WomenEntrepreneur.com has been published. Read on where I discuss the tax benefits of a seasonal office party. You can get a valuable tax deduction by showing your appreciation for clients, customers, and employees this holiday season.
Holiday Parties
Who doesn't love a party? Holiday office parties are a fantastic way to show your employees you appreciate them. Showing appreciation for the people you work with every day is especially crucial during challenging economic times. And with holiday bonus checks shrinking every year, a holiday party is a nice alternative. Let me get to the best part: The cost of throwing parties for your employees is 100 percent deductible. The food, the beverages, the decorations -- all those expenses can be deducted. The only caveats: The expenses must not be overly extravagant (e.g., champagne, caviar and lobster for a holiday luncheon), and the parties must be infrequent (weekly parties are likely to raise an eyebrow or two at the IRS and could invite an audit).
Another common business practice is hosting holiday events for clients. Some choose to throw one big party; others opt to take individual clients out for a meal. Either way, when you entertain clients and potential clients, the tax benefit is the same: You may deduct 50 percent of the cost. The requirements here are that the expenses not be extravagant, and business must be discussed or conducted either during or adjacent to the meal (e.g., going out to dinner after a meeting).
Gift Giving
Many business owners reward their employees with small gifts, tokens of appreciation at the holidays. These can be part of a holiday party or a stand-alone gift. The key here is to keep the value of these gifts in a reasonable range or, as the IRS says, "of nominal value." Doing so allows you to give these gifts and claim deductions for nonwage work business expenses. Even better, these "de minimis" gifts are not subject to the standard 50 percent deduction limit that usually applies to meal and entertainment expenses.