Praise the Lord and pass the hot wings, FOOTBALL season is here! And in the South you can’t have football without a Tailgate Party. But what if your next Tailgate could be a tax deduction?
Believe it or not, there are a few tax strategies that could allow you to do just that.
How To Deduct 100% Of Your Tailgate Party….
In order to deduct 100% of your event it must be “primarily” for the benefit of employees that are not part of a “tainted group.” We are by no means trying to suggest that any of your employees are nothing short of stellar. However if any employee is paid more than $110k a year, is a 10% owner or any family member of a 10% owner, the IRS considers them part of a tainted group. So, just make sure that tailgating is primarily (more than 50%) for the benefit of employees that fall below the “tainted group” thresh hold. You can also deduct the cost of entertaining your employee’s spouses the same as you deduct the cost of entertaining the employees. Follow this simple rule and hut, hut you’ve got a 100% deductible tailgate party.
You could also qualify your tailgate as 100% deductible if it is open to the general public. Blast out a Facebook, Twitter, Blog or press release that your company will be out tailgating and that anyone is welcome to join and Boom, 100% deductible.
How To Deduct 50% Of Your Tailgate Party…
If your tailgate party is not for the benefit of employees or open to the general public, the IRS is gonna throw a flag on the play and not allow it to qualify for the 100% entertainment deduction.
However if you invite clients, vendors, or other business associates, the tailgate can still qualify for the 50% entertainment deduction. You just need to show the tailgate party directly related to your business or directly related to a discussion that preceded or followed the tailgate event.
How do I relate my tailgate party to my business?
This is where you can get creative. Have some of your product on hand for people to tryout or look at. Use your tailgate as a podium and give a small speech before everyone hits the hotdog line. Think about it like your own mini trade show.
How To Mix 100% And 50%
So, there might be a case where your tailgate has some employees and some business associates. How do you allocate the costs?
On your chart of accounts you should have a place for both 100% Entertainment and 50% Entertainment. So, if your tailgate party has 30 guests and 15 of the partygoers are employees and their spouses, half the cost of the party will be 100% deductible. If the other 15 guests are clients, vendors or business associates, 50% of the remaining costs will be 50% deductible.
Document! Document! Document!
For any type of entertainment function you want to document the 5 W’s:
- WHO was in attendance and how where they related to the business. (ex: Clients, Potential Clients, Employees, etc).
- WHAT is the business purpose of your tailgate party? (ex: Open to the public Meet & Greet, Client Meeting/Entertainment, Employee Entertainment)
- WHEN did the happen, date & time.
- WHERE did the tailgate happen, exact location of event.
- WHY it was necessary to host the event in the tailgate atmosphere. (ex: Potential clients in targeted industries frequent these events, Clients and/or potential clients enjoy these events, Reward to Employees)
If you have any questions about planning and setting up a tax deductible tailgate party or if would simply like to invite us to your Tailgate Party, please give us a call at 706-227-9191!