Holiday Party Tax Write-Off

Our office is becoming alive with excitement because we’re now in the planning stages of our annual holiday office party that will be hosted soon. Throughout the many offices and workplaces nationwide, hopefully, you’re fortunate to be with a company that hosts some sort of holiday function. Whether the event is formal, semi-formal, casual, or just a fancy table spread in the breakroom, a holiday social just feels right.

If you’re a business owner, then an entertainment expense such as a holiday party can be used as a tax write-off; however, there are certain rules that come with attempting this type of deduction. Let’s start with the type of shindig you plan on hosting this holiday season:

Traditional Office Party

Simple, yet effective. The traditional holiday party at the office is as exclusive as you can get with holiday socials. It can be as extravagant or as quaint as you want. With the traditional office party, you’re most likely keeping the festivities well within the office space, and invitations are only extended to your employees and their families.

Write It Off: Because the guest list only consists of company employees and family members, the costs can be 100% deductible – every cent. You just follow whatever itemized deduction method your company has in place, and you’re good to go. Be sure to distinguish the expenses from any other entertainment expense.

Company Holiday Dinner

The quarterly earnings must have been more than fair, so this year you want to splurge on something a little more elaborate to show your appreciation. You may decide to host this event outside of the work space like at a restaurant or some other venue. Not only are you inviting your employees, but also a few business associates and a number of clients.

Write It Off: There are a few restrictions with this type of shindig. Unfortunately, you can’t deduct entertainment expenses from a goodwill party involving business associates and clients. However, in this situation, you do have employees attending so the expenses can be allocated between employees and nonemployees, and then deducted.

If you have a moment within your event when there’s clearly a substantial business discussion, like a presentation, speech, or an unveiling, you can deduct up to 50% of the expenses only towards your clients or customers in attendance. Like the traditional office party, expenses for employees are still 100% deductible.

Year-End Gala

Bonuses for everyone! It has been an amazing year, and you will spare no expense to host the most elegant holiday celebration that will be talked about for months to come. You have the largest fanciful venue, the most premium choice of decorations and foods, crystal glasses and champagne flutes, sterling silverware, a 74-inch ice sculpture of the company logo, and every beautiful thing you can ever conceive to enhance the atmosphere. Invitations have been extended to employees, business associates, clients, friends, even the general public, and everyone must be formally dressed in a tuxedo or gown.

Write It Off: With something of this magnitude, you definitely want to get back as much as you can. As mentioned with the holiday dinner, you can’t deduct expenses towards business associates; you also can’t deduct from friends either. You must have a moment of substantial business discussion to deduct 50% of expenses from clients or customers. You can deduct 100% from employees, and even 100% from the general public.

Obviously, you don’t need to have an event as specific as the examples given. All that matters is who’s in attendance. Documentation is key – be sure to keep a record of the guest list for allocation purposes. Make sure to have a record of the invitation along with a clearly indicated business purpose. Record any presentation, speech, or unveiling to serve as proof.

If you need more detailed information to successfully deduct your expenses, give yourself more time with ExpressExtension. We offer support for business tax extensions in which you can get an automatic 5 or 6-month extension based on your type of business. We’ve also spared no expense with the effective, live assistance you can receive from our support team in Rock Hill, South Carolina.

Give us a call at (803) 514-5155 Monday through Friday from 9 a.m. to 6 p.m. EST. Or email us 24/7 at [email protected]. We also live chat one-on-one at www.expressextenion.com.