What Expenses are Deductible while Sales Prospecting?

For a business expense to be tax deductible it must be both ordinary and necessary. Expenses that paid for to drum up business have special rules associated with them.  Here’s a list of the most common.

Business lunches are still deductible at 50%. So, a businessperson or salesperson can take a client to lunch to discuss business and an employee eating lunch while traveling are still deductible.

Entertainment expenses are no longer deductible. For example, a box at the ballpark, tickets to a concert, or a golf outing with clients is not going to be deductible.

Gifts you purchase for clients are deductible as a business expense–but the deduction is limited to $25 per person per year.  The $25 limit applies only to gifts to individuals. Gifts to a company are deductible in any reasonable amount.

Business clothing can be deductible if it can’t be used for ordinary street wear. This means you can’t deduct a regular business suit. However, you may deduct the cost of a sport jacket, coat, or other clothing item with a company logo on it.

Club dues paid to organizations are not deductible if their main purpose is to provide entertainment to members or their guests.

Business mileage is deductible.  Keep a written record of your business mileage. Mileage rate allowed for the IRS is 54.5 cents per mile for business. The business can set any amount they choose for reimbursement.

Employee expenses, not reimbursed by the employer, are not deductible on the employee’s personal income tax return.   This is effective January 1, 2018.

To secure the tax deduction be sure to note the business reason, whom you were with, where, date and the amount.  Credit card statements are not acceptable as documentation.

This information is for discussion only.  Be sure to check with your tax professional to determine what deductions you are entitled to.

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