Each year I’ll have several clients roll up with some pretty hefty receipts for what they will call “client gifts”. They are usually shocked to hear that there is a $25.00 limit on such gifts. Meals and entertainment will usually yield you a greater deduction, if you can swing it that way. Here it is in a nut shell.
Packaged Food: If you give packaged food or drink to a business associate, where the item is intended to be consumed at a later time, it is a gift.
Tickets to the Theater or Sporting Event: If you attend the event along with your business associates the cost of the tickets for yourself and your associates is treated as an entertainment expense. You may only deduct 50% of the face value of the tickets even if you paid more.
If you give business associates tickets to the theater or a sporting event and you do not accompany them you have two options for treating the expense as a gift, subject to the $25 limitation, or as an entertainment expense subject to the entertainment expense rules: 50% of the cost (face value for tickets) is deductible and a business meeting must have taken place either before or after the event.
Taking Turns Paying the Bill: If you and your business associates take turns picking up the tab for meals and entertainment and no business purpose is served, no one gets a deduction.