Headed to the Final Four or Shell Houston Open? Know the rules to deduct event ticket costs Apr 1, 2016, 1:05pm CDT
By Cory Bunyard, Guest Contributor
Whether you spend the weekend at the Shell Houston Open or catching a NCAA Final Four game at NRG Stadium, time spent with current or potential business associates at such live entertainment events builds and sustains business relationships. While Internal Revenue Code recognizes ticket costs incurred for such activities as legitimate business expenses, employees and employers must adhere to established criteria and processes for claiming and deducting such costs.
Deducting costs of tickets IRC regulations generally classify live-event tickets as business entertainment expenses and allow 50 percent of the ticket costs to be deducted, provided three criteria are met. First, a ticket cost incurred by an employee must relate to performance of services to the employer, with substantiation that includes a business purpose, such as entertaining a prospective client or long-time customer. Second, an employee must provide an employer with proof of the expense within a reasonable amount of time. One of two safe harbor provisions – a fixed date method or a periodic statement method – can be used. The fixed date method is based on when the ticket cost was incurred, while the periodic statement method is based on employers issuing statements – at least four times a year – to employees that list unsubstantiated business expenses and instructions for submitting substantiated expenses. Third, employees must return excessive reimbursements to the employer with 120 days. The safe harbor method used determines when that 120-day span starts.
Costs for beverages and food consumed during an event may also be deducted at the 50 percent entertainment expense rate. Determining the deduction The highest public ticket price determines the deduction for luxury suite admission. The individual admission or ticket price deduction for an event viewed from a luxury suite is limited to 50 percent of the highest-priced face value ticket available to the general public. For a Houston Rockets game at the Toyota Center, a luxury suite admission cost might be based on the ticket cost for a lower-level courtside seat. For a Houston Astros game at Minute Maid Park, that luxury suite admission might be based on the ticket cost for lower-level seats behind the competing teams’ dugouts. Luxury suite beverage and food costs may also be deducted at the 50 percent rate allowed for entertainment expenses. Document it Continual compliance requires awareness and ongoing documentation. To legitimately deduct ticket costs from year to year, employers need to be aware of related tax provisions and then educate affected employees. Establishing processes then for regularly substantiating and documenting such costs ensures that related tax deduction claims remain valid and accurate. Cory Bunyard is a senior manager for tax and strategic business services in the Houston office of Weaver. Link: http://www.bizjournals.com/houston/news/2016/04/01/headed-to-the-final-four-or-shellhouston-open.html