Can a fishing trip expense be tax deductible?
Everyone loves a little entertainment. That includes your current and potential clients. If you love fishing and you want to make it into a valid business deduction, here’s how you should structure your fishing trip expense as part of an entertainment deduction.
Like any entertainment expense, a fishing trip is a form of tax-deductible entertainment. You get to deduct 50% of the cost of the trip. After all, it is the cost of keeping happy clients, isn’t it? Just make sure to follow some simple rules so it passes the “sniff test” for the IRS.
Fishing trip expense must be for a business purpose.
Entertainment costs are deductible when you engage in business during or near the time of the entertainment. Any business activity will work for this purpose, including:
- negotiation a deal.
- explaining your products.
- strategizing new business opportunities.
- discussing customer concerns.
For the fishing trip expense, there will be plenty of time on the dock to discuss your next deal or describe the benefits of your product or service. Therefore, remember to keep good records to prove that the fishing trip expense was a valid business entertainment event.
Four rules for entertainment expenses.
For a fishing trip expense, here are the 4 rules that make your entertainment expenses deductible:
- You need a specific reason why you expect the trip to generate income or other business benefits for you. Your expectations do not need to come true, necessarily. But, you can still deduct the expense if your client or prospect decides not to buy.
- Your business activity must occur close in time to the entertainment. That means you should have your entertainment and business discussion occur on the same day.
- The overall nature of your meeting with the client or prospect must relate more to business than to entertainment. For fishing trips, hunting and trips on yachts or pleasure boats, you must more clearly show the business nature of your trips. This rules catches a lot of business owners, so beware.
- Spend your money on your client or prospect, not people unrelated to your business. There are some allowable guests, like customers, clients, suppliers, employees, agents, partners, and professional advisors. In addition, you can pay for someone who is “closely related” to your guest, like spouses and client spouses. However, it is a dangerous assumption to also include your brother, dad and uncle in this fishing trip deduction. Instead, keep in mind that the purpose of this fishing trip must be business in nature. Thus, if your guests have no interest in your business, the IRS will want good reason why they are part of your deduction.
Make entertainment work for your business
Entertainment expenses are a necessary and vital part of your business. Therefore, take advantages of ways create deductions for client entertainment and get to enjoy your favorite fishing trip activities. Paragon Accounting & Tax Solutions specializes in small business in Canton, GA; Woodstock, GA; Marietta, GA; Alpharetta, GA; and Kennesaw, GA. Saving you money on businesses taxes is what we love to do!