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Holiday Parties with Surprising Tax Advantages

  • 24 September 2013
  • Author: ellice909
  • Number of views: 3688
Holiday Parties with Surprising Tax Advantages

Now that the holiday party planning season is upon us, did you know your holiday party is up to 100 percent tax deductible? One way to achieve this is to keep the party in-house. Holiday parties, as well as other meals and entertainment for staff, are generally 50 percent deductible. However, when food and beverages are furnished for employees on business premises, the party may be 100 percent tax free. That is, as long as these rules are followed:

  • Spouses of employees are more than welcome, but the 100 percent deduction drops back down to 50 percent when clients and independent contractors enter the mix. What’s more, your own family members cannot be deducted at all, even if they are employees or owners.
  • Some sort of business must be conducted before, during, or after the party. Keeping the event in-house, whether during or right after a workday, can help support this. However, do not over-compensate for the fact you’ve asked the employees to let loose at work. Extravagant expenses will likely be denied.

So while a 100 percent tax free holiday party is possible, it’s likely that -- given these restrictions – at least a small portion will fall under the 50 percent rule of “meals & entertainment.” In the end, it will be helpful to separate your expenses as they incur.

Also, consider piggy-backing employee appreciation awards or announcing a new initiative to employees with the holiday party, to tie it back to the business. If you think your employees might mind the duality, you may be surprised. Statistics from Gallup, Workforce Moodtracker, and Babcock Marine (Clyde) Ltd. (as seen on this great infographic) show that employees who feel appreciated, whether through recognition or by being actively engaged in the vision and mission of the business, are more productive, more loyal, and even more safe on the job. Additionally, appreciation and recognition are consistently ranked among the top five desires of employees worldwide. So, while you don’t pay a dime in taxes, your employees may vote this year’s holiday party the best to date.

Image credit:  chagin / 123RF Stock Photo


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