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.