It’s that time of year again when people are starting to plan their Super Bowl parties.
That got us at Gedeon Law & CPA thinking, how can our business clients claim a tax deduction for spending time with friends and family while watching over-hyped commercials and consuming unhealthy food and adult beverages?
As a business owner, you actually have a couple of options when it comes to taking a write off for hosting a Super Bowl party.
With the right tax planning, you can save some money on your taxes to go along with all the money you’ll be making off your Super Bowl bets.
Needless to say, a Super Bowl party is inherently a personal non-deductible event. Thus, for you to achieve a deduction, you need to overcome the personal nature of the event. To deduct the party as a business expense, it will be important for you to establish either that the party was directly related to the active conduct of your business or that it directly preceded or followed a substantial and bona fide business discussion.
Say one of our attorney clients is thinking of hosting a Super Bowl party and inviting his friends. How can our client convert the party to a business event?
Our client would start by having a substantial and bona fide business discussion with each guest invited. This would need to be done in a business setting before, during, or after the party. Our client would also record the name of each person and describe the basic business discussion.
Say our client doesn’t want to have a business discussion with each guest on a personal basis; another option would be to hold a group seminar for his guests in a business setting before, during or after the game.
You’re probably thinking, what if I’m not a financial advisor, attorney or other professional services provider, can I still write off the party?
The answer is yes. You can structure the party as a business event by inviting your clients, business associates and prospects and having your business rent out your home for the party. In one of our other articles, we discussed how to claim a business deduction for renting out your home to your business. Moreover, as we mentioned in our previous article on how to write off a company holiday party, you’ll want to create a guest book and document the business relationship of the guests attending your Super Bowl party. In addition, we recommend documenting in your minutes the reason for having the party outside your business office. Your reason could be something like you didn’t have the space to hold the party or the party would have interrupted your normal business operations.
So say you meet the requirements to treat the party as a business expense, how will you save on taxes?
Let’s assume the fair market value for renting your house to your business for the party is $3,000. You’ll also spend $1,000 on food and drinks (after all, guacamole and Doritos are expensive). If your combined federal and state tax bracket is 45%, then you’ve just saved yourself $1,350 in taxes by deducting the rent paid to yourself tax free. For the food and drinks, however, you’ll only be able to deduct half the amount spent ($500). After taxes, you’re out of pocket about $750 for the food. Overall, however, you’ve spent $1,000 in cash and you’ve saved about $1,600 in taxes from your Super Bowl party.
At the very least, your tax profit can help offset the bets you lose.
