Well, the big college football game is just around the corner and you don’t have tickets. You are planning to purchase the tickets, entertain a client at the game and write off the cost. Is that going to be cool with the IRS?
It’s a good idea to read the tax rules before you spend the money on football tickets, especially if you purchase them from a broker for market value. If you purchase tickets to a college football game through a ticket broker (and you meet the legitimate business meeting requirement below), you can only use 50 percent of the face value of the tickets in determining your business deduction – not the market value. So you aren’t really happy with that as far as the tax deduction goes and you decide to just give the client the tickets and take the cost of the tickets as a business gift.
Not so fast my friend! If you decide to just give the tickets to your client rather than go yourself, the IRS gives you a choice to treat it as entertainment or as a gift. Under the tax law, businesses are limited to deducting $25 per gift per person in a tax year. So if you gave a client a $100 ticket as a gift, you can deduct only $25. Keep in mind, if the tickets are to be considered an entertainment expense, you’ll have to engage in a business discussion with your client or customer before, during or after the event. I would recommend having that discussion before the event – just in case your favorite team loses and you really don’t feel much like engaging in conversation afterwards.
So you’ve decided next year you are not going to be at the mercy of ticket brokers and want to donate to the “athletic club” of your favorite college sports team which will then allow you to purchase season tickets at their face value. The IRS will allow a portion of this donation to be tax-deductible. The club will calculate the fair-market value of the benefits accompanying your level of giving and you will receive a description of your benefits and their value. According to the IRS, a contribution associated with the privilege of purchasing season tickets is deductible as a charitable contribution at 80 percent of the gift. This 80 percent amount should then be reduced by the fair value of the benefits you received.
Finally, what if you are feeling really good about your team before the game and are thinking about placing a wager with your favorite Las Vegas sports book? Maybe a little primer on gambling winnings and losses is in order before making that phone call. Gambling winnings are fully taxable and must be reported on your tax return. You must include all of your winnings from lotteries, raffles, horse races and casinos. You may deduct gambling losses only if you itemize deductions. However, the amount of losses you deduct may not be more than the amount of gambling income reported on your return. Claim your gambling losses on Form 1040, Schedule A, as a miscellaneous itemized deduction.
So the bottom line I believe is go have fun and enjoy college football with your clients and friends and take your legitimate tax deductions in doing so and put all your money on the Buckeyes to beat the Wolverines this year. You won’t feel bad at all about claiming the winnings on your tax return!
This article was originally published in Illuminations: Facts & Figures from people with a brighter way, a Rea & Associates enewsletter, 9/26/2012.
Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.