Are Holiday Office Parties Deductible?

This is the season for holiday parties! If you have ever taken on the task of throwing one of these celebratory events for your office, then you know how pricey they can be. Just because holiday parties can be expensive, don’t let this discourage you from giving your employees something exciting to look forward to! Additionally, as a business owner, the IRS has made it so that you are able to write-off the expenses associated with your holiday office party!

However, there are are some guidelines that come along with throwing a 100% tax deductible, follow these IRS guidelines:

Invite All Employees: The IRS has stated that the set standard of a 50% limit for deducting business-related meal and entertainment expenses does not apply to the expenses of providing recreational, social, or similar activities for your employees. As long as your party is held primarily for the benefit of your employees who are not highly compensated, then you can take the full deduction. However, if your holiday party has a business motive and your guest list includes clients, potential clients, and/or customers, then you will be subject to the 50% limitation rule.

No Outlandish Expenses: Deduct reasonable expenses and stay within a reasonable expense. If you’re a small company and you spend thousands of dollars on an office party- it may raise some eyebrows at the IRS, leading to an audit. As a general rule, the amount spent on your event should not be a major percentage of your business expenses for that year.

Keep Strong Records : On the off chance your holiday party happens to raise a red flag with the IRS, you want to make sure you have detailed documentation for your office festivities. To take full advantage of this tax write-off, save your receipts for all the expenses incurred for the party and keep a comprehensive list of all attendees. Take photos of the event and post them on your website or company social media.

Celebrate this holiday season with a fully deductible office holiday party! After all, your employees work hard and deserve some fun!

Sandra King is an enrolled agent, empowered by The United States Treasury to prepare your personal or business tax filing. While her services are offered nationwide, Sandra King locally serves the greater Dallas-Fort Worth area, including but not limited to Arlington, Bedford, Colleyville, Euless, Fort Worth, Grand Prairie, Hurst, Mansfield, North Richland Hills, and Richland Hills.