Deducting entertainment expenses?

Question

Hi. I sell music CDs and movie DVDs at my store. Sometimes I go to the movie theater, rent movies at blockbuster, or go to a music concert to get an idea of what movie or CD to sell.

Can I deduct the movie/concert tickets and rental receipts as business expenses, since they are related to my business? If 'Yes', then what percentage?

Answer 1

Entertainment expenses are for employees. You cannot use that category if you own the store. It will be on schedule C. There are a lot of ways to get reviews of movies without going to them. My guess is it is not deductible. It has to be ordinary and necessary. If it is standard procedure for all owners in the industry then it would be ordinary. My guess is that most owners buy all the new releases and let their customers choose. You can buy videos and play them in your store for customers.

Answer 2

I would talk to your CPA about that one.  If you are doing legitimate research for your business the expenses should be able to be written off, but the IRS could construe it differently.  Let your CPA guide you on how to do this without raising flags for the IRS.

Good Luck!

Answer 3

You characterize your expense as "entertainment."  You cannot deduct your own entertainment.  Viewing a movie for business expenses is probably not considered an ordinary and necessary business of working in a music store.  A ticket to a concert is more of a stretch.

However, your ordinary and necessary business expenses are deducted on Schedule A.  You may receive a tax benefit for these expenses only if you itemize (all your deductions are more than $5,400 for single filing status).  Your deduction is limited to the excess of 2% of your AGI.