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Company Picnic: Engage Staff + Tax Deduction

(posted: June 20th, 2016)

Do you host a company picnic or barbecue for your employees in the summer?

If so, you already know that it's one of those great activities that can bring your staff together and increase job satisfaction, employee engagement and retention.

But what you may not know is that you might also be able to take a larger deduction for the cost of the event than you could on other meal and entertainment expenses.

So, you ask, how does it work?

Deduction Limits

Generally, businesses are limited to deducting 50% of allowable meal and entertainment expenses. Certain expenses, however, are 100% deductible, including expenses:

  • For recreational or social activities for employees, such as summer picnics and holiday parties
  • For food and beverages furnished at the workplace primarily for employees
  • That are excludable from employees' income as de minimis fringe benefits

There is one caveat for a 100% deduction: The entire staff must be invited. Otherwise, expenses are deductible under the regular business entertainment rules. But being the great employer that you are, you would have done that anyway.

Recordkeeping Requirements

Whether you deduct 50% or 100% of allowable expenses, there are a number of requirements, including certain records you must keep to prove your expenses.

If your company has substantial meal and entertainment expenses, you can reduce your tax bill by separately accounting for and documenting expenses that are 100% deductible.

If doing so would create an administrative burden, you may be able to use statistical sampling methods to estimate the portion of meal and entertainment expenses that are fully deductible.

For any questions, or more information about deducting business meals and entertainment, including how to take advantage of the 100% deduction, please contact us.


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