Deducting Your Entertainment CostsHow much is it legal to deduct?

On the entertainment side, tax law allows you to deduct 50 percent of meals and entertainment expenses that are business-related. To qualify, you must be able to show that the expense directly preceded or followed a substantial, bona fide business discussion or that it's directly related to the active conduct of your trade or business. You must keep good records, which include a receipt for any expenditure of $75 or more. Holiday parties, picnics and other social events you put on for your employees and their families are an exception to the 50 percent rule. Such events are 100-percent deductible.