Figure 28-A. Does the 50% Limit Apply to Your Expenses? Summary: This flowchart is used to determine if the 50% limit applies to your expenses and is used by all employees and self-employed
people.
The amount you can deduct for entertainment expenses may be limited. Generally, you can deduct only 50% of your unreimbursed
entertainment expenses.
There are exceptions to these rules. See Exceptions to the 50% Limit. All employees and self-employed persons can use this
chart. For more
information, see 50% Limit.Start. This is the starting of the flowchart.Decision (1). Were your meal and entertainment expenses reimbursed? (Count only reimbursements your employer did not include in box 1 of
your Form W-2. If
self-employed, count only reimbursements from clients or customers that are not included on Form 1099-MISC, Miscellaneous
Income.)
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IF Yes Continue To Decision (2)
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IF No Continue To Process (a)
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Decision (2). If an employee, did you adequately account to your employer under an accountable plan? If self-employed, did you provide the
payer with
adequate records? (See How To Report.)
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IF Yes Continue To Decision (3)
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IF No Continue To Process (a)
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Decision (3). Did your expenses exceed the reimbursement?
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IF Yes Continue To Decision (4)
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IF No Continue To Process (b)
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Decision (4).
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FOR the amount reimbursed... Continue To Process (b)
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FOR the excess amount... Continue To Process (a)
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Process (a). Your meal and entertainment expenses ARE subject to the 50% limit.
Process (b). Your meal and entertainment expenses are NOT subject to the 50% limit. However, since the reimbursement was not treated as
wages or as other
taxable income, you cannot deduct the expenses.
End. This is the ending of the flowchart.
