Lou Shyster, attorney at law, uses a country club to entertain clients and spends the following amounts at the club:

Question

Lou Shyster, attorney at law, uses a country club to entertain clients and spends the following amounts at the club: 

Annual dues $2,000

Personal meals 1,500

Business meals 3,000.

What amount can Lou deduct against the legal fees he earns as a self-employed attorney?

Answer 1

As a general rule, entertainment expenses are not deductible for tax purposes while business meals are at least partially deductible.

For this question, we can categorize the three expenses as follows:

1. Annual dues - Entertainment expense: club dues paid to country or entertainment clubs are considered as entertainment expenses under the IRS tax rules. Therefore, these are not deductible.
2. Personal Meals - Not a business expense. Therefore, not deductible.
3. Business Meals - Meals expense: considered as deductible under IRS tax rules. For the January 1, 2021 - December 31, 2022 period these meals are 100% deductible. Under normal circumstances they would be 50% deductible.

Based on the above analysis we can see that only the Business meals are deductible. Assuming that the meals occurred during the 2021 or 2022 tax years, the full amount of $3000 can be deducted. If they occurred in other tax years, most likely 50% of the business meals are eligible for deduction ($1500).