If you spend $5,000 on business entertainment during the tax year, how much can you deduct?

If you said “50 percent,” you are correct.

How much of the $5,000 do you report to your tax preparer?

If you said “$2,500,” you are likely wrong. Why? Because tax preparers usually make the 50 percent cut when preparing tax returns.

Problem 1

In its publication where it discusses the entertainment deduction, the IRS states that you apply the 50 percent limit after identifying the amount deductible.1

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