Updated for Current IRS Rules
(IRC §274, TD 9925, Publication 535)
The IRS made significant changes to entertainment deductions under the Tax Cuts and Jobs Act (TCJA). As of today’s law (2024–2025), entertainment expenses — including sporting event tickets — are nondeductible when provided to clients.
This article reflects those current rules, including how employee-related events may still qualify for deductions under specific exceptions.
Client Example: Why Sports Tickets Are Not Deductible for Clients
Here’s a common misconception:
“If I give my top client season tickets and they send me $50,000 in new business, isn’t that obviously deductible?”
Under current law, no.
Even when a business owner gives sports tickets to a client with a genuine business purpose — appreciation, relationship building, or even reward for new revenue — the IRS still classifies this as entertainment, and entertainment is 0% deductible.
Why?
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Sporting event tickets are entertainment under IRC §274(a).
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TCJA removed the deduction for entertainment, amusement, and recreation.
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Business benefit does not change the entertainment classification.
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There is no exception for “successful outcomes” (like referrals, retainers, or new business earned).
Bottom line for clients:
✔ Business purpose ≠ deductible
✔ New business generated ≠ deductible
✔ Sports tickets = entertainment = nondeductible
This rule applies even if documentation is perfect.
What Has Changed: Employee Events vs. Individual Gifts
Although sports tickets for clients are nondeductible, some business owners ask:
“What if I just give the tickets to an employee instead?”
Here’s the IRS position under current law:
❗Giving sports tickets to one employee is still NOT automatically deductible.
Sporting event tickets are specifically excluded from “de minimis fringe” status.
(IRS: De Minimis Fringe Benefits – season tickets do not qualify)
However — there is a path to deductibility:
When Sports Tickets Can Qualify — Employee-Wide Recreational Events
Under IRC §274(e), certain activities for the benefit of employees as a group remain fully deductible, including:
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Employee parties
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Holiday celebrations
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Company picnics
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Recreational events primarily for employees
If a business purchased tickets for a company-wide recreational outing for employees, where the benefit is:
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For the majority of non-highly-compensated employees
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Not exclusive to executives
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Part of a morale-building or recreational event
Then the expense may qualify under the 100% employee recreational exception.
✔ Example of a deductible scenario (employee-focused):
A business purchases Braves tickets for a company summer outing where all employees are invited.
→ 100% deductible (recreational employee event)
✘ Non-deductible examples:
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Giving two season tickets to only one employee
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Giving a pair of tickets to a top performer
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Giving tickets as a reward for performance or referral
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Personal gifts
These are treated as compensation or entertainment — not recreational events.
The Updated Takeaway
Here’s the clean version:
✔ Deductible
Employee recreational events where the primary beneficiaries are employees as a group (picnic, party, company outing).
❌ Not Deductible
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Sports tickets given to clients
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Season tickets
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Tickets given to one employee
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Entertainment activity costs without a qualifying exception
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Anything resembling a personal or one-off gift
⚠ Possibly Deductible
If tickets given to an employee are treated as taxable compensation (added to W-2), the business may deduct them as a wage expense.
However, the employee must pay tax on the value — and the employer must withhold.
This is a viable structure, but not always desirable.
Why IRS Rules Don’t Always Feel Logical
It may seem counterintuitive that:
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Tickets given to a client generating revenue → not deductible
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Tickets given as part of a broad employee recreational event → deductible
But the IRS draws strict lines under IRC §274:
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Entertainment for clients → always nondeductible
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Recreational benefits for employees → deductible when inclusive
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Compensation → deductible with payroll reporting
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Gifts → nondeductible if they’re entertainment
Need Help Structuring Event Expenses Correctly?
Sports tickets can be deductible — but only when structured under the right IRS category, with the right purpose, and with proper documentation.
Most business owners unintentionally misclassify entertainment expenses, losing legitimate deductions or creating avoidable audit red flags.
If you want to maximize allowable deductions and stay IRS-compliant, ask Paragon how to structure employee events, appreciation outings, or ticket purchases the right way.
