Do you throw a holiday party, summer outing or a similar type of event for your employees? The expense of providing recreational, social or similar activities (including the use of a facility) for your employees is deductible and isn’t subject to the 50% limit. However, the benefit must be primarily for employees who aren’t highly compensated.

A highly compensated employee is an employee who meets either of the following requirements:

• Owned a 10% or more interest in the business during the preceding year. An employee is also treated as owning any interest owned by his or her brother, sister, spouse, ancestors and lineal descendants.
• Received more than $120,000 in pay for the preceding year. You can choose to include only employees who were also in the top 20% of employees when ranked by pay for the preceding year.